Healthcare Industry An Economic System

Medicare: Medicare spending, which represented 20 percent of national health spending in 2012, grew 4.8 percent to $572.5 billion, a slight slowdown from growth of 5.0 percent in 2011. A one-time payment reduction to skilled nursing facilities in 2012, after a large increase in payments in 2011 due to implementation of a new payment system contributed to the slower growth.

Medicaid: Total Medicaid spending grew 3.3 percent in 2012 to $421.2 billion, an acceleration from 2.4-percent growth in 2011. The relatively low annual rates of growth in Medicaid spending in 2011 and 2012 can be explained in part by slower enrollment growth tied to improved economic conditions and efforts by states to control health care costs. Federal Medicaid expenditures decreased 4.2 percent in 2012, while state and local Medicaid expenditures grew 15.0 percent—a result of the expiration of enhanced federal aid to states in the middle of 2011.

Private Health Insurance: Overall, premiums reached $917.0 billion in 2012, and increased 3.2 percent, near the 3.4 percent growth in 2011. The net cost ratio for private health insurance —the difference between premiums and benefits as a share of premiums —was 12.0 percent in 2012 compared with 12.4 percent in 2011. Private health insurance enrollment increased 0.4 percent to 188.0 million in 2012, but still 9.4 million lower than in 2007.

Out-of-Pocket: Out-of-pocket spending grew 3.8 percent in 2012 to $328.2 billion, an acceleration from growth of 3.5 percent in 2011, reflecting higher cost-sharing and increased enrollment in consumer-directed health plans.

Source: Centers for Medicare & Medicaid Services. (2014). National Health Expenditure Data Highlights. Retrieved from