Growth in health spending grinding to a halt: OECD

LONDON (Reuters) - Growth in health spending reversed a long-term trend of rapid increase and either slowed or fell in real terms in most OECD countries in 2010, driven by cuts among governments imposing austerity budgets, data showed on Thursday.

Overall health spending grew by nearly 5 percent a year in real terms in the 34 countries of the Organisation for Economic Co-operation and Development (OECD) between 2000-2009, but this was followed by zero growth in 2010.

In its Health Data 2012 report, the OECD also said preliminary figures for a limited number of countries suggest there was little or no growth in health spending in 2011.

"The halt in total health spending in 2010 was driven by a fall of 0.5 percent in public spending for health, following an increase of over 5 percent per year in 2008 and 2009," the report said.

It found that while government health spending tended to be maintained at the start of the economic crisis, cuts really began to bite in 2010.

This was most evident in European countries hardest hit by recession, such as Ireland, Greece and Estonia.

In Ireland, cuts in government spending drove total health spending down by 7.6 percent in 2010, compared with an average yearly growth rate of 8.4 percent between 2000 and 2009.

In Greece, OECD estimates suggest total health spending fell by 6.5 percent in 2010 after a yearly growth rate of more than 6 percent on average since 2000.

In Iceland, health spending fell by 7.5 percent in 2010, and in Estonia it dropped by 7.3 percent, driven by reductions in both public and private spending.

The OECD said most of the health spending cuts in Ireland were made through cuts in wages or fees paid to professionals and pharmaceutical companies, as well as through reductions in the number of health workers.

Estonia cut administrative costs in the ministry of health and also reduced prices of publicly reimbursed health services.

Investment plans have also been put on hold in a number of countries, including Estonia, Ireland, Iceland and the Czech Republic, while other countries have been seeking efficiency gains through mergers of hospitals or ministries, or by accelerating the move from caring for patients in hospitals towards more out-patient care and day surgery.

More generic drugs are also being used by a number of countries, the OECD said, and some other measures have been introduced to make people pay more out of their own pockets.

Outside of Europe, health spending growth slowed in 2010, to about 3 percent in the United States, Canada and New Zealand. Growth remained at more than 8 percent in Korea.

As a result of the zero growth in health spending across OECD countries in 2010, the percentage of GDP devoted to health stabilized or declined slightly in most countries.

Health spending accounted for 9.5 percent of GDP on average across OECD countries in 2010, versus 9.6 percent in 2009.

The United States spent by far the highest proportion of its GDP in health, at 17.6 percent, followed by the Netherlands at 12 percent and France and Germany on 11.6 percent.

The lowest proportions devoted to health were in Mexico, at 6.2 percent and Turkey on 6.1 percent. In Japan, the share of spending allocated to health has increased substantially in recent years to 9.5 percent, up from 7.6 percent in 2000.

The share also increased in Korea to 7.1 percent in 2010, up from 4.5 percent in 2000.

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Modest Health Care Spending Rise Expected for 2013: Report

TUESDAY, June 12 (HealthDay News) -- Health care spending in the United States from 2011 to 2013 is expected to grow 4 percent, which is slightly more than the historic low of 3.8 percent in 2009, government officials said Tuesday.

According to the experts at the U.S. Centers for Medicare and Medicaid Services (CMS), growth in health care spending by consumers remained sluggish in 2011 and that trend is expected to continue this year and next.

"We are expecting near-historic low growth in health spending for the first three years of our projection period," Sean Keehan, a senior economist in the CMS Office of the Actuary and lead author of the report, said during an early-afternoon press conference.

But in 2014, when all the facets of the Affordable Care Act go into effect, health care spending is expected to increase significantly, he added. "This is especially the case for prescription drugs and clinician clinical services," Keehan said.

"In addition, by 2021, the number of uninsured people is expected to be reduced by nearly 30 million," Keehan noted.

By 2021, health care spending is expected to be 19.6 percent of the gross domestic product (GDP), up from 17.9 percent in 2010, according to the report published online June 12 and in the July print edition of Health Affairs.

Despite the slow rate in health spending growth seen during the recession and beyond, in 2014 health spending growth is expected to pick up and accelerate to 7.4 percent. This increase is largely due to the expansion of the Affordable Care Act, which will make medical care accessible for many more people, according to the report.

In addition, from 2011 through 2021, health care spending is expected to grow an average of 5.7 percent a year, which is 0.9 percent faster than the expected yearly increase in gross domestic product over that time.

And by 2021, federal, state and local government health care spending is expected to account for almost 50 percent of national health expenditures. That's up from 46 percent in 2011, with federal spending accounting for some two-thirds of the total government share, the researchers reported.

These rising costs are being driven by more baby boomers enrolling in Medicare and more people taking advantage of Medicaid as its coverage is expanded under the Affordable Care Act. In addition, subsidizing people who buy their health care insurance through health insurance exchange plans will increase government's bottom line, the report authors noted.

"By the end of the projection period, higher income growth and the continuing shift of baby boomers into Medicare are expected to cause health spending to grow roughly 2 percentage points faster than overall economic growth, which is about the same differential experienced over the past 30 years," the study authors concluded.

Some factors that may make it necessary to update these projections include the slow growth of the economy and the upcoming U.S. Supreme Court ruling on the Affordable Care Act, which is expected this month.

"Like everyone else, we are waiting to see what the Supreme Court finds," Keehan said. "We don't have any plans to redo the projections immediately following the decision, but those plans could change depending on what the decision is."

More information

For more about health care spending, visit the Kaiser Family Foundation.

View the original article here

Health spending growth to stay low, then jump

Near historic growth rates in health spending will continue through 2013, then increase as the economy recovers and major health reform provisions take effect, a federal health agency projects.

NEW YORK (CNNMoney) -- Total health spending in the United States will grow at near-historic low rates until 2014 and then increase as provisions of the health reform law take effect, according to a government report Tuesday.

The report by the Centers for Medicare and Medicaid Services measures what everyone in the country spends on health -- governments, businesses and individuals.

