Health Finance Issues
Updated April 2013
Introduction
Health finance includes the mobilization of funds for health care, the allocation of funds to specific regions and population groups and for specific types of health care, and/or mechanisms for paying for health care. Rising health care costs continue to dominate the American health policy agenda. Accordingly, there are thousands of publications, hundreds of professional, industry and advocacy organizations, and dozens of well-funded "think tanks" writing about health finances. In the face of this activity, the National Conference of State Legislatures has concentrated its own resources on questions frequently asked by state legislators.
At-a-Glance:
Health spending in the U.S. reached an estimated $2.8 trillion in 2012 while overall growth remains low. For 2011, the figure was $2.7 trillion, according to the most recent federal actuary analysis released in Health Affairs in January 2013. The rate of growth nationwide in both 2010 and 2011 was 3.9 percent, and only 0.1 percentage point higher than the 2009 growth rate of 3.8 percent. National health spending averaged $8,680 per person in 2011. Health care accounted for 17.9 percent of the gross domestic product in both 2010 and 2011, according to the report. [Health Affairs summary posted here]
The major areas where spending growth accelerated in 2011 (over 2010) were:
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Physician and clinical services (4.3 percent) spending grew faster in 2011 compared to growth of 3.1 percent in 2010 and was due primarily to increased growth in nonprice factors, such as the use and complexity or intensity of services that more than offset slower growth in prices for these services.
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Medicare spending (6.2 percent) growth (compared to 4.3 percent growth in 2010) is attributable to a one-time increase in spending for skilled nursing facilities and faster growth in spending for physician services under fee-for-service Medicare and for Medicare Advantage spending.
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Private health insurance (3.8 percent) accelerated from 3.4 percent growth in 2010 and was mainly due to private health insurance enrollment increasing 0.5 percent in 2011, after declining each year from 2008 to 2010.
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Retail prescription drugs (2.9 percent) spending growth accelerated from 0.4 percent growth in 2010, partly because of price increases in brand-name and specialty drugs. Howeverthe growth is significantly lower than the 2009 figure of 5 percent growth.
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Out-of-pocket spending (2.8 percent) growth increased faster in 2011 compared to 2010, when growth was 2.1 percent, and was partially due to higher cost sharing and increased enrollment in consumer-directed health plans.
The major areas where spending growth slowed (from 2010) were:
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Medicaid expenditures (2.5 percent) growth slowed from 5.9 percent in 2010 and was mainly due to continued financial pressure on state budgets because of the economy and a shift in the share of spending from the federal government to the states (a result of expiration of enhanced federal aid to states in June 2011), as well as slower enrollment growth in the program (from 4.9 percent in 2010 to 3.1 percent in 2011).
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Hospital spending (4.3 percent) slowed from 4.9 percent growth in 2010 is attributable to slower growth in the prices charged by hospitals and low growth in use of hospital services and in Medicaid spending for hospital care.
