January 23, 2013
Costs for Retail Prescription Drugs Spike While Overall Increases Remain Low

Bethesda, MD—Increased spending for retail prescription drugs went against the tide of low levels of annual growth in health care spending, according to a new report.

The annual growth in health care spending remained at 3.9% in 2011, the same low level of annual growth as in 2009 and 2010. Those 3 years represent the slowest growth rates ever recorded in the 52-year history of the National Health Expenditure Accounts, according to a recently published analysis from the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS).

Some areas of health care spending were dramatically contrary to that trend, according to the report in the January issue of the journal Health Affairs. Posting the greatest increase in growth rate from 2010 to 2011 were retail prescription drugs, which shot up from 0.4% growth in 2010 to 2.9% growth in 2011. Report authors blamed part of that trend on price increases in brand-name and specialty drugs.

Despite the overall stability in health care spending, the health-spending share of GDP stayed stable in 2011 at 17.9%. "We observed faster growth in spending among some payers and services in 2011," said Micah Hartman, statistician in the Office of the Actuary at CMS and lead author of the Health Affairs article.

In fact, faster growth in personal health care spending in 2011 was driven by increases in expenditures for retail prescription drugs and a few other sectors. Those were partly offset by slower growth in spending for hospital services.

In addition to retail prescription drugs, areas showing faster growth were:

• Physician and clinical services, which grew 4.3% in 2011 compared to 3.1% in 2010, largely because of nonprice factors, such as the use and complexity or intensity of services that more than offset slower growth in prices for these services, according to the report;
• Medicare spending, 6.2 % in 2011 compared to 4.3% in 2010, which was attributed to a one-time increase in expenditures for skilled nursing facilities and faster growth in spending for physician services under fee-for-service Medicare and for Medicare Advantage spending;
• Private health insurance, 3.8% in 2011 compared to 3.4% in 2010, said to be related to a 0.5% increase in private health insurance enrollment, which had declined from 2008 to 2010; and
• Out-of-pocket spending, 2.8% in 2011 compared to 2.1% in 2010, linked to higher cost sharing and increased enrollment in consumer-directed health plans.

On the other hand, the growth in hospital spending declined from 4.9% in 2010 to 4.3% in 2011, and analysts suggested that was because of slower growth in the prices charged by hospitals and low growth in use of hospital services and in Medicaid spending for hospital care.

The biggest drop was in Medicaid expenditures, where growth slowed from 5.9% in 2010 to 2.5% in 2011, primarily because of continued financial pressure on state budgets due to the economy and a shift in the share of spending from the federal government to the states with the expiration of enhanced federal aid to states in June 2011. The Medicaid program also had slower enrollment growth, from 4.9% in 2010 to 3.1% in 2011.

Report authors admit some uncertainty about whether the overall stable growth trends will continue.

“Overall, there was relatively slow growth in incomes, jobs, and GDP in 2011,” they write, “which raises questions about whether U.S, health care spending will rebound over the next few years as it typically has after past economic downturns.”

U.S. Pharmacist Social Connect