Between 2011 and 2021, national health spending is forecast to grow by an average of 5.7% -- or slightly more than the U.S. economy, the agency said.

But for the first three years, annual spending growth will likely average just 4%, slightly above the historic low of 3.8% recorded in 2009. That's in part because of the effects of the recession and slow economic recovery tamping down income, although health experts believe other factors may be at play, too.

"The sustained effects ... on disposable personal income, insurance coverage and unemployment rates are expected to continue to dampen health spending growth through 2013," a group of CMS economists and actuaries wrote in an article detailing the findings in the journal Health Affairs.

By 2014, however, the CMS expects the annual growth rate to jump to 7.4% as major provisions of the health reform law along with a stronger economy kick in. By 2021, the rate slows to 6.2%.

Health reform provisions going into effect in 2014 include an expansion of eligibility for Medicaid; a mandate that all individuals be insured; and federal subsidies for low- and middle-income Americans purchasing policies on state-based insurance exchanges.

The law is expected to reduce the number of uninsured by 30 million over the decade.

As a percentage of the overall economy, the agency expects national heath spending to grow to 19.6% in 2021, up from 17.9% in 2010.

By 2021, federal, state and local governments are projected to foot about half of the nation's health spending, with two-thirds coming from Uncle Sam. That's because of faster growth in Medicare as more baby boomers retire, expanded Medicaid coverage and subsidies to buy insurance on the exchanges.

The CMS expects the health reform law will raise average health spending growth by a tenth of a percentage point over the decade.

Growth in health spending is not synonymous with growth in health care costs. While increased costs of health services and insurance can be factors, so too are how much health care people use and how many buy insurance and prescription drugs, among other things.

The CMS report was released with just days to go before the Supreme Court is expected to rule on the health reform law, which was passed in 2010. The court could choose to uphold the law, strike it down or just strike down portions of it, such as the mandate to have health insurance.

How the high court's decision might affect the CMS forecast, if at all, is unclear. Like everyone else, the agency is waiting to see how the Supreme Court rules, said Sean Keehan, a senior economist in the CMS actuary office. 

First Published: June 12, 2012: 4:01 PM ET

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Health spending growth to stay low, then jump

Near historic growth rates in health spending will continue through 2013, then increase as the economy recovers and major health reform provisions take effect, a federal health agency projects.

NEW YORK (CNNMoney) -- Total health spending in the United States will grow at near-historic low rates until 2014 and then increase as provisions of the health reform law take effect, according to a government report Tuesday.

The report by the Centers for Medicare and Medicaid Services measures what everyone in the country spends on health -- governments, businesses and individuals.

Between 2011 and 2021, national health spending is forecast to grow by an average of 5.7% -- or slightly more than the U.S. economy, the agency said.

But for the first three years, annual spending growth will likely average just 4%, slightly above the historic low of 3.8% recorded in 2009. That's in part because of the effects of the recession and slow economic recovery tamping down income, although health experts believe other factors may be at play, too.

"The sustained effects ... on disposable personal income, insurance coverage and unemployment rates are expected to continue to dampen health spending growth through 2013," a group of CMS economists and actuaries wrote in an article detailing the findings in the journal Health Affairs.

By 2014, however, the CMS expects the annual growth rate to jump to 7.4% as major provisions of the health reform law along with a stronger economy kick in. By 2021, the rate slows to 6.2%.

Health reform provisions going into effect in 2014 include an expansion of eligibility for Medicaid; a mandate that all individuals be insured; and federal subsidies for low- and middle-income Americans purchasing policies on state-based insurance exchanges.

The law is expected to reduce the number of uninsured by 30 million over the decade.

As a percentage of the overall economy, the agency expects national heath spending to grow to 19.6% in 2021, up from 17.9% in 2010.

By 2021, federal, state and local governments are projected to foot about half of the nation's health spending, with two-thirds coming from Uncle Sam. That's because of faster growth in Medicare as more baby boomers retire, expanded Medicaid coverage and subsidies to buy insurance on the exchanges.

The CMS expects the health reform law will raise average health spending growth by a tenth of a percentage point over the decade.

Growth in health spending is not synonymous with growth in health care costs. While increased costs of health services and insurance can be factors, so too are how much health care people use and how many buy insurance and prescription drugs, among other things.

The CMS report was released with just days to go before the Supreme Court is expected to rule on the health reform law, which was passed in 2010. The court could choose to uphold the law, strike it down or just strike down portions of it, such as the mandate to have health insurance.

How the high court's decision might affect the CMS forecast, if at all, is unclear. Like everyone else, the agency is waiting to see how the Supreme Court rules, said Sean Keehan, a senior economist in the CMS actuary office. 

First Published: June 12, 2012: 4:01 PM ET

View the original article here

Modest Health Care Spending Rise Expected for 2013: Report

TUESDAY, June 12 (HealthDay News) -- Health care spending in the United States from 2011 to 2013 is expected to grow 4 percent, which is slightly more than the historic low of 3.8 percent in 2009, government officials said Tuesday.

According to the experts at the U.S. Centers for Medicare and Medicaid Services (CMS), growth in health care spending by consumers remained sluggish in 2011 and that trend is expected to continue this year and next.

"We are expecting near-historic low growth in health spending for the first three years of our projection period," Sean Keehan, a senior economist in the CMS Office of the Actuary and lead author of the report, said during an early-afternoon press conference.

But in 2014, when all the facets of the Affordable Care Act go into effect, health care spending is expected to increase significantly, he added. "This is especially the case for prescription drugs and clinician clinical services," Keehan said.

"In addition, by 2021, the number of uninsured people is expected to be reduced by nearly 30 million," Keehan noted.

By 2021, health care spending is expected to be 19.6 percent of the gross domestic product (GDP), up from 17.9 percent in 2010, according to the report published online June 12 and in the July print edition of Health Affairs.