Read More: This CMS Office of the Auctuary report received widespread media attention – see:
National Health Expenditures (NHE), Amounts And Share Of Gross Domestic Product (GDP), Selected Calendar Years 2000–2011
|
Spending category |
2000 |
2009 |
2010 |
2011 |
2011 Growth |
|
NHE, billions |
$1,377.2 |
$2,501.2 |
$2,600.0 |
$2,700.7 |
3.9% |
|
Health consumption expenditures |
1,289.6 |
2,355.1 |
2,450.8 |
2,547.2 |
3.9% |
|
Personal health care (PHC) |
1,165.4 |
2,111.6 |
2,190.0 |
2,279.3 |
4.1% |
|
Hospital care |
415.5 |
777.9 |
815.9 |
850.6 |
4.3% |
|
Professional services |
390.2 |
672.5 |
694.2 |
723.1 |
4.2% |
|
Physician and clinical services |
290.9 |
503.2 |
519.1 |
541.4 |
4.3% |
|
Other professional services |
37.0 |
66.8 |
69.8 |
73.2 |
4.9% |
|
Dental services |
62.3 |
102.5 |
105.3 |
108.4 |
3.0% |
|
Other health, residential, and personal care |
64.5 |
122.5 |
128.0 |
133.1 |
4.0% |
|
Home health care |
32.4 |
67.3 |
71.2 |
74.3 |
4.5% |
|
Nursing care facilities and continuing care communities |
85.1 |
138.5 |
143.0 |
149.3 |
4.4% |
|
Retail outlet sales of medical products |
177.6 |
332.9 |
337.8 |
348.9 |
3.3% |
|
Prescription drugs |
120.9 |
254.6 |
255.7 |
263.0 |
2.9% |
|
Durable medical equipment |
25.2 |
34.9 |
36.9 |
38.9 |
5.3% |
|
Other nondurable medical products |
31.6 |
43.5 |
45.2 |
47.0 |
4.9% |
|
Government administration |
17.1 |
30.8 |
31.1 |
32.5 |
4.7% |
|
Net cost of health insurance |
64.1 |
137.1 |
150.4 |
156.4 |
4.0% |
|
Government public health activities |
43.0 |
75.6 |
79.3 |
79.0 |
-0.5% |
|
Investment |
87.5 |
146.1 |
149.1 |
153.5 |
2.9% |
|
Research |
25.5 |
45.3 |
49.0 |
49.8 |
1.7% |
|
Structures and equipment |
62.1 |
100.8 |
100.1 |
103.7 |
3.6% |
|
GDP, billions of dollars |
$9,951.5 |
$13,973.7 |
$14,498.9 |
$15,075.7 |
4.0% |
|
US Population (millions) |
282.3 |
306.4 |
308.9 |
311.1 |
0.7% |
|
NHE per capita |
$4,878 |
$8,163 |
$8,417 |
$8,680 |
3.1% |
|
GDP per capita |
$35,251 |
$45,605 |
$46,939 |
$48,452 |
3.2% |
|
NHE as percent of GDP |
13.8 |
17.9 |
17.9 |
17.9 |
0.0%
|
SOURCES: Adopted from exhibits 1 and 2 as published in Health Affairs, January 7, 2013. Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group; and US Department of Commerce, Bureau of Economic Analysis and Bureau of the Census.
Medicaid Expenditures and Enrollment continue to be a dominant state concern and commitment.
According to NCSL's State Budget Update of December 2011) six states reported that Medicaid or other health care programs were over budget, compared with 18 states last year. Georgia indicated that its State Health Benefit Plan (for state and school employees) was over budget this fiscal year, but actions were already being taken to correct the imbalance. California officials assume that the state will be unable to achieve budget savings in Medi-Cal, the state’s Medicaid program. Colorado, Maine, Maryland and North Carolina reported that their Medicaid programs had costs above the budgeted level for FY 2012.
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NCSL's Fall State Budget Update report.
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Among the 2012 budgets "the most significant change "was the absence of American Recovery and Reinvestment Act (ARRA) funds. Some states reported large appropriations increases as they attempted to restore some of the spending previously supported by ARRA funds—Medicaid (34 states)."
HHS finalizes rule guaranteeing 100 percent funding for new Medicaid beneficiaries
On March 29, 2013, Health and Human Services (HHS) announced a final rule with a request for comments that provides, effective January 1, 2014, the federal government will pay 100 percent of the cost of certain newly eligible adult Medicaid beneficiaries. These payments will be in effect through 2016, phasing down to a permanent 90 percent matching rate by 2020. The Affordable Care Act authorizes states to expand Medicaid to adult Americans under age 65 with income of up to 133 percent of the federal poverty level (approximately $15,000 for a single adult in 2012) and provides "unprecedented federal funding for these states." Read the HHS fact sheet and rules, released 3/29/2013.
NCSL Published Resources
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NCSL Cost Containment Project: Containing Health Costs and Improving Efficiency: An Analysis of State Options- 16 NCSL reports on state options for health cost containment, with recent updates for 2012-2013.
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Medicaid: Containing Costs and Improving Value - NCSL Overview, updated 2013.
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States and Small Business Health Insurance: An Overview- NCSL report, updated 2013.
