Temperate financial growth continues with health spending up 4.2 percent in July


[See also: Healthcare costs raise serious concern among general public]

National health spending in July grew 4.2 percent relative to July 2011, up from the 3.9 percent growth rate experienced in June, according to the Health Sector Economic Indicators brief released recently by the Altarum Institute's Center for Sustainable Health Spending.

Despite the upward tick in health spending, the growth represents a historically moderate trend rate.

Healthcare prices in July were up 1.9 percent from July 2011, down fractionally from June. On a 12-month moving average basis, price growth is now lower than at any time since January 1999.

"This is historically a low rate of growth," said Charles Roehrig, director, Center for Sustainable Health Spending. "Researchers have typically been asking themselves why is it going up so slowly relative to historical trends."

One reason commonly cited for the slow growth rate is the recession, but there is a flaw in that argument, said Roehrig.

"Spending was actually declining prior to the recession, about two and a half years before the recession, so it's incorrect to attribute the slow growth [to the economy]," he said.

According to Roehrig, the center is currently studying the trend and working to determine the main factors.

Although he said it is "too soon to draw firm conclusions," Roehrig believes stagnant Medicare reimbursement rates are one possible contributing factor.

"Medicare has put the clamps on fee increases," he said. "I think payment rates from Medicare have been holding spending down. That's a credit to the government...in terms of holding spending down."

Roehrig expects Medicare rates to remain steady given the current state of the U.S. economy. "The pressure to push down spending is going to be relentless," he said.

Another possible factor, Roehrig noted, is higher-deductible insurance plans. "Deductibles have gotten higher and higher on the privately insured side of the market and it's a likely cause of the slowdown. Utilization has been slowing and greater out-of-pocket spending is a natural source of that slower spending."

Other key reasons for the slow growth rate are savings from generic drugs, the decline in employer-sponsored health insurance plans and a new level of scrutiny around the use of CT and MRI machines, said Roehrig.

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