NEW REPORT FINDS HISTORICALLY LOW RATE OF GROWTH, HEALTH SPENDING GROWS FASTER THAN OVERALL ECONOMY
Nominal health spending in the United States grew 4.4 percent in 2008, to $2.3 trillion or $7,681 per person. This was the slowest rate of growth since the Centers for Medicare & Medicaid Services started officially tracking expenditures in 1960. Despite slower growth, however, health care spending continued to outpace overall nominal economic growth, which grew by 2.6 percent in 2008 as measured by the Gross Domestic Product (GDP). The findings are included in a report by CMS’ Office of the Actuary, released today in the health policy journal Health Affairs.
“This report contains some welcome news and yet another warning sign,” said Jonathan Blum, director of CMS’ Center for Medicare Management. “Health care spending as a percentage of GDP is rising at an unsustainable rate. It is clear that we need health insurance reform now.”
The 4.4 percent growth in 2008 was down from 6.0 percent in 2007, as spending slowed for nearly all health care goods and services, particularly for hospitals.
However, health spending as a share of the nation’s GDP continued to climb, reaching 16.2 percent in 2008, up 0.3 percentage points from 2007. Larger increases in the health spending share of GDP generally occur during or just after periods of economic recession.
The economic downturn significantly impacted health spending as more Americans could not afford to spend their limited resources on health care and instead went without care. This led to slower growth in personal health care paid by private sources of funds, which increased only 2.8 percent in 2008. The recession also made it difficult for many Americans to afford private health insurance, coverage, leading to lower growth in private health insurance benefit spending which slowed to 3.9 percent in 2008.
Health spending was also impacted by the American Recovery and Reinvestment Act of 2009 (ARRA), which provided a temporary 27-month increase in Federal Medical Assistance Percentages (FMAP) used to determine the federal Medicaid payments to states. The legislation led to approximately $7 billion of Medicaid spending shifting from states to the federal government for the last quarter of 2008.
Other statistics on the growth of health care spending in the new report include:
- Hospital spending in 2008 grew 4.5 percent to $718.4 billion, compared to 5.9 percent in 2007, the slowest rate of increase since 1998.
- Physician and clinical services’ spending increased 5.0 percent in 2008, a deceleration from 5.8 percent in 2007.
- Retail prescription drug spending growth also decelerated to 3.2 percent in 2008 as per capita use of prescription medications declined slightly, mainly due to impacts of the recession, a low number of new product introductions, and safety and efficacy concerns.
- Spending growth for both nursing home and home health services decelerated in 2008. For nursing homes, spending grew 4.6 percent in 2008 compared to 5.8 percent in 2007.
- Total health care spending by public programs, such as Medicare and Medicaid, grew 6.5 percent in 2008, the same rate as in 2007.
- Health care spending by private sources of funds grew only 2.6 percent in 2008 compared to 5.6 percent in 2007.
- Private health insurance premiums grew 3.1 percent in 2008, a deceleration from 4.4 percent in 2007.
To read the complete report, visit http://www.cms.hhs.gov/NationalHealthExpendData/02_NationalHealthAccountsHistorical.asp#TopOfPage
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