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Certificate of Need: State Health Laws and Programs- NCSL report, updated 2012.
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Employer Tax Incentives to Offer Health Insurance- NCSL report, updated 2011.
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State Tobacco Tax Increase Legislation- Report updated 2011.
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Health Care Provider and Industry Taxes and Fees- NCSL report with data from Fiscal Affairs Program, updated 2013.
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Health Insurance: Premiums and Increases Comparison Nationally and by State - 2004 - 2011- Compiled by NCSL, updated 2013.
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State Legislation Relating to Transparency and Disclosure of Health and Hospital Charges- NCSL report on price transparency.
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State Employee Health Benefits- A one-stop web resource page, with statistics, links to states and premiums, and other experts, updated for 2013.
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State Pharmaceutical Assistance Programs - Health Program, updated for 2012.
NCSL Meeting Presentations
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Can We Afford Our Healthcare? New Directions and Solutions- NCSL Legislative Summit, Sponsored by the NCSL Health Committee, 7/24/10
America spends an astounding $2.4 trillion to keep us alive, productive and healthy, a number that will rise by $175 billion this year. Some states want to take the lead in "fixing" key parts this system—a daunting task for big- and small-government experts alike. Hear three national experts discuss recent initiatives intended to control costs while preserving or improving health outcomes.
Jeanne Lambrew, Associate Professor of Public Affairs, LBJ School, University of Texas; former Assistant Director for Health, OMB, White House- Presentation
Robert B. Helms, Resident Scholar & Director of Health Policy Studies, American Enterprise Institute; former Assistant Secretary, HHS, Washington, D.C.- Presentation
John Clymer, President, Partnership for Prevention, Washington, DC- Presentation
Additional, Non-NCSL Online Resources & Reports of Interest
The following is a select list of more recent or state-oriented reports from government, policy, media and academic sources.
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Assessing the Effects of the Economy on the Recent Slowdown in Health Spending.
Health spending has been growing at historically low levels in recent years. The Office of the Actuary (OACT) in the Centers for Medicare and Medicaid Services reports that national health spending grew by 3.9% each year from 2009 to 2011, the lowest rate of growth since the federal government began keeping such statistics in 1960. Estimates from the Center for Sustainable Health Spending at the Altarum Institute suggest that the slowdown largely continued into 2012, with health spending growing by 4.3% last year. The Kaiser Family Foundation/Health Research & Educational Trust Employer Health Benefits Survey shows similar moderation, with premiums in employer-sponsored health plans increasing by 4% in 2012. [Full Report, HTML] Kaiser Family Foiundation, April 2013
Health Care Costs and Spending in Massachusetts: A Review of the Evidence This comprehensive chart pack pulls together, in one easy-to-use resource, many of the major findings and analyses from recent state and national research efforts including reports by the Massachusetts Division of Health Care Finance and Policy, the Massachusetts Attorney General’s Office, as well as analyses by the Centers for Medicare and Medicaid Services and the Dartmouth Atlas of Health Care. The chart pack features data and complete references on topics such as Massachusetts health care spending trends, cost drivers, variations in pricing as well as key differences between Massachusetts and the U.S.- March 2012.
> Health Care Costs and Spending in Massachusetts: A Review of the Evidence as a PDF file
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Medical Expenditure Panel Survey (MEPS) - comprehensive health data by state, 2011 and earlier,
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Insurance Component collects data from private and public sector employers on the health insurance plans offeed to employees.
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Publications: Analyses of MEPS data ranging from brief to extensive reports, chartbooks consisting mainly of graphs, and descriptions
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Conduct your own state data search - 50-state tables on costs, premiums, enrollment, most for 2011 and back to 1999. State Search
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Private-sector establishments that offer health insurance by firm size and % by State: 2011- PDF | HTML
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Private-sector establishments that offer health insurance by plan provider arrangement, % by State: 2011 PDF (6.6 KB) HTML
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The New York Times published Slower Growth of Health Costs Eases U.S. Deficit, by Annie Lowrey, February 11, 2013. The article discusses the recent report (The Budget and Economic Outlook: Fiscal Years 2013-2023) released by the Congressional Budget Office in which findings suggest that spending on Medicare and Medicaid in 2020 will be roughly $200 billion, or 15 percent less than was projected as recently as three years ago. The report also suggests that the U.S. is looking at a fourth consecutive year of record-low growth in health care spending, the lowest in more than 50 years.
