National Health Spending in 2011: Overall Growth Remains Low But Some Payers and Services Show Signs of Acceleration

Micah Hartman Anne Martin Joseph Benson Aaron Catlin and The National Health Expenditure Accounts Team 1

2011 National Health Expenditure Accounts: Highlights

 National health spending increased 3.9 percent in 2011, the same rate of growth as in 2009 and 2010  National health spending reached $2.7 trillion, or $8,680 per person in 2011  The share of Gross Domestic Product (GDP) devoted to health care spending remained steady from 2009 through 2011 at 17.9 percent SOURCE: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group.

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2011 National Health Expenditure Accounts: Highlights

 Personal health care (PHC) spending increased 4.1 percent in 2011—a slight acceleration from growth of 3.7 percent in 2010  Growth in non-price factors such as the use & intensity of health care goods and services increased in 2011  Spending for retail prescription drugs, physician and clinic’s services grew at a quicker pace in 2011  Medicare, private health insurance, and consumer out-of pocket spending growth picked up in 2011 SOURCE: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group.

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Affordable Care Act

 Affordable Care Act provisions effective in 2010 and 2011 had minimal impact on overall growth  Sector and payer specific impacts include:  Private health insurance  Under twenty-six provision  Medical Loss Ratio  Retail Prescription Drugs  Part D coverage gap  Medicaid retail prescription drug rebates  Medicare Program  Payment rate updates  Preventative services SOURCE: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group.

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Recessionary Impact on National Health Expenditures 2008-2010

 2008- Slowdown from growth of 6.2 (2007) to 4.7 (2008)  Private health insurance enrollment, other private revenues, out-of pocket spending growth slowed or declined  2009- Slowdown from growth of 4.7 (2008) to 3.9 (2009)  Decline in structures and equipment investment, private health insurance enrollment, and slower growth in out-of-pocket spending  2010- Flat from growth of 3.9 (2009) to 3.9 (2010)  Historically low growth in personal health care goods and services (3.7) due in part to decline in use and intensity SOURCE: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group.

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6,0 4,0 2,0 0,0 -2,0 12,0 10,0

Growth in National Health Expenditures and Gross Domestic Product (GDP), 1985-2011

July 1990 March 1991 Recession March 2001 November 2001 Recession December 2007-June 2009 Recession 8,0 -4,0 Calendar Years NHE GDP SOURCE: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group, U.S Department of Commerce, Bureau of Economic Analysis and National Bureau of Economic Research, Inc.

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National Health Expenditures as a Share of Gross Domestic Product, 1985-2011

8,0 6,0 4,0 2,0 0,0 20,0 18,0 16,0 14,0 12,0 10,0 July 1990 March 1991 Recession March 2001 November 2001 Recession December 2007 June 2009 Recession

Calendar Years

SOURCE: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group, Department of Commerce, Bureau of Analysis and National Bureau of Economic Research, Inc.

17.9% 7

Factors Accounting for Growth in Per Capita National Health Expenditures and Personal Health Care, Selected Calendar Years 2004-2011

Other nonprice factors Age and sex factors Medical prices Per capita spending growth 6,5% 2,5% 2,0% 1,5% 1,0% 0,5% 0,0% -0,5% 6,0% 5,5% 5,0% 4,5% 4,0% 3,5% 3,0% National health expenditures Personal health care expenditures Average annual growth 2004 2008 2008 2009 2010 2011 Average annual growth 2004 2008 2008 2009 2010 2011 SOURCE Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group. NOTES Medical price growth, which includes economy-wide and excess medical-specific price growth (or changes in medical-specific prices in excess of economy-wide inflation), is calculated using the chain-weighted national health expenditures (NHE) deflator for NHE and the chain-weighted personal health care (PHC) deflator for PHC expenditures. As a residual, the category of other non-price factors includes use and intensity and any errors in measuring prices or total spending.

