Medicare's Bending Cost Curve. July 28, 2014. III. Medicare Spending Growth Trends by Service Category


In order to provide a more detailed analysis of the slowdown in Medicare spending, we examined trends in spending by service category and by geographic area. Table 1 compares the compounded average growth rate for the 2000-2008 period and more recent years (2009-2012), by service category. Definitions for each of the service categories used in this analysis are reported in the Appendix (see Table A.1). As with any time period comparisons, the beginning and end years chosen can affect the findings. The earliest year available for the Master Beneficiary Summary File (MBSF, summary data on spending and utilization for beneficiaries in the traditional Medicare program) is 1999, which was used to calculate growth in 2000. The first year of the recession (2008) was selected as the end point for the historical period. The latest year of available MBSF data is 2012. All service categories, with the exception of Anesthesia, experienced declines in their average growth in recent years.

While Table 1indicates the service categories that experienced the largest reductions in spending growth, it does not identify those service categories that contributed the most to the overall slowdown in spending growth. That information is presented in Table 2, which displays each service category’s contribution to the slowdown and its contribution to overall Medicare spending. Post acute services (SNF, home health, hospice), Part B drugs, and imaging procedures contributed the most to the slowdown relative to their share of spending. Although acute inpatient services accounted for 25 percent of the overall slowdown in spending growth, this contribution was smaller than its 32 percent share of overall spending.

Table 1

Change in Medicare Compound Average Spending Growth between 2000-2008 and 2009-2012, by Service Category

Medicare Service Category Compound Average Annual Growth Change in Compound Average Annual Growth
2000-2008 2009-2012
Hospice 16.3% 4.7% -11.6
Imaging 6.5% -4.0% -10.5
Part B Drugs 11.7% 1.9% -9.8
DME 5.9% -2.7% -8.6
Part D 11.7% 3.8% -8.0
SNF 9.6% 1.8% -7.8
Home Health 7.7% 0.1% -7.6
ASC 9.2% 2.9% -6.3
Testing 7.2% 3.1% -4.2
Other Part B 6.7% 2.7% -4.0
Acute Inpatient 3.1% -0.4% -3.5
HOPD 9.3% 6.6% -2.7
Other Inpatient 4.5% 2.1% -2.4
Physician E&M 5.1% 3.0% -2.1
Other Procedures 4.4% 2.3% -2.1
Dialysis 2.4% 2.2% -0.1
Anesthesia 2.9% 3.4% 0.5
img for Change in Medicare Compound Average Spending Growth Between 2000-2008 and 2009-2012

Change in Medicare Compound Average Spending Growth between 2000-2008 and 2009-2012, by Service Category

Medicare Service CategoryCompound Average Annual Growth 2000-2008Compound Average Annual Growth 2009-2012Change in Compound Average Annual Growth
Part B Drugs11.7%1.9%-9.8
Part D11.7%3.8%-8.0
Home Health7.7%0.1%-7.6
Other Part B6.7%2.7%-4.0
Acute Inpatient3.1%-0.4%-3.5
Other Inpatient4.5%2.1%-2.4
Physician E&M5.1%3.0%-2.1
Other Procedures4.4%2.3%-2.1

Data Source: CMS Medicare Beneficiary Summary File

Table 2

Contribution to Slowdown in Medicare Spending Growth between Historical Period (2000-2008) and Recent Years (2009-2012) vs. Average Contribution to Overall Spending in 2008*

Service Category Contribution to Slowdown Contribution to Spending
SNF 11.8% 7.1%
Part B Drugs 7.5% 3.3%
Hospice 6.7% 2.6%
Home Health 8.4% 5.0%
Imaging 5.3% 2.2%
DME 4.7% 2.4%
ASC 1.0% <1.0%
Other Part B 1.5% 1.7%
Dialysis <1.0% <1.0%
Testing 2.1% 2.4%
Part D 11.3% 12.2%
Other Inpatient 2.3% 4.1%
Other Procedures 2.3% 4.9%
Physician E&M 3.7% 7.9%
HOPD 7.2% 11.8%
Acute Inpatient 24.1% 31.0%
Anesthesia^ 0% 0%

* The order of the categories is based on the ratio of contribution to the slowdown to share of spending. For example, skilled nursing facility (SNF) services has the highest ratio ([1+0.118]/[1+0.071] = 1.043).

† The contribution to the slowdown is calculated by multiplying the percentage point decrease in the average spending growth rate for each services category between 2000-2008 and 2009-2012 by each category’s average contribution to overall spending in 2008.

‡ The growth rate for prescription drugs for 2000-2008 is based on the 2008 growth rate, since the Part D program was introduced in 2006 with enrollment ramping up through 2007.

^ The average growth rate for anesthesia increased between 2000-2008 and 2009-2012

Data Source: CMS Medicare Beneficiary Summary File

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