Despite the slow rate in health spending growth seen during the recession and beyond, in 2014 health spending growth is expected to pick up and accelerate to 7.4 percent. This increase is largely due to the expansion of the Affordable Care Act, which will make medical care accessible for many more people, according to the report.

In addition, from 2011 through 2021, health care spending is expected to grow an average of 5.7 percent a year, which is 0.9 percent faster than the expected yearly increase in gross domestic product over that time.

And by 2021, federal, state and local government health care spending is expected to account for almost 50 percent of national health expenditures. That's up from 46 percent in 2011, with federal spending accounting for some two-thirds of the total government share, the researchers reported.

These rising costs are being driven by more baby boomers enrolling in Medicare and more people taking advantage of Medicaid as its coverage is expanded under the Affordable Care Act. In addition, subsidizing people who buy their health care insurance through health insurance exchange plans will increase government's bottom line, the report authors noted.

"By the end of the projection period, higher income growth and the continuing shift of baby boomers into Medicare are expected to cause health spending to grow roughly 2 percentage points faster than overall economic growth, which is about the same differential experienced over the past 30 years," the study authors concluded.

Some factors that may make it necessary to update these projections include the slow growth of the economy and the upcoming U.S. Supreme Court ruling on the Affordable Care Act, which is expected this month.

"Like everyone else, we are waiting to see what the Supreme Court finds," Keehan said. "We don't have any plans to redo the projections immediately following the decision, but those plans could change depending on what the decision is."

More information

For more about health care spending, visit the Kaiser Family Foundation.

View the original article here

Health spending growth to stay low, then jump

Near historic growth rates in health spending will continue through 2013, then increase as the economy recovers and major health reform provisions take effect, a federal health agency projects.

NEW YORK (CNNMoney) -- Total health spending in the United States will grow at near-historic low rates until 2014 and then increase as provisions of the health reform law take effect, according to a government report Tuesday.

The report by the Centers for Medicare and Medicaid Services measures what everyone in the country spends on health -- governments, businesses and individuals.

Between 2011 and 2021, national health spending is forecast to grow by an average of 5.7% -- or slightly more than the U.S. economy, the agency said.

But for the first three years, annual spending growth will likely average just 4%, slightly above the historic low of 3.8% recorded in 2009. That's in part because of the effects of the recession and slow economic recovery tamping down income, although health experts believe other factors may be at play, too.

"The sustained effects ... on disposable personal income, insurance coverage and unemployment rates are expected to continue to dampen health spending growth through 2013," a group of CMS economists and actuaries wrote in an article detailing the findings in the journal Health Affairs.

By 2014, however, the CMS expects the annual growth rate to jump to 7.4% as major provisions of the health reform law along with a stronger economy kick in. By 2021, the rate slows to 6.2%.

Health reform provisions going into effect in 2014 include an expansion of eligibility for Medicaid; a mandate that all individuals be insured; and federal subsidies for low- and middle-income Americans purchasing policies on state-based insurance exchanges.

The law is expected to reduce the number of uninsured by 30 million over the decade.

As a percentage of the overall economy, the agency expects national heath spending to grow to 19.6% in 2021, up from 17.9% in 2010.

By 2021, federal, state and local governments are projected to foot about half of the nation's health spending, with two-thirds coming from Uncle Sam. That's because of faster growth in Medicare as more baby boomers retire, expanded Medicaid coverage and subsidies to buy insurance on the exchanges.

The CMS expects the health reform law will raise average health spending growth by a tenth of a percentage point over the decade.

Growth in health spending is not synonymous with growth in health care costs. While increased costs of health services and insurance can be factors, so too are how much health care people use and how many buy insurance and prescription drugs, among other things.

The CMS report was released with just days to go before the Supreme Court is expected to rule on the health reform law, which was passed in 2010. The court could choose to uphold the law, strike it down or just strike down portions of it, such as the mandate to have health insurance.

How the high court's decision might affect the CMS forecast, if at all, is unclear. Like everyone else, the agency is waiting to see how the Supreme Court rules, said Sean Keehan, a senior economist in the CMS actuary office. 

First Published: June 12, 2012: 4:01 PM ET

View the original article here

U.S. Health Care Spending High, But Quality Lags: Report

THURSDAY, May 3 (HealthDay News) -- Despite the fact that Americans spend more on their health care than citizens of 12 other developed nations, a new report finds that more does not necessarily equal better when it comes to quality of care.

The Commonwealth Fund report, led by senior research associate David Squires, revealed that the United States is shelling out roughly $8,000 per capita for health care, according to 2009 figures. By contrast, the Japanese and New Zealanders spend just one-third of that amount on health care, while Norwegians and the Swiss cough up about two-thirds.

Yet Americans now fare the worst in terms of preventable asthma fatalities among patients aged 5 to 39. The country also ranks poorly -- alongside Germany -- in diabetes-related amputations. As for in-hospital heart attack and stroke death rates, the United States stacks up as average at best.

"It is a common assumption that Americans get more health care services than people in other countries, but in fact we do not go to the doctor or the hospital as often," Squires said in a Commonwealth Fund news release. "The higher prices we pay for health care and perhaps our greater use of expensive technology are the more likely explanations for high health spending in the U.S. Unfortunately, we do not seem to get better quality for this higher spending."

Released on Thursday, the report analyzed health spending in Sweden, Australia, New Zealand, France, Canada, Germany, Norway, Japan, Switzerland, Denmark, the Netherlands and the United Kingdom, as well as the United States -- the only nation among those studied that does not provide universal health care.

The authors found that in 2009, the United States ranked No. 1 (followed by the Netherlands) in the proportion of its gross domestic product devoted to health care: a full 17 percent. By comparison, the other countries in the report spent 12 percent or less, with Japan ranking as the lowest spender at about 9 percent.

Despite their country's spending, Americans can expect poorer access to physicians than people in other industrialized nations, with just 2.4 doctors for every 100,000 citizens. On that score, only Japan fared worse, according to the report.

Other troubling indicators included the fact that Americans also have the second-worst rate of physician consultations (behind Sweden), relatively few hospital beds, fairly short hospital stays in acute-care situations and a low rate of hospital discharges.