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The Commonwealth Fund released a report, Stabilizing U.S. Health Spending While Moving Toward a High Performance Health Care System, in January 2013. The report provides a strategy for stabalizing health spending and concludes that the "approach could slow spending by a cumulative $2 trillion by 2023."
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The Alliance for Health Reform released High and Rising Costs of Health Care in the U.S. The Challenge: Changing the Trajectory, in January 2013. "Controlling costs requires decreasing waste; reforming the payment system to change incentives; changing the delivery system to improve coordination and integration; managing costly patients with chronic diseases differently; engaging patients and families in shared decision making, particularly at the end of life; and many other discrete activities."
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Non-Profit Hospitals and Community Benefits
The Hilltop Institute’s Hospital Community Benefit Program, is a central resource for policymakers who seek to ensure that tax-exempt hospital community benefit activities are responsive to community health needs. The Institute has released a number of new resources. [links added April 2013]
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What Are Hospital Community Benefits? - A Fact Sheet gives a brief overview of hospital community benefits and considerations for state and local decision-makers.
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Community Benefit State Law Profiles, a compilation of each state’s community benefit laws and regulations analyzed in the context of the Affordable Care Act’s (ACA’s) community benefit framework. An interactive map links to each state’s Profile and a summary table compares community benefit laws from state to state.
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Hospital Community Benefits after the ACA: The State Law Landscape - An issue brief presents the Profiles’ findings and begins the analysis to facilitate a better understanding of each state’s community benefit landscape and its significance in the context of national health reform.[16 pp, PDF]
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National Spending for Long-Term Services and Supports (LTSS), 2011
Long-term services and supports (LTSS) for the elderly and younger populations with disabilities are a significant component of national health care spending. In 2011, spending for these services was $210.9 billion (9.3 percent of all U.S. personal health care spending), almost two-thirds paid by the federal-state Medicaid program. This publication by the National Health Policy Forum (NHPF) presents data on LTSS spending by major public and private sources. February, 2013. [8 pp, PDF]
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"The relevant question is how best we can serve our social needs at the lowest possible cost...improving the delivery of social services like health care and pensions may be possible without increasing the burden on American families, simply by removing the profit motive from the equation," reports Eduardo Porter of the New York Times. Health Care and Profits Make for a Poor Mix, January 9, 2013.
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State Health Expenditure Accounts by Residence Location Highlights [PDF, 80KB]- from the CMS Actuary / Census Bureau [added to this site, 6/2012]
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Health Spending by State of Residence, 1991-2009 [PDF, 1MB]
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State Health Expenditure Accounts, 1991-2009: Converting Estimates from State of Provider to State of Residence [PDF, 236KB]
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Health expenditures by state of residence: Summary Tables, 1991-2009 [PDF, 1MB]
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Health Spending Projections Through 2018: Recession Effects Add Uncertainty To The Outlook- Heath Affairs, 2/24/09.
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Physician Practices' Interactions With Plans Cost $31 Billion Annually- Health Affairs, 5/14/09.
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Can Episode-of-Care Based Payments Be the Bridge That Finally Brings Accountability to America's Fragmented Health Care System?- A critical part of restructuring the health care delivery system is the need to develop an effective payment formula that rewards professionals for delivering high-quality, coordinated and efficient care. Harbridge/RW Johnson, 8/17/09.
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States Slash Budgets Including Cuts In Health Programs - News from Kaiser Health Network, 12/23/09.
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National Health Expenditures Historical 1970-2008- Released 1/5/2010. [PDF]
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"Estimated Financial Effects of the Patient Protection and Affordable Care Act"- Published by the HHS/CMS Office of the Actuary, 4/22/10.
