Health Care Spending Increases but Rate Slows With Recession and Economy

While health care spending rose in 2012, it did so only slightly due to the recession and slow overall economic growth. Ray Suarez talks to Health Affairs’ Susan Dentzer about the dichotomies of health care spending, including why there has been a slowdown in health care spending when personal out-of-pocket costs have increased.

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    Now: what's behind the continuing rise in health care spending and why the rate of growth has slowed.

    Ray Suarez has the story.


    For the third consecutive year, health care spending in the U.S. grew by just under 4 percent.

    Government data released today show that roughly 2.7 trillion dollars was spent in total in 2011, or just under $8,700 a person. That 4 percent increase is above the rate of inflation, but it's well below the recent historical trends.

    The information was published today in the journal "Health Affairs."

    And to help us break it down, I'm joined again by Susan Dentzer. She's the editor of the journal and an analyst for the NewsHour.

    And, Susan, has this ever happened before? Have we ever had a three-year run of such modest price increases?

    SUSAN DENTZER, "Health Affairs": Not in the 52 years in which these national health expenditure data have been collected.

    It really is unprecedented. And, clearly, it's very much linked to the very dramatic recession we had and the slow growth period that has followed it. We never have seen though — even though it is the case that recessions always produce a slowdown in health care spending growth, we have never seen one quite of this magnitude. And it didn't — it never has kicked in quite as early as this one did.

    It's almost if, as soon as the recession set in, health spending growth really plummeted and we continue to see the effects to this day.


    So if the recession is a part of it, do we know whether it was from people trying to spend less on health care, whether this was consumer-driven, or on the provision side, were the price increases just not there because the providers didn't think they can get those prices?


    Clearly, more of it was happening on the so-called demand side. We had about seven million people lose health insurance and health care coverage on net.

    And, of course, numbers of people actually qualified for Medicaid and got coverage, but the net effect was seven million people between 2007 and 2010 without — additional people without health insurance.

    Also, we had a lot of people now — we do have a lot of people who are in so-called consumer-directed health plans, high-deductible health plans. They're responsible for a good share of their health care spending typically.

    Those people are probably the kinds of people who put health care spending, if it was discretionary, on hold over the course of the recession, as they were obviously worried about their jobs and their income. So, we saw just across the board people not getting health care, people not having insurance coverage and not getting health care. And that was probably the biggest driver of this effect.


    Even with the large number of Americans unemployed, the large number uninsured, most Americans still are covered by workplace-based employer health care plans. Was there anything different about the way money was being spent there?


    Well, again, to the degree those people, some of them are in high-deductible health plans, yes, they seem to be spending less, and sometimes even on things that they're actually covered for.

    We have seen health spending increases in the employer-covered population also moderate. Overall, health insurance premiums for the whole population, private health insurance premiums are also rising, or at least as of 2011 were still rising at about 4 percent across the board.

    And for employer groups, typically large employer groups, it's also been in that range, 3-4 percent.

    Most recently, we are seeing some tick up in people who are not in large employer groups. Those are people who are either in individual health insurance or small business health insurance. Those historically have been the areas of health insurance coverage that have been the most volatile and most subject to price increases and price swings. So we still are seeing that.

    But, again, the bigger picture at least through 2011 was this rate of growth that is much closer to the overall rate of growth of the general economy.


    Is this a pretty uniform phenomenon, or are there regional variations? Are there places in America where it's a relative bargain to get health care?


    There are some regional variations. It's also very important to note, though, that there are program-by-program differences.

    Medicaid spending on a per-person basis, actually, it looks like, fell in 2011, according to these data, whereas Medicaid spending on a per-enrollee basis was up.

    Also, within the Medicare program, if you were in the Medicare Advantage program, which is the HMOs and PPOs, that side of Medicare, as opposed to the free-for-service program, there were different rates of growth in the program.

    So it's a big story. A $2.7 trillion health care system is a big story. And we do see this kind of patchwork quilt of different things going on, depending on what piece of the quilt you're looking at.


    Today, the secretary of HHS noted that it's roughly the same amount of GDP year on year on year over these three years, that it hasn't been growing as a share of the economy.

    But also a report over the weekend came out that showed that some people who are in those small groups buying their own insurance have been faced by tremendous increases, 15, 17, 20 percent in the cost of their insurance policies.



    And we can imagine — we don't know this for a fact, because — we don't have access to all of the underlying data here, but what it looks like certainly happened — and, in fact, the chief actuary of the Centers for Medicare and Medicaid Service made the point in a news conference we had today — if you think about people who were in small employment groups or individual insurance, particularly over the course of the recession, a lot of people lost that coverage.

    A lot of small businesses dropped coverage. A lot of people who had individual insurance couldn't afford it anymore. People who stayed insured were most likely were people who really needed coverage. They were likely to be people who had a multiple chronic disease. And probably what happened is those people were very high utilizers of their health coverage.

    So, what is possibly going on now is insurers are saying, well, we spent a lot of money on this population. We have to re-price that going forward.

    Now, it's true that the new health care reform law gives states and the federal government tools to push back on health insurance premium increases that are not warranted. But, clearly, some of them are. And a lot of it is this increase in utilization that we see from a high-use population of chronically ill people.


    Susan Dentzer, as always, thanks for joining us.


    Great to be with you, Ray.