It wasn't all bad news, however. The United States is No. 1 in survival rates among breast cancer patients. It also shares the top spot (with Norway) for survival rates among colorectal cancer patients.

But when it comes to both hospital and prescription drug costs, Americans are at the highest peak by far.

By the time a U.S. patient is discharged from a hospital, he or she will have cost the health care system about $18,000 on average. Care for a similar Canadian patient comes to just $13,000, while in many other countries (Sweden, Australia, New Zealand, France and Germany) it dips below $10,000.

When comparing the cost of the 30 most common prescription medications, the report found that Americans are paying one-third more than Canadians and Germans, and twice as much as their Australian, French, Dutch, British and New Zealand counterparts.

Americans can take some solace in the report's observation that every nation in the study is battling a trend of ever-increasing health care costs. Karen Davis, president of the Commonwealth Fund, noted that recent legislative changes have the potential to help improve the financials of health care across the country.

"The Affordable Care Act gives us the opportunity to build a health care system that delivers affordable, high-quality care to all Americans," Davis said in the news release. "To achieve that goal, the United States must use all of the tools provided by the law, including new methods of organizing, delivering and paying for health care, that will help to slow the growth of health care costs while improving quality."

More information

Visit the World Health Organization to learn about global health expenditure.

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In Hopeful Sign, Health Spending Is Flattening Out

Much of the slowdown is because of the recession, and thus not unexpected, health experts say. But some of it seems to be attributable to changing behavior by consumers and providers of health care — meaning that the lower rates of growth might persist even as the economy picks up.

Because Medicare and Medicaid are two of the largest contributors to the country’s long-term debts, slower growth in health costs could reduce the pressure for enormous spending cuts or tax increases.

In 2009 and 2010, total nationwide health care spending grew less than 4 percent per year, the slowest annual pace in more than five decades, according to the latest numbers from the Centers for Medicaid and Medicare Services. After years of taking up a growing share of economic activity, health spending held steady in 2010, at 17.9 percent of the gross domestic product.

The growth rate mostly slowed as millions of Americans lost insurance coverage along with their jobs. Worried about job security, others may have feared taking time off work for doctor’s visits or surgical procedures, or skipped nonurgent care when money was tight.

Still, the slowdown was sharper than health economists expected, and a broad, bipartisan range of academics, hospital administrators and policy experts has started to wonder if what had seemed impossible might be happening — if doctors and patients have begun to change their behavior in ways that bend the so-called cost curve.

If so, it was happening just as the new health care law was coming into force, and before the Supreme Court could weigh in on it or the voters could pronounce their own verdict at the polls.

“The tectonic plates might be beginning to shift,” said Karen Davis, the president of the Commonwealth Fund, a nonprofit research group in New York. “It’s hard to believe everything that’s been tried over the last decade to slow spending wouldn’t be making a difference.”

Experts were surprised, for instance, at a drop in spending on some hospitalized seniors — people enrolled in Medicare, whose coverage the recession should not affect. They also noted that some of the states where health care spending slowed most rapidly were states that were not hit particularly badly by the recession, suggesting that other factors were at play.

“The recession just doesn’t account for the numbers we’re seeing,” said David Cutler, a Harvard health economist and former adviser to President Obama. “I think there’s much more going on.”

The implications of a bend in the cost curve would be enormous. Policy makers on both sides of the aisle see rising health care costs as the central threat to household budgets and the country’s fiscal health. If the growth in Medicare were to come down to a rate of only 1 percentage point a year faster than the economy’s growth, the projected long-term deficit would fall by more than one-third.

The growth of health costs slowed in the 1990s as health maintenance organizations became more popular. That played a role in both gains in household income — less money on employer-provided health benefits means more money for raises — and in budget surpluses, economists argue.

Some experts caution that there remains too little data to determine whether the current slowdown will become permanent, or whether it is merely a blip caused by the economy’s weakness.

“If there’s something else going on, we don’t know what it is yet,” said Gail Wilensky, a health economist who headed Medicare and Medicaid during the administration of President George Bush. “The most honest thing to say is that, one, the reduction in use is greater than the recession predicts; two, we don’t understand why yet; and, three, you’d be foolhardy to say that we can understand it.”

She argued that the unusual decline in not just income but also wealth during the recession might be one factor cutting down on use of the health care system.

But many other health experts say that there is just enough data to start detecting trends — even if the numbers remain murky, and the vast complexity of the national health care market puts definitive answers out of reach.

Many experts — and the Medicare and Medicaid center itself — point to the explosion of high-deductible plans, in which consumers have lower premiums but pay more out of pocket, as one main factor. The share of employees enrolled in high-deductible plans surged to 13 percent in 2011 from 3 percent in 2006, according to Mercer Consulting.

That means thousands of consumers with an incentive to think twice about heading to the doctor. One study by the RAND Corporation found that health spending among people who shifted into a high-deductible plan dropped 14 percent — though the study also found that enrollees cut back on some care that tended to save money in the long run, like vaccinations.

A second factor is a dearth of expensive, novel drugs coming onto the market, experts said, as well as growing pressure to use generics. “There just aren’t as many blockbusters,” said Professor Cutler, the Harvard economist.

Finally, and most important, health economists point to a shift toward accountable care, in which providers are paid for the quality of care, not the quantity.

There are about 164 “accountable organizations” in the United States, according to research by Leavitt Partners. Hundreds of other insurers and health systems have enacted some of the features of accountable care, like assigning specially trained nurse practitioners to patients with multiple chronic conditions to make sure they take their medications and to prevent hospitalizations.

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Health Plans Will Pay $1B Obamacare Rebate For Not Spending Enough On Care

WASHINGTON, DC - FEBRUARY 15: Health and Human Services Secretary Kathleen Sebelius testifies during a Finance Committee hearing on Capitol Hill on President Obama's Fiscal 2013 budget request for the Department of Health and Human Services. (Image credit: Getty Images via @daylife)

More than $1 billion is headed to consumers and employers this summer from their insurance companies thanks to a part of the federal health law that requires a rebate from plans that don’t spend at least 4 of every 5  premium dollars on medical care.

