In 2012, Health Care Costs Grow More Slowly Than U.S. Economy

Health care spending continued to rise in 2012, but it did so at a relatively low rate for the 4th year in a row. The report from the Centers for Medicare and Medicaid Spending said overall spending on health care increased 3.7 percent over the previous year.

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We have been hearing for, well, what feels like forever about skyrocketing health care costs. It's at the center of debates in Washington and state capitals. And many people feel the impact on their wallets and pocketbooks. But here's this reality: Spending on health care, while still going up, appears to be rising more slowly. 2012 was the fourth straight year of modest growth.

As NPR's John Ydstie reports, the people who crunch the numbers for the government are far from ready to call this a long-term trend.

JOHN YDSTIE, BYLINE: Health care spending from all sources rose 3.7 percent in 2012. That's slightly higher than in 2011 but about average for the four years beginning in 2009. A number of things contribut,ed to the modest increase. For one thing, the growth in spending on nursing home services was slower.

Anne Martin is an economist with the Office of the Actuary at CMS, the Centers for Medicare and Medicaid Services. She says growth in prescription drug spending also declined.

ANNE MARTIN: The slowing of prescription drug prices, because of the wave blockbuster drugs that went off patent, at the end of 2011 and in 2012, led to lower prices for previously expensive drugs.

YDSTIE: Slower growth in Medicare spending also contributed. And increases in private health insurance spending remained at historically low rates. The Affordable Care Act had a minimal impact on spending growth in 2012 according to the actuary's report.

Despite the tempering of the growth in health care spending, Aaron Catlin, a deputy director at the CMS, says his group doesn't see evidence of a long-term moderation of the rate of health care spending increases. And Catlin says this kind of stabilization in health care spending has occurred before.

AARON CATLIN: It's consistent with what we've seen in post-recessionary periods in the past.

YDSTIE: Consumers spend less on everything during a recession, including health care, and historically there's a lag in the recovery of health care spending.

Larry Levitt of the Kaiser Family Foundation, acknowledges that health care spending does stabilize after recessions, but he says this time is different.

LARRY LEVITT: Growth this slow for such a sustained period of time truly is unprecedented. I mean these are the lowest rates of growth over these years for a half century, I mean since they've been recording these numbers.

YDSTIE: Levitt says a Kaiser Family Foundation analysis of health care trends finds there's more going on than just the lagging effects of the recession. It concludes that one factor that's slowing spending growth is the rise in health insurance deductibles for consumers.

LEVITT: And as their out-of-pocket costs increase, people are somewhat discouraged from using the health care system, and that brings health care costs down.

YDSTIE: Levitt also believes that even though the ACA hasn't fully kicked in, health care providers, like hospitals, are already taking measures to reduce costs in order to comply with and compete in the new system.

John Ydstie, NPR News, Washington.

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