Fact Sheets
RECESSION EXPECTED TO IMPACT GROWTH IN NATIONAL HEALTH EXPENDITURES OVER THE NEXT SEVERAL YEARS
RECESSION EXPECTED TO IMPACT GROWTH IN NATIONAL HEALTH EXPENDITURES OVER THE NEXT SEVERAL YEARS
Growth in national health expenditures (NHE) in the United States is expected to have increased faster than the growth in the Gross Domestic Product (GDP) last year, according to a report issued today by the Centers for Medicare & Medicaid Services (CMS). The report was prepared by CMS’s Office of the Actuary and published on-line by the journal Health Affairs.
In 2009, NHE is projected to have reached $2.5 trillion and grown 5.7 percent, up from 4.4 percent in 2008 (the latest available historical year), while GDP, with the economy still in recession, is anticipated to have declined 1.1 percent.
Note that although we are in the year 2010, health spending estimates for 2009 represent projections as data for all of calendar year 2009 are not yet available.
The projected acceleration in growth for 2009 was due in part to faster spending growth for the Medicaid program (9.9 percent; up from 4.7 percent in 2008), reflecting increasing growth in enrollment associated with the recession. Also contributing to the acceleration was faster growth in the use of a variety of health care services as many sought treatment for the H1N1 virus and an expected increase in the take-up rate for coverage provided through the Consolidated Omnibus Budget Reconciliation Act (COBRA) in response to the government's subsidization of COBRA premiums. As a result of NHE growth outpacing GDP growth in 2009, the health share of GDP is expected to have increased from 16.2 percent of GDP in 2008 to 17.3 percent in 2009, which would represent the largest one-year increase in history.
In 2010, NHE growth is expected to decelerate to 3.9 percent while GDP is anticipated to rebound to 4.0 percent growth. Much of the projected slowdown in NHE growth is attributable to a deceleration in Medicare spending growth (1.5 percent in 2010, from 8.1 percent in 2009) that is driven by a 21.3-percent reduction in Medicare physician payment rates called for under current law’s Sustainable Growth Rate (SGR) provisions.
Under a scenario where the SGR provisions of law are revised and physician payment rates are held at 2009 levels, total health spending is projected to grow 4.7 percent—0.8 percentage points faster than under current law—and total Medicare spending is projected to grow 5.1 percent.
Private spending in 2010 is projected to grow just 2.8 percent, which is related to both declining private health insurance enrollment because of sustained high rates of unemployment and the expiration of Federal subsidies associated with COBRA coverage.
Over the projection period (2009-2019), average annual health spending growth (6.1 percent) is anticipated to outpace average annual growth in the overall economy (4.4 percent). By 2019, national health spending is expected to reach $4.5 trillion and comprise 19.3 percent of GDP. Public spending is projected to grow faster on average than private spending (7.0 percent versus 5.2 percent, respectively) for 2009 through 2019. As a result of more rapid growth in public spending, the public share of total health care spending is expected to rise from 47 percent in 2008, exceed 50 percent by 2012, and then reach 52 percent by 2019.
Opposite trends in spending growth for Medicare and Medicaid are projected to have occurred in 2009. Medicare spending ($507.1 billion) is projected to have increased 8.1 percent in 2009, down from 8.6 percent in 2008, partly due to slower growth in hospital spending. Medicaid spending ($378.3 billion) is projected to have increased 9.9 percent in 2009, up from 4.7 percent in 2008, due largely to rapidly increasing Medicaid enrollment during the recession. From 2009 through 2019, Medicare and Medicaid spending growth rates are projected to average 6.9 percent and 7.5 percent, respectively.
Spending on private health insurance premiums ($808.7 billion) is projected to have increased 3.3 percent in 2009, up from 3.1 percent in 2008. The steady rate of growth in premiums is the net result of a reduction in the number of people with private health insurance coverage due to job losses associated with the recession, somewhat offset by an increase in the take-up rate of COBRA due to government subsidization of these premiums.
Growth in out-of-pocket spending is expected to have slowed from 2.8 percent in 2008 to 2.1 percent in 2009 and have reached $283.5 billion. Recessionary effects resulting in slowing growth in the demand for services with significant out-of-pocket costs have helped drive the projected slowdown in out-of-pocket spending growth. Between 2009 and 2019, out-of-pocket spending growth is projected to average 4.8 percent.
Spending growth in three of the major health care sectors is expected to have accelerated in 2009. Hospital spending growth is expected to have increased 5.9 percent in 2009, up from 4.5 percent in 2008, and reached $760.6 billion. Physician and clinical services spending growth is expected to have increased 6.3 percent in 2009, up from 5.0 percent in 2008, and reached $527.6 billion.
The 2009 accelerations in spending growth for hospital services and physician and clinical services were in part driven by higher Medicaid spending growth and increased demand for services associated with treating persons who contracted the H1N1 virus.
Prescription drug spending growth is expected to have increased 5.2 percent in 2009, up from 3.2 percent in 2008, and reached $246.3 billion. This increase is due in part to higher use of antiviral drugs, as well as faster price growth for brand-name prescription drugs.
Over the projection period (2009-2019), average annual spending growth for hospital, physician and clinical services, and prescription drugs is projected to increase 6.1 percent, 5.9 percent, and 6.3 percent, respectively.
The health care spending projection data can be found on the CMS web site at http://www.cms.hhs.gov/NationalHealthExpendData/03_NationalHealthAccountsProjected.asp