A new study by the Kaiser Family Foundation estimates the rebates at $1.3 billion, which should arrive by August, from health plans that spent too much on administrative overhead. The money paid will be tax free to the recipients, according to rules on so-called medical-loss ratios that are part of the Affordable Care Act signed into law two years ago by President Obama.

Under the law, individual policies and those sold to small groups with 49 or fewer workers generally have to spend 80 percent of health plan subscriber premiums on health costs. Policies sold to businesses or groups with more than 50 workers typically have to spend at least 85 percent of premiums on medical care.

Supporters of medical loss ratios say they are important because they differentiate between how much of the premium goes toward medical claims and how much of the premium goes toward administrative expenses.

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Gov. Brownback on the Health-Care Law, Government Spending

Gov. Sam Brownback, (R-Kan.), on the costs of the health-care law, reducing government spending and Mitt Romneys campaign.

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How Health-Care Spending Strains the U.S. Military

VA Secretary Eric Shinseki. Image by AFP/Getty Images via @daylife

Lots of people have views about U.S. military spending. Liberals and libertarians think we spend far too much on defense. On the other side, Mitt Romney speaks for many conservatives in arguing that we should spend more: “If you do not want America to be the strongest nation on Earth,” says Romney, “I am not your President. You have that President today.” But while we usually think of military spending in terms of foreign wars and joint strike fighters, we often neglect one of the biggest growth drivers of the U.S. defense budget: health care.

“Health care costs are eating the Defense Department alive,” said former Defense Secretary Robert Gates in 2011. Military spending consumes over half of all federal discretionary spending: $712 billion out of $1,277 billion in 2011 discretionary outlays. Defense analyst Todd Harrison calculates that military health spending is about 9.5 percent of the base defense budget: $52.5 billion out of the $559 billion that the Defense Department requested for fiscal year 2012. On top of that, the Department of Veterans Affairs, which has a separate budget, seeks to spend $51 billion of its $132 billion 2012 budget request on health care.

We spend $520 billion a year on Medicare, $450 billion a year on Medicaid, and $300 billion a year on the employer health insurance tax deduction. Still, $100 billion in annual military health spending is real money. And while defense spending as a percentage of GDP nears historic lows (about 4 percent today, compared to 6 percent in the 1980s), the military’s health-care spending is increasing at rates much faster than inflation, just like health spending elsewhere.

Curbing the Defense Health Program

The $52.5 billion in requested DoD health spending for FY 2012 can be broken down into three parts: $32.2 billion for the Defense Health Program, a.k.a. TRICARE, which provides health care for active-duty service members; $10.7 billion for TRICARE for Life, a Medicare supplemental insurance program for military retirees; and a mish-mash of other stuff, including military hospitals and pay for military health-care workers. Overall, the program covers 9.6 million Americans.

The Congressional Budget Office has come up with a number of options for reducing military health spending, including: (1) introducing minimum out-of-pocket requirements under TRICARE for life ($43 billion in savings from 2012-2021); (2) limiting the TRICARE benefit for military retirees and their dependents ($115 billion); (3) increase cost-sharing for prescription drugs under TRICARE ($26 billion); (4) increase cost-sharing for military retirees not yet eligible for Medicare ($30 billion); and (5) end enrollment in VA medical care for high-income veterans without service-connected disabilities ($30 billion).

The DOD’s FY 2013 budget request, a product of last year’s debt ceiling deal that requires $487 billion in defense cuts, reflects some of these ideas. The new budget request proposes to increase and means-test TRICARE premiums, nearly quadrupling them in some cases. (Today, TRICARE premiums are far lower than those for civilian insurance.) Some believe that the Obama Administration is seeking to drive more service members into the PPACA exchanges. In addition, the proposal will charge new annual enrollment fees for TRICARE for Life, the military retiree program.

As you can imagine, these cuts have elicited a vigorous reaction from military personnel groups. “We think it’s absolutely wrong,” said Kathryn Beasley of the Military Officers Association of America. “This is a breach of faith [with those who have served].”

Personally, I’m not sure what to do about TRICARE. It seems like an inefficient mess. Servicemen I know complain incessantly about the program, and believe that it provides inadequate care. Would vouchers for conventional private insurance be an improvement? They could be, though they might also expose servicemen to the high cost of conventional private insurance.

Is the Veterans Health Administration a single-payer model?

Unlike TRICARE, which contracts with private-sector insurers and providers in the U.S., the Veterans Health Administration is a single-payer system, along the lines of the British National Health Service, in which the government owns the hospitals along with paying the bills.

When I was a medical student in the 1990s, I did a couple of clinical rotations at the VA Hospital in West Haven, Connecticut. It was a terrible experience. Poor conditions led to a higher rate of hospital-borne infections and surgical complications, among other problems. Since then, there have been some improvements to the VA system, leading some to describe it as a model for single-payer health care. But the VA has many of the rationing and access problems that plague other single-payer systems, and spending continues to increase at similar rates to those of the private sector.

Here’s a chart from the Congressional Budget Office that compares the Congressional budget baseline for VA health spending, which assumes that veterans’ health spending grows in line with inflation, to two more realistic scenarios: “Scenario 1,” in which health spending grows at historical rates; and “Scenario 2,” which takes the growth rates of Scenario 1 and adds in the larger contingent of veterans emerging from Iraq and Afghanistan.

Privatizing the VA could reduce system-wide health costs

The VA system is an anachronism. It made sense in the World War II era, when tens of millions of Americans served in war, and when America did not yet have a national network of full-service hospitals. Today, however, that isn’t true.