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The Nation’s Health Dollar ($2.7 Trillion), Calendar Year 2011: Where It Went

Dental Services and Other Professionals 7% Prescription Drugs 10% Government Administration and Net Cost of Health Insurance 7% Investment 1 6% Nursing Care Facilities and Continuing Care Retirement Communities 6% Physicians and Clinics 20% Другой 14% Other Medical Products 2 3% Government Public Health Activities 3% Home Health Care 3% Hospital Care 31% Other Health, Residential, and Personal Care 3 5%

1 Includes Research (2%) and Structures and Equipment (4%).

2 Includes Durable (1%) and Non-durable (2%) goods.

3 Includes expenditures for residential care facilities, ambulance providers, medical care delivered in non-traditional settings (such as community centers, senior citizens centers, schools, and military field stations), and expenditures for Home and Community-based Waiver programs under Medicaid.

Note: Sum of pieces may not equal 100% due to rounding.

SOURCE: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group.

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Annual Growth in Spending by Type of Service, 2010 and 2011

National Health Expenditures 3,9 3,9 Gov’t Admin & Net Cost of Health Insurance 8,1 4,1 Investment 2,1 2,9 4,9 Public Health Activities -0,5 Personal Health Care Hospital Care 3,7 4,1 4,3 4,9 3,1 Physician and Clinical Services Other Professional Services 4,3 4,6 4,9 Dental Services 2,7 3,0 Other Health, Residential, & Personal Care 4,0 4,5 5,8 Home Health Care 4,5 3,2 Nursing Care Facilities 1 4,4 0,4 Retail Prescription Drugs 2,9 Other Medical Products 2 4,8 4,6 -2,0 0,0 2,0 4,0 6,0 8,0 10,0 2010 2011 1 Includes Continuing Care Retirement Communities 2 Includes Durable Medical Equipment and Other Non-Durable Medical Products 10 SOURCE: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group.

5,0 4,0 3,0 2,0 1,0 0,0 9,0 8,0 7,0 6,0 31%

Hospital Spending, Annual Growth, 2000 - 2011

6,7 4,9 4,3 • • • $850.6 billion in 2011 Slower Growth in 2011 – – A slowdown in price growth and low growth in utilization Slower growth in Medicaid Acceleration in Private Health Insurance and Medicare SOURCE: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group.

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9,0 8,0 7,0 6,0 5,0 4,0 3,0 2,0 1,0 0,0 20%

Physician and Clinical Services Spending, Annual Growth, 2000 - 2011

3,5 3,1 4,3 • • $541.4 billion in 2011 Acceleration in 2011 – Increase in growth in use and intensity of services; slower growth in prices – Clinical services’ spending increasing faster than physician services’ spending – Acceleration in Private Health Insurance and Medicare SOURCE: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group.

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10% 18,0 16,0 14,0 12,0 10,0 8,0 6,0 4,0 2,0 0,0

Retail Prescription Drugs Spending, Annual Growth, 2000- 2011

5,0 2,9 0,4 • • $263.0 billion in 2011 Faster growth in 2011 – Brand name and specialty drug price accelerated – Increased spending on new brands SOURCE: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group.

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The Nation’s Health Dollar, Calendar Year 2011:

Other Third Party Payers and Programs 1 Investment 6% 7% Out-of pocket 2 11% Government Public Health Activities 3%

Where It Came From

Health Insurance 73% Medicaid (Title XIX) State and Local 6% Medicaid (Title XIX) Federal 9% Medicare 21% VA, DOD, and CHIP (Titles XIX and Title XXI) 4% Private Health Insurance 33% Health Insurance

1 Includes worksite health care, other private revenues, Indian Health Service, workers’ compensation, general assistance, maternal and child health, vocational rehabilitation, Substance Abuse and Mental Health Services Administration, school health, and other federal and state local programs.

2 Includes co-payments, deductibles, and any amounts not covered by health insurance. Note: Sum of pieces may not equal 100% due to rounding.

SOURCE: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group.

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Annual Growth in Spending by Source of Funds, 2010 and 2011

National Health Expenditures 3,9 3,9 Out-of-pocket 2,1 2,8 Health Insurance Private Health Insurance 4,4 4,3 3,4 3,8 4,3 Medicare 6,2 5,9 Medicaid (Title XIX) 2,5 5,1 Total CHIP (Title XIX and Title XXI) 3,0 Department of Defense 3,6 4,3 Department of Veterans Affairs 8,6 8,7 Other Third Party Payers & Programs 4,1 4,1 2010 2011 SOURCE: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group.

