Slow health spending growth continued in 2013, but is expected to increase

The recent slowdown in health spending growth continued through 2013, according to a new report released by the Centers for Medicare and Medicaid Services (CMS). Health spending per capita grew at 2.9% in 2013, a continuation of the historically low annual growth rates in recent years.

In total, the U.S. spent $2.9 trillion on healthcare and related expenses in 2013. As health spending grew at a similar rate as the overall economy, the health sector continues to represent 17.4% of the nation’s economy. (Health spending as a percent of gross domestic product has remained flat at this level since 2009.)

The CMS report points to several factors that likely had downward effects on health spending growth in 2013. In addition to the remaining effects of the recent economic downturn, the report suggests that some key provisions of the Affordable Care Act (which went into effect before the more widely known 2014 coverage expansions) may have held spending growth down.

“A few key [ACA] provisions exerted downward pressure on health spending growth in 2013, including the productivity adjustments to Medicare fee-for-service payments, reduced Medicare Advantage base payment rates, increased Medicaid prescription drug rebates, and the medical loss ratio requirement for private insurers.”

CMS, National Health Spending In 2013

Additionally, higher patient cost-sharing (in the form of deductibles, copayments, and coinsurance) likely exerted downward pressure on health spending growth. As patients bear more financial responsibility for the cost of health care services, they tend to become more price-sensitive and healthcare utilization generally declines as a result. This trend was reflected in the recent decline in private insurance spending on hospital services, according to the CMS report.

Although there is general consensus among researchers that the economic downturn has played a key role in the recent health spending slowdown, experts have reached varying conclusions about the relative importance of structural factors, like changes to health insurance cost-sharing and Medicare payment policies. Whether these structural changes to the health system will continue to hold down spending – even as the economy improves – remains to be seen, but recent projections suggest that spending growth will rebound in the coming years.

“The recent similarity between national health care spending and GDP growth is consistent with historically observed patterns as the economy moves further from the end of the recession.”

CMS, National Health Spending In 2013

The chart collection below shows how health spending has changed over time in the U.S. and has been updated with the most recently available data.