The VA system could be turned into a huge asset for our nation’s health-care system if it were privatized. One of the big drivers of rising health spending is hospital monopolies: when one or two hospitals dominate a particular region, those hospitals have the power to charge whatever they want to insurers and patients. If civilians were allowed to use VA hospitals, and vice-versa for veterans, we could significantly improve this problem. In addition, if the VA hospitals have indeed come up with operational efficiencies, competing private-sector hospitals would be forced to adopt those efficiencies, or lose patients.

If liberals are right, and the VA is a model, competition will force private hospitals to improve on both quality and cost. If conservatives are right, and VA hospitals are terrible, privatization would allow veterans to gain access to superior private-sector health care, while increasing provider competition. Seems like a win-win.

(This piece originally appeared in The Atlantic, where I’m guest-blogging for Megan McArdle for two weeks.)

Follow Avik on Twitter at @aviksaroy.

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India plans big increase in health-care spending to catch up to rivals

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Correction:

A previous version of this story incorrectly said that national spending for New Delhi’s health budget is about $3 billion annually. The actual amount is $20 billion. This story has been corrected.

India plans big increase in health-care spending to catch up to rivalsView Photo Gallery — ?As other developing countries race ahead of India in improving health care, the country announced it plans to increase health-care spending.

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NEW DELHI —With its health-care system increasingly eclipsed by rivals, India has a plan to nearly double public spending on health over the next five years, with the goal of eventually making medical care free for all Indians.

It is an ambitious goal, and the kind of investment many experts have been advocating for decades. But already critics are wondering if the government will live up to its promise, or if throwing money at the problem without reforming the health-care delivery system from top to bottom will make much of a difference.

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In recent years, India has watched with alarm as countries such as China, Egypt, Mexico and Brazil raced ahead, and as its performance on child health and infant mortality was overtaken even by much of sub-Saharan Africa.

The planned budget increase would lift annual spending on health to 2.5 percent of the country’s economic output, from a current 1.4 percent. The increase is aimed at giving free medicine to all Indians at government facilities, setting up free ambulances in rural areas, doubling the number of trained health workers, and lifting millions of young children and women out of chronic malnutrition and preventable deaths.

“In the past five years, other emerging economies like Brazil, Mexico, Malaysia have marched ahead on basic public health indicators,” said Amarjeet Sinha, a senior health official in the northern state of Bihar, who helped design India’s rural health program. “Just two decades ago, we were all in the same place. It’s a shame that we got left behind in our health performance despite our economic progress.”

With a rapidly growing young population, India urgently needs to harness the energy of its youth by creating jobs and improving their health care, or it will squander the gains of its recent economic boom, analysts say.

A newborn baby dies every 20 seconds in India and four out of 10 children are malnourished. Last month, Prime Minister Manmohan Singh called the state of the health-care system a “national shame.”

“In the years to come, these children will join our workforce as scientists, farmers, teachers, data operators, artisans and service providers,” Singh said, releasing a report by an anti-hunger and anti-malnutrition advocacy group Hungama. “We cannot hope for a healthy future for our country with a large number of malnourished children.”

The proposed hike in New Delhi’s health budget, from a current national allocation of a little more than $20 billion annually, was first discussed almost a decade ago, but bureaucratic delays and a lack of political will delayed the decision to go ahead.

Misspent money

Critics say Singh’s government has a habit of throwing money at problems without reforming basic delivery systems to ensure that the money reaches those it is meant for. Already, India spends $7.8 billion every year on one of the largest rural job guarantee programs in the world. It is also planning a $20 billion program to make food accessible to millions of poor. Much of the money ends up in the pockets of local officials, or lost in poor implementation.

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Gerard Anderson: Health Care Spending Compared to Defense Budget and Federal Budget Deficit

Sorry, I could not read the content fromt this page.

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Where America's Health Spending Goes

It's an article of faith across the political spectrum in the United States: health spending has accelerated out of control. What you hear less often is the inevitable corollary, that health spending thus ought to be curtailed. (Tell that to a parent whose child has cystic fibrosis.) What's rarely mentioned is that a) health spending is largely voluntary, b) the parts that aren't voluntary are often under the aegis of government agencies that have little incentive to cut costs and c) "health spending" is at best an ambiguous phrase.

How Much?
The New York Times cites a recent Organization for Economic Co-operation and Development (OECD) study which claims that in 2010, Americans spent about $8,000 per capita on healthcare. That's the highest figure listed among the several countries in the study, again with the implicit understanding that the number is somehow too high.

Is it? To draw a comparison, "education spending" is a category that many would argue is underfunded. Tell a typical man on the street that not enough money is being spent on education in this country, and chances are fairly good he'll agree with you. Yet, we're to believe the opposite applies regarding health spending. But isn't health a more fundamental necessity than education? After all, you can't learn when you can't function.

Swaziland wasn't one of the countries included in the OECD study, but it can illustrate a point: it's safe to assume that healthcare spending there is a tiny fraction of what it is in the U.S. Does that mean the Swazis have successfully "reined in" health spending? Far from it. With an abysmal average life expectancy of around 48 years, not to mention that around every 4th adult Swazi is believed to be HIV-positive, the conclusion seems to be that some nations' citizens could afford to spend more on health care. Much more.

But how much more? Or in the case of the U.S., how much less? Ask that same passerby (or a journalist) if health spending in the U.S. is too high and public perception presumes that he'd again answer "yes." Then ask him what a reasonable per capita number for health spending should be, if not $8,000. Make sure you check the box next to "blank stare."

How's It Figured?
There isn't a simple answer, and we've just proven that there's little correlation between dollars spent and benefit rendered. The aforementioned OECD study gives only slight details as to how it calculates its figures, breaking healthcare spending down into four categories: public health and administration, ambulatory, hospitals and nursing homes and pharmaceuticals. So if, say, a perfectly chipper American woman decides to purchase breast implants, she'd be adding to the totals for the 2nd, 3rd and 4th categories: she'll spend money on initial consultations, on the hospital stay for the surgery itself and on promethazine for any post-surgical pain.