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8% 7% 6% -1% -2% -3% -4% 5% 4% 3% 2% 1% 0% 33%

Private Health Insurance: Growth in Enrollment, Premiums, and Benefits, 2007 – 2011

Total PHI: Growth in Enrollment, Premiums, and Benefits Per Enrollee: Growth in Premiums and Benefits

8% 7% 6% 5% 4% 3% 2% 1% 0% 2007 2008 2009 2010 2011 2007 2008 2009 2010 Premiums per enrollee Benefits per enrollee 2011 PHI Enrollment Premiums Benefits SOURCE: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group.

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25% 21%

Medicare: Growth in FFS and Medicare Advantage Expenditures and Enrollment, 2007 – 2011

Fee-for-Service Medicare Advantage

25% 20% 15% 20% 15% 10% 10% 5%

5,3% 4,9% 4,1% 2,7% 4,3%

5%

3,4% 5,6% 4,5% 1,5%

0% 0% 2007 -5% FFS Enrollment 2008 2009 FFS Spending 2010 2011 Per FFS enrollee -5% 2007 MA Enrollment 2008 2009 MA Spending

-1,1%

2010 2011 Per MA enrollee SOURCE: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group.

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10% 8% 6% 4% 2% 0% -2% 15%

Medicaid: Growth in Enrollment and Total, Federal, and State & Local Expenditures, 2007 – 2011

Total Medicaid Expenditures and Enrollment Federal and State & Local Medicaid Expenditures 6,2% 2,2%

2007 2008 2009 -10,0% 6,3% 6,7% 5,7% 0,7% 5,8% 9,6% 8,8% 21,9% 2007 Enrollment 2008

1,4%

2009 Spending

1,0% -0,7%

2010 2011 Per enrollee 2010 2011 -7,1% Total 5,9% 7,7% 2,5% 2,5% Federal State/local 22,2% SOURCE: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group.

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11%

Out-of-Pocket Expenditures

Shares of Out-of-Pocket Spending by Type of Service, 2011 Growth in Out-of-Pocket Spending, 2007-2011

8%

Other 1 , 24% Hospital Care; 9% Physician and Clinical Services; 17%

6%

5,3%

4%

Prescription Drugs; 15% Nursing Care Facilities; 13% Home Health Care; 2% Dental Services; 15% Other Professional Services; 6%

2%

2,4% 2,1% 2,8% 0,1%

0% 1 “Other” includes out-of-pocket spending for Durable Medical Products (7%), Other Nondurable Medical Products (14%), and Other Health, Residential, and Personal Care (2%). Totals may not sum due to rounding.

2007 2008 2009 2010 SOURCE: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group.

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Distribution and Annual Growth by Type of Sponsor

100%

Distribution of National Health Expenditures by Type Of Sponsor, 2007 and 2011

90% 18% 17% State and local government 80% 70% 23% 28% Federal government 60% 7% 50% 7% Other Private Revenues 40% 29% 28% 30% Households 20% 10% 0% 23% 2007 21% 2011 Private Business 20% 15% 10% 5% 0% -5%

Annual Growth in Spending by Sponsor, 2007 - 2011

2007 2008 2009 2010 State and Local Government Federal Government Private Business Households 2011 Note: Sum of pieces may not equal 100% due to rounding.

SOURCE: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group; 20

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2011 National Health Expenditure Accounts: Summary

National Health Expenditures reached $2.7 trillion, or $8,680 per person in 2011  National Health Expenditures increased 3.9 percent in 2011  National Health Expenditures represented a 17.9 percent share of Gross Domestic Product (GDP) for the third consecutive year  Spending grew faster in 2011 for: • Retail prescription drugs (2.9 percent) • Physician and clinical services (4.3 percent) • Medicare (6.2 percent) • Private health insurance (3.8 percent) • Out-of-pocket (2.8 percent)  Spending grew at a slower rate in 2011 for: • Hospital services (4.3 percent) • Medicaid (2.5 percent)  Sponsors of Health Care (% share in 2011) • Federal government (28 percent) • Households (28 percent) • Private businesses (21 percent) • State and local government (17 percent) SOURCE: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group.

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