Health Care Spending Remains Stable, but Not for Long

Alyene Senger /

Health care spending actually didn’t skyrocket in 2011–but just wait.

This week, the Centers for Medicare and Medicaid Services (CMS) Office of the Actuary released the National Health Expenditures report for 2011. The report shows that growth in national health spending remained relatively low in 2011, growing at 3.9 percent.

Overall, the U.S. spent $2.7 trillion on health care in 2011, which accounts for 17.9 percent of total gross domestic product (GDP).

There are four major takeaways from the report:

  1. A slow economic recovery played a role. The slow growth in health spending correlates with overall slow growth in incomes, jobs, and GDP in 2011. As the report explains, this “raises questions about whether US health care spending will rebound over the next few years as it typically has after past economic downturns.”
  2. Obamacare’s effects were minimal. Because its major provisions don’t begin until 2014, the slow growth in health spending had little to do with Obamacare. The CMS states, “Although some provisions of [Obamacare] were in effect in 2010 and 2011, the impact on aggregate health spending growth was minimal in these years.”
  3. Health spending is projected to rise. In the actuary’s previous projections, total health spending is expected to rise significantly—from $2.7 trillion in 2011 to $4.78 trillion in 2021. Worse, government’s portion of health spending—and the weight it puts on taxpayers—is only expected to rise further after the most costly provisions of Obamacare take effect in 2014. The CMS projects, “By 2021, government financing is projected to account for nearly half of all health spending…reaching a total of $2.4 trillion, of which, the federal government is projected to pay two-thirds. This increase in the federal share is associated with Medicaid expansion, the baby boomers reaching Medicare age, and costs related to [Obamacare’s] exchange and cost-sharing subsidies.”
  4. Consumer-directed plans provide cost-containment hope. The nature of consumer-directed health plans offers a promising solution to reducing health spending by achieving more cost-conscious patient decision making. According to the report, enrollment in consumer-directed plans has more than doubled since 2008. In 2011, 17 percent of covered workers were enrolled in consumer-directed health plans; enrollment in these plans has increased, on average, by 23 percent per year, making these types of plans the second most popular type of private insurance plan. The growth in these plans, combined with other factors, played a role in the low growth in private health insurance spending from 2008 to 2011.

Instead of expanding government’s role in health care with Obamacare, which will dramatically increase health spending, policymakers should learn from existing private market trends that give consumers more control.

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