And that kind of surgery is a multibillion-dollar industry in the U.S. The American Society for Aesthetic Plastic Surgery's own literature points out that such discretionary spending is increasing at 9%, annually – more than four times faster than the rate of increase in other health care costs. Still, poorer nations presumably have their laser skin resurfacing and chemical peel expenditures "under control." Only a nation that's already advanced past the rudiments of how to maintain health – with a clean water supply, dentists who recommend fluoride, etc. – can accommodate a market for unnecessary cosmetic surgery.

Insurance
That doesn't mean that the $8,000 per capita figure is necessarily a positive, either. Let's look at how much it costs to keep ourselves insured. Of course there's a tremendous variance among patients, from Olympic decathletes to TV documentary subjects who undergo bariatric surgery, but the average is worth noting. The Kaiser Family Foundation estimates that an employer-sponsored health insurance policy for a typical individual runs $5,429 a year. That's not even counting user deductibles. And that figure has doubled in the last decade. If an average citizen can pay that much (indirectly via an employer, but still) without ever setting foot in a hospital nor seeing a specialist, is there sufficient incentive to even get insurance? Or ever visit a doctor?

Expenditures
Studies and public perception notwithstanding, there isn't a generic "health spending" account that these dollars go toward, either. Do over-the-counter cough drops count as a health expenditure? The OECD doesn't give a conclusive answer. Emergency surgery for traumatic construction accidents neither does nor should fall into the same category as methadone for heroin users. Better we spend on the former than the latter, but better still if ironworkers don't balance themselves on I-beams hundreds of feet in the air in the first place.

American expenditure on health care follows, more or less, from the principle of limited government: that a nation's taxpayers should only collectively foot the bill for public goods whose benefit is enjoyed by society as a whole, and which private enterprise couldn't reasonably turn a profit on (e.g., roads and armed forces). Healthcare can obviously be provided by the private sector, as a look at any Health Maintenance Organization's balance sheet will tell you. Health itself necessarily differs from person to person – it's pretty much the one thing each of is individually most responsible for – thus making it the ultimate private good.

The Bottom Line
What about the results of that $8,000 per capita? What data would indicate a healthy population, i.e., money well spent? High life expectancy is just one bellwether, but the others are obvious –low obesity, average resting heart rate in the prescribed range, etc. That data is nigh impossible to collect in a nation of 300 million, and it wouldn't count the people who voluntarily reduce the nation's overall health. The same newspaper that cited the OECD study tacitly acknowledges that the money spent on drug and alcohol treatment in the U.S. reaches well into the billions of dollars, too. This would be filed under "voluntary." In a society of people who choose not to abuse drugs, spending on this particular subsection of health care would dwindle to nothing and, one hopes, give the OECD cause to rejoice.

While waiting for per capita health spending in the United States to reach whatever the optimal level is, it might be time to update the old aphorism: a penny of prevention is worth a dollar of cure.

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Is U.S. Health Spending Finally Under Control?

9:36 a.m. | Updated to correct reference to lines in Chart 3.

Uwe E. Reinhardt is an economics professor at Princeton. He has some financial interests in the health care field.

“Growth in U.S. health spending remains slow in 2010” was the headline of a news release on Jan. 9 by the Centers for Medicare and Medicaid Services, part of the Department of Health and Human Services. At an increase of 3.9 percent over national health spending in 2009, “the rates of health spending growth in 2009 and 2010 marked the lowest rate in the 51-year history of the National Health Expenditure Accounts,” the release said.

Perspectives from expert contributors.

The news was quickly picked up and disseminated by news organizations, including The New York Times.

What is one to make of this development? Is it evidence that we have finally “broken the back of the health care inflation monster,” as former Secretary of Health and Human Services Margaret Heckler famously put it in 1984. That was just after the Reagan administration had introduced the current prospective case-based payments for hospital inpatient care but two years before the health care inflation monster returned with a vengeance.

The charts below provide a longer-run perspective on health spending in the United States. They are all based on the rich data tables released annually by the Office of the Actuary of the Centers for Medicare and Medicare Services.

Charts 1 and 2 show the growth of health spending from 1965 to 2010, broken down by source of payment. Chart 1 exhibits the time path of actual health spending, not adjusted for inflation. Chart 2 exhibits the percentage of total national health spending contributed by the various sources in the chart.

In the charts the green area denotes out-of-pocket spending at the time health care is consumed, the red private health insurance, the gray Medicare, the yellow Medicaid and the blue “other third-party payments.”

The latter category is a grab bag of mainly public programs like spending by the Department of Defense, the Veterans Administration health system, the Indian Health Service, Workers’ Compensation, school health, general federal and state public-health activities and so on. Although each item in the list is relatively small, together these programs now add up to slightly over 20 percent of total national health spending.

Charts 1 and 2 illustrate the growing role of the Medicare and Medicaid programs in total health spending. They also show that out-of-pocket spending as a percentage of total national health spending has steadily decreased over time, even though the average American family probably feels that quite the opposite has occurred.

This is so because out-of-pocket spending for health care in dollars in the United States can rise even though as a percentage of total health spending it falls, because per-capita health spending in the United States is so large – typically twice as large as the corresponding figures in other nations.

Charts 3 and 4 tell an interesting story. The blue line in Chart 3 represents inflation-adjusted, real national health spending per capita in constant 2005 dollars. The red line represents real, inflation-adjusted gross domestic product per capita. The G.D.P. deflator was used to adjust the two-time series for inflation (see Table B-7).

As the charts show, both real national health spending per capita and real G.D.P. per capita fluctuate considerably from year to year. On average, the growth rate of health spending has exceeded the growth rate of G.D.P., although in a few years the opposite occurred.

I am certainly not the first to notice this. Charts like these are old hat in the Office of the Actuary of the Centers for Medicare and Medicaid Services, and they have been remarked on in the literature for some time, as this example shows.

Charts 3 and 4 illustrate two additional points.

First, depending on the beginning and end points one chooses for calculation, the average percentage points by which the annual growth in health spending has exceeded the average annual growth in G.D.P. over the chosen period – a difference known among health policy analysts simply as “excess cost growth” – can vary quite a bit. One really needs charts like these to study the phenomenon, not point-to-point averages.

