Health care spending grows, but at near-record low rate

Health care spending increased by 3.9 percent in 2010, the second-lowest rate of growth since officials began tracking data in 1960, according to a new report by the Centers for Medicare & Medicaid Services. The report concludes that the Affordable Care Act has contributed only 0.1 percent to that spending growth.

The largest single factor for this low spending growth is the current recession. Americans lost jobs and employer-sponsored insurance, as well as income. All of those factors created a reduction in overall health care spending.

At the same time, federal spending has increased over the last three years, largely due to increased enrollment in the federal Medicaid safety-net program, which has become a last resort for coverage for the newly unemployed.

For the first time since 2003, the growth in insurance premiums grew faster than the amount of money insurance carriers spent on health care benefits. Premiums increased by about 4.4 percent in 2010 while the amount spent on claims increased by 3.7 percent. This is due in part to the recession, which has caused Americans to cut back on doctor visits and more expensive medical treatment.

On a related note, the White House has published a blog on health care spending growth, Lowering Health Care Cost Growth to Get More Value for Consumers. It  points out:

"In 2010, the net cost of health insurance – which includes the overhead and insurance company profits – increased by 8.4 percent. That's more than twice the increase in the cost of health care and represents $11.3 billion more than was spent on insurance overhead in 2009."

The Affordable Care Act has already introduced a number of health insurance reforms, such as medical loss ratios, (MLRs), which require insurance companies to spend at least 80-85 percent on medical care as opposed to other administrative costs; disclosure requirements for premium increases greater than 10 percent; and grants of $250 million dollars to states, including Colorado, to improve insurance rate-review programs and activities.


Article posted on January 18, 2012