Minnesota's health care spending slows

2.2 percent increase in 2010 was slowest growth since 1997, likely because of recession, the state said.

Health care spending in Minnesota rose just 2.2 percent in 2010 -- the slowest annual growth rate since 1997, the Minnesota Department of Health reported Wednesday.

Lingering effects of the 2008-09 recession probably explain much of the slowdown, as Minnesotans delayed routine and acute care, according to Health Commissioner Ed Ehlinger. In addition, surveys indicate that many people lost employer health coverage.

Nevertheless, total medical spending reached $37.7 billion, nearly one-seventh of the state economy, according to the yearly report.

And officials said health care inflation is likely to resume its upward spiral soon. Spending through 2020 is expected to grow at an average annual rate of 7.4 percent as the economic recovery gains momentum and Minnesotans return to previous levels of insurance coverage and health care use, the department predicted.

"We are concerned that these rates may increase in coming years as people address their deferred health care needs," Ehlinger said.

Although hospital systems such as the Mayo Clinic, Fairview Health System and Allina Health have been experimenting with insurers on ways to control costs, these efforts remain too small to make much of a dent in overall spending, department analysts said.

On average, Minnesotans spent $7,090 per person on health care in 2010, well below the national average of $7,910.

Health spending also consumed a smaller share of Minnesota's economy than the national average -- 13.9 percent vs. 16.8 percent nationally.

One "puzzle" in the data is that Minnesotans spend less on health care, per person, than the national average yet are far healthier by most indicators, said Louis Johnston, an associate professor of economics at the College of St. Benedict.

"We have strong wellness plans, we have lower rates of smoking and we tend to have better dental care, which affects other categories of health care," he suggested as a possible explanation.

Private health insurance was the largest source of payment, at 40.5 percent of all outlays. Medical Assistance, a federal-state program for the poor, disabled and elderly, came in second at 19.4 percent. Medicare, the federal health insurance program for the elderly, was third, at 18.3 percent, and consumer out-of-pocket spending represented 12.3 percent.

Government pays nearly half

Public insurance programs picked up a larger share of the total bill in 2010 -- 44.6 percent -- as Minnesotans lost private insurance coverage. Nevertheless, private and public health spending both grew more slowly than in previous years.

In-patient hospital care and physician services were the two largest categories of spending -- each representing 20 percent of the total -- followed closely by long-term and home-health care, at 15 percent. Prescription drugs accounted for just under 10 percent of the total.

The report counted health care outlays from all sources, including private health insurance, out-of-pocket spending, state public programs and Medicare.

The report is available online at www.health.state.mn.us/healtheconomics.

pwalsh@startribune.com • 612-673-4482 crosby@startribune.com • 612-673-7335

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