June 30, 2014
Report finds low health care spending growth in 2012
Third lowest rate of increase since mid-1990s
Health care spending in Minnesota increased by 4 percent to $39.8 billion from 2011 to 2012, according to a report released today by the Minnesota Department of Health (MDH).
The report includes the most recent Minnesota spending data and looks at all health care spending, including private health insurance, out-of-pocket spending, state public programs, and Medicare.
These latest health care spending data show that health care spending increased slightly as the economy improved but remained low by historic standards. Minnesota spending growth was about the same as the national spending growth rate of nearly 4 percent in 2012, the most recent year for which data are available. Although twice the spending growth in 2011, the 2012 growth represents the third lowest rate of increase since Minnesota began tracking this trend in the mid-1990s.
Minnesota's per-person health care spending in 2012 of $7,403 was lower than the national per person cost of $8,389. Plus, health care spending accounted for a smaller share of Minnesota's economy, 13.5 percent, compared to the national number of 16.2 percent.
"By historic standards Minnesota saw low growth in health care spending in 2012," said Minnesota Commissioner of Health Dr. Ed Ehlinger. "However, projections of future spending highlight that we must continue to focus on disease prevention and creating healthy communities if we are going ensure sustainability of health care costs over the long term."
The spending trend suggests the considerable effect of the recession may have begun to wane in 2012, even though Minnesota's uninsured rate remained high and employment had not fully recovered. "It's yet to be seen whether Minnesota will return to near double-digit rates of growth after the lagged effects of the recession have worn off," said Stefan Gildemeister, MDH's state health economist. "What we are learning from Minnesota's lower than national per-person spending suggests our role as a leader in delivering efficient health care services remains intact."
Other possible factors slowing the growth in costs include:
- Continued increased shifting of costs to consumers.
- Slower development and implementation of new medical technologies.
- Implementation of consumer protections in insurance, which require health insurance companies to spend a certain share of premiums on delivery of health care services.
- A number of government and private sector initiatives aimed at improving care coordination, promoting value through payment reform and investing in health information technology.
Future spending projections
The report also contains projections of health care spending to estimate future spending trends, including the marginal impact of the Affordable Care Act and Minnesota health reforms.
Considering all available information, including Minnesota's 2008 reforms and the recent financial downturn, MDH projects that health care spending will reach $76.4 billion by 2022, an average annual growth of 6.7 percent. A small portion of this growth is driven by anticipated growth in coverage and health care use due to the Affordable Care Act. Health care spending for the newly insured is projected to increase total spending by about $1.8 billion in 2016, the year when analysts expect changes in coverage to stabilize.
The report also contains projections of what may have happened to health care spending without Minnesota's 2008 reforms. In 2012, actual spending was $3 billion below the level of spending expected without Minnesota reforms, a difference that state law defines as "savings related to reform." The report estimates that $372.1 million of this may be attributable to state-administered programs.
This report is available online at http://www.health.state.mn.us/healtheconomics.