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Healthcare Spending Growth Hits 53-Year Low

John Commins, for HealthLeaders Media, January 7, 2014

Offsetting that growth, however, was slower growth in spending for prescription drugs and nursing home care. Out-of-pocket spending for Medicaid grew faster in 2012 than in 2011, while private plans and Medicare saw lower spending growth than in 2011, the report said.

CMS offered this detailed breakdown of healthcare cost growth in 2012 compared with 2011:

Hospital spending (4.9%)
Reached $882.3 billion in 2012, an increase of 1.5 percentage points over the 2011 growth rate due to faster growth in both price and non-price factors. Price growth (as measured by the Producer Price Index for hospital services) picked up slightly in 2012 to 2.5%, compared to 2.1% a year earlier. Non-price factors, which include use and intensity of services, also grew faster than in 2011.

Physician and clinical services (4.6%)
Growth increased from 4.1% in 2011 to reach $565 billion in 2012 due primarily to increased growth in non-price factors, such as the use and complexity or intensity of services. Physician services, which accounted for 80% of this spending, grew by 4% in 2012, up from 3.5% growth in 2011.

Medicaid expenditures (3.3%)
Growth increased from 2.4% in 2011 to reach $421.2 billion in 2012. Nevertheless, these were the two slowest annual rates of growth in the history of Medicaid, excluding 2006 when Medicare Part D was implemented and changed the way Medicaid paid for some beneficiaries' prescription drugs. These slow growth rates were due primarily to slower enrollment growth and efforts by the states to control costs following the expiration of enhanced federal matching rates.

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