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National Health Spending Growth in 2013, at 3.6 Percent, Continued a Pattern of Low Growth for Five Consecutive Years

Spending Remains at 17.4 Percent of Gross Domestic Product, Unchanged since 2009
December 3, 2014

Bethesda, MD—A new analysis from the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS) estimates that in 2013 health care spending in the United States grew at a rate of 3.6 percent in 2013 to $2.9 trillion, or $9,255 per person. The increase was slower than the 4.1 percent growth in 2012 and continued a pattern of low growth that has held relatively steady at between 3.6 percent and 4.1 percent annual growth for five consecutive years.

The continued low growth in health spending is consistent with the modest overall economic growth since the end of the recent severe recession and with the long-standing relationship between economic growth and health spending—particularly several years after the end of economic recessions, when health spending and overall economic growth tend to converge. As a result, health spending’s share of the nation’s gross domestic product (GDP) remained at 17.4 percent in 2013.

The study is being released today by Health Affairs as a Web First. The study link, once the embargo lifts, will be

Slower growth in both private health insurance and Medicare contributed to the 0.5 percentage-point slowdown in the nation’s health care spending growth. Private health insurance premium growth slowed from 4.0 percent in 2012 to 2.8 percent in 2013. Growth in private insurance benefits slowed from 4.4 percent in 2012 to 2.8 percent in 2013, largely driven by slower growth in spending for hospital services and physician and clinical services.  Medicare spending growth decelerated as a result of slower growth in enrollment, net impacts of the Affordable Care Act (ACA) and the federal budget sequestration. 

“The key question is whether health spending growth will accelerate once economic conditions improve significantly,” said Micah Hartman, a statistician in the Office of the Actuary at CMS and lead author of the Health Affairs article. “Historical evidence suggests it will.”

Legislation, including the ACA and budget sequestration, affected spending growth trends in 2013, particularly for Medicare. Several key ACA provisions exerted downward pressure on health spending growth, including the adjustments to Medicare fee-for-service payments, reduced Medicare Advantage base payment rates, increased Medicaid prescription drug rebates and the medical loss ratio requirement (which requires insurers spend a minimum percentage of revenue on medical claims and health care quality improvements). At the same time, other provisions—such as early Medicaid expansion initiatives, a temporary increase in Medicaid primary care provider payments, reducing the Medicare Part D doughnut hole and the implementation of prescription drug industry fees—exerted upward pressure on health spending growth.

Major areas where spending growth slowed (from 2012) included:

  • Private health insurance (2.8 percent)—premiums grew at a slower rate in 2013 than in 2012, increasing just 2.8 percent to $961.7 billion, compared to an increase of 4.0 percent in 2012. Contributing factors included low overall enrollment growth, a shift toward enrollment in consumer-directed high deductible plans, historically low underlying benefit cost trends, and the impact of the medical loss ratio requirement and rate review required by the ACA.
  • Medicare spending (3.4 percent)—growth slowed in 2013, increasing 3.4 percent compared to 4.0 percent growth in 2012, to reach $585.7 billion in 2013. This slowdown was primarily caused by a deceleration in Medicare enrollment growth, as well as net impacts from the ACA and sequestration. Per-enrollee Medicare spending grew at about the same rate as 2012, increasing just 0.2 percent in 2013.
  • Out-of-pocket spending (3.2 percent)—spending by consumers (including copayments, deductibles, and spending on services not covered by insurance) grew by 3.2 percent in 2013, which was slightly slower than the 3.6 percent growth rate in both 2012 and 2011.
  • Hospital spending (4.3 percent)—expenditures reached $936.9 billion in 2013, an increase of 4.3 percent, which was slower than the growth of 5.7 percent for the previous year. The slower growth is attributed in part to decreased use of hospital inpatient services and a slower rate of growth in prices.  
  • Physician and clinical services (3.8 percent)—spending slowed from a growth rate of 4.5 percent in 2012. Slower price growth (from 1.2 percent in 2012 to less than 0.1 percent in 2013— its slowest since 2002) was a contributing factor to the deceleration.

Major areas where spending growth accelerated in 2013 (over 2012) included:

  • Retail prescription drugs (2.5 percent)—spending reached $271.1 billion in 2013. This follows a low growth rate of just 0.5 in 2012, which was due largely to a number of blockbuster drugs losing their patent protection and becoming available much less expensively in generic form. Other factors influencing the 2013 pickup in growth rate included price increases for brand-name and specialty drugs, as well as increased spending on new medicines and increased utilization.
  • Medicaid expenditures (6.1 percent)—spending reached $449.4 billion in 2013, accounting for 15 percent of total national health expenditures. This followed growth of 4.0 percent in 2012 and 2.5 percent in 2011—the two slowest growth years in the history of Medicaid (excluding 2006 when Medicare Part D was implemented, changing the way Medicaid paid for some beneficiaries’ prescription drugs). The faster growth in 2013 was due in part to increased growth in some provider reimbursement rates and a temporary increase in payments to primary care physicians mandated by the ACA. Medicaid enrollment grew 2.7 percent, and spending per enrollee grew by 3.3 percent in 2013.   

Note:  This study will appear in the January 2015 issue of Health Affairs.


Amy Martin Vogt ([email protected], 202-745-5052)

Sue Ducat ([email protected], 301-841-9962)