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2010 Long-Term Care Cost of Care research report - Prudential Financial resource for consumers seeking information to help them make informed decisions about their long-term care needs. The study found an increase in the average cost of long-term care ranging from 5% to 13%, varying by type of service, in the past two years alone.
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An Overview of the U.S. Health Care System: Chart Book- Published by Centers for Medicare and Medicaid Services and Office of the Assistant Secretary for Planning and Evaluation, HHS, 11/17/10.
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Geographic Variation in Spending and Utilization Among the Commercially Insured- Thomson Reuters, 7/27/11.
> Graphic from "Assessing the Effects of the Economy on the Recent Slowdown in Health Spending" Report April 2013
Dated and Archived Online Resources
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Health Care Spending in the United States and OECD Countries- Kaiser Family Foundation, 1/07.
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A first-time detailed analysis by the HHS/CMS Office of the Actuary (2008 Actuarial Report on the Financial Outlook for Medicaid):
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Estimated average Medicaid enrollment was 49.1 million people in 2007. At some point during the year, 61.9 million people, or about one of every five persons in the U.S., were enrolled in Medicaid.
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Per-enrollee spending for health services was an estimated $6,120 in 2007. Per-enrollee spending for non-disabled children ($2,435) and adults ($3,586) was much lower than that for aged ($14,058) and disabled beneficiaries ($14,858), reflecting the differing health status of these groups.
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Expenditures for medical assistance payments represent about 94 percent of all Medicaid outlays and are projected to increase 7.3 percent to $339.0 billion in 2008. Over the next 10 years, expenditures on benefits are projected to increase at an average annual rate of 7.9 percent and to reach $673.7 billion by 2017.
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Total Medicaid outlays in FY 2007 were $333.2 billion; $190.6 billion or 57 percent represented federal spending, and $142.6 billion or 43 percent represented state spending.
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Insurance Premium Cost-Sharing and Coverage Take-up- Kaiser Family Foundation, 2/07.
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Health Spending Projections Through 2016: Modest Changes Obscure Part D’s Impact. Over the next decade, U.S. health care spending is expected to double from today’s level, reaching $4.1 trillion and consuming almost twenty cents of every dollar spent, federal forecasters report in an article published in Health Affairs Web Exclusive. Health spending in 2006 is projected at $2.1 trillion, which accounts for 16 percent of the gross domestic product. The average annual growth in health care spending is projected to remain relatively steady at 6.9 percent from 2006 through 2016, Health Affairs, 2/21/07.
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The Burden of Out-of-Pocket Health Spending Among Older Versus Younger Adults- Analysis of Medicare data by the Kaiser Family Foundation, 9/07.
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Individual Health Insurance 2006-2007: A Comprehensive Survey of Premiums, Availability, and Benefits- The latest in a series of AHIP surveys shows that the market for individually purchased coverage is more affordable and accessible than may be widely known. America's Health Insurance Plans, 12/19/07.
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"Health Spending Projections Through 2017: The Baby-Boom Generation Is Coming To Medicare" - CMS staff analysis as published in Health Affairs Web article, 2/26/08.
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"The cost of hospital care is difficult to pin down" - Philadelphia Inquirer, 6/8/08.
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"Surgical Errors Cost Nearly $1.5 Billion Annually"- AHRQ, 7/28/08.
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79 Million Americans Struggle to Pay Medical Bills- New numbers show the problem is getting worse, not better, even for middle class. US News & World Report, 8/20/08.
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Key Issues in Analyzing Major Health Insurance Proposals- Focuses on "large-scale proposals, provides extensive background information, and includes analysis of numerous issues that could arise should the Congress seek to enact major changes in the health insurance system. Key Issues does not provide analyses of specific proposals." Published by the Congressional Budget Office, 12/08. PDF Charts Summary. [196 pages, PDF]
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(c) New York Times January 8, 2013
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Information compiled by Richard Cauchi and Kara Hinkley, NCSL Health Program, Denver.
NOTE: NCSL provides links to other Web sites for informational purposes only. Providing these links does not indicate NCSL's support or endorsement of the site.
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