Second, the annual growth in real health spending per capita appears to have fluctuated around a long-run trend that has declined ever so gently over the longer period (see the blue line in Chart 3). That trend reflects in part that the annual growth in real G.D.P. per capita has also fluctuated around a gently declining trend line. As is shown in Chart 4, the trend line around which excess growth fluctuates is virtually flat.

The $64,000 question is how soon the excess growth of health spending will descend from its historical average of 1.5 to 2.5 percent first to, say, 1 percent or so, and eventually to 0 percent.

It is tempting to view the relatively lower cost growth in recent years as a first step in that direction. But nothing in the history of health spending in the United States suggests that this is the time to break out the Champagne to celebrate that victory.

After all, low rates of spending increases in 2009-10 could just be the lagged effect of the deep recession in 2008-9. There is evidence in the literature that health spending does not completely march to its own drummer, regardless of what happens in the rest of the economy, but instead tends to rise and fall somewhat with the rest of the G.D.P., albeit with a lag of one to two years. The safest bet is that on the long road to eventual zero excess growth in health spending, we will ride up and down quite a few more times on the health-spending roller coaster.

Now why is it reasonable to assume that excess cost growth will just have to decline to zero in the long run – that is, to assume that health spending will not eventually growth faster than G.D.P. and perhaps even more slowly?

Economists would explain such a trend as flows: as the fraction of G.D.P. devoted to health care increases, the added satisfaction, or utility, that people derive from added health care is likely to diminish relative to the added satisfaction derived from consuming more of other things. It could explain a gradual decline in the excess growth of health care spending.

Finally, economists retreat here to the one law on which they all agree, namely, Stein’s Law, named for the late economist Herbert Stein: “If something cannot go on forever, it will stop.” Trust us. It will, in the long run.

This post has been revised to reflect the following correction:

Correction: January 20, 2012

An earlier version of this post reversed a reference to the lines in Chart 3. The blue line (not red) represents health spending; the red line (not blue) represents gross domestic product per capita.

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Health Spending Growth Up in Early 2011 But Trending Toward Record Lows at Year’s End

ANN ARBOR, Mich.--(BUSINESS WIRE)-- The January Health Sector Economic Indicators briefs released today by Altarum Institute’s Center for Sustainable Health Spending indicate that over the first 11 months of 2011, health spending has grown at an annual rate of 4.5 percent, compared to the 3.9 percent increase for 2010, which has just been officially released by the Centers for Medicare & Medicaid Services. This growth was driven by high spending early in 2011 followed by a gradual, steady decline. Spending grew by only 3.6 percent in November 2011 relative to November 2010. Thus, while spending for 2011 as a whole is up, the nation will likely enter 2012 with health spending growth near the record-low levels experienced in 2009 and 2010.

Health care price inflation was 2.0 percent in November, a rate that has been steady throughout 2011, indicating the early 2011 jump in health spending can be traced to a bounce back in per capita health care utilization, which exhibited almost no growth in 2010. Health employment in December rose by 23,000 jobs, just under the 2-year average of 24,000. The health spending share of GDP was 17.8 percent in October 2011, up from 16.4 percent at the start of the recession (December 2007) but down from the all-time high of 18.2 percent in June 2011.

The complete set of briefs, providing monthly data on health care spending, prices, and employment, can be viewed at www.altarum.org/healthindicators.

“Our data build upon and extend the results issued by the Centers for Medicare & Medicaid Services earlier this week and reflect the latest revisions in data from the Bureau of Economic Analysis,” said Center Director Dr. Charles Roehrig. “Hospital spending has much to do with the slowing growth trend through 2011. And while both spending and utilization jumped early in the year, they declined throughout the year to bring us to near record low growth at year’s end.”

Altarum’s Health Sector Economic Indicators briefs offer timely analysis of health sector employment, spending, and prices. To receive an email notification regarding the monthly release of Health Sector Economic Indicators, please visit http://www.altarum.org/publications-resources-health-systems-research/sign-up.

Altarum Institute (www.altarum.org) integrates objective research and client-centered consulting skills to deliver comprehensive, systems-based solutions that improve health and health care. Altarum employs more than 400 individuals and is headquartered in Ann Arbor, Mich., with additional offices in the Washington, D.C., area; Sacramento, Calif.; Atlanta, Ga.; Portland, Maine; and San Antonio, Texas.

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Total health spending is slowing. Government health spending isn’t.

???initialComments:true! pubdate:01/11/2012 12:49 EST! commentPeriod:14! commentEndDate:1/25/12 12:49 EST! currentDate:1/12/12 10:0 EST! allowComments:true! displayComments:true!Posted by Sarah Kliff at 12:49 PM ET, 01/11/2012

Largely due to the recession, health care spending grew in 2009 and 2010 at its slowest rate in five decades. What has not slowed, however, is government spending on health care: A new analysis from the McKinsey Center for U.S. Health System Reform shows that state and federal spending on health care has grown by 55 percent since 2003, nearly twice as fast as private spending growth. Two changes in health care spending, both also products of the recession, explain this trend.

First, fewer Americans have private health insurance, meaning less spent on monthly premiums. Here’s how the McKinsey report explains it:

Between 2007 and 2009, the number of people with employer-sponsored or private individual insurance fell by nearly 10 million. In 2009, the share of Americans with private insurance slipped to 64.5 percent — the lowest level in 20 years of census records — while the share receiving some form of public insurance hit a record high.

That ties into the second driver: Medicaid rolls have expanded as more Americans lose private coverage, and become eligible for the government health-care program that covers low-income individuals. Medicaid has seen huge enrollment gains and, as this chart from the Center for Medicare and Medicaid Services shows, that’s been especially true since 2008:

The overall health care spending slowdown actually masks two divergent trends — one, private health care spending accounts for an increasingly smaller chunk of the $2.6 trillion that the United States spends on health care, and two, government programs foot a larger part of the tab.

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