CMS: Recession stunts growth in healthcare spending

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Healthcare spending in the U.S. grew at a historically low rate in 2009 on the heels of the recession, curtailed primarily by a deceleration in private health insurance spending as 6.3 million Americans lost coverage. Government spending moderately offset the slowing growth, as federal spending on healthcare grew to 54 percent of the government's total revenue, according to research conducted by the Centers for Medicare & Medicaid Services (CMS).

Total U.S. expenditures on healthcare reached $2.5 trillion in 2009, with growth decelerating from 4.7 percent in 2008 and 6.1 percent in 2007 to 4.0 percent in 2009, the lowest rate of growth in the 50-year history of the National Health Expenditure Accounts (NHEA). Still, growth in healthcare expenditures outpaced that of the U.S. economy as a whole, resulting in healthcare expenditures rising from 16.6 percent of GDP in 2008 to 17.6 percent in 2009.

"Slower growth in health spending during 2009 was influenced primarily by a deceleration in spending growth for private health insurance—from 3.5 percent in 2008 to 1.3 percent in 2009—as private health insurance enrollment declined 3.2 percent, or by 6.3 million enrollees," according to a concomitant report published in the January issue of Health Affairs by Anne Martin, a CMS economist, and co-authors from the NHEA research team.

At the same time, the outpacing of national GDP growth by health expenditures translated to $8,086 in health spending for each American. This increase was accompanied by a 1.2 percent slowing in private health benefits payment.

Led by continuing job losses, Medicaid saw the largest growth in federal spending since 1991, 22 percent. Medicaid spending at all levels of government grew from 4.9 percent in 2008 to 9.0 percent in 2009 as the low-income program took in 3.5 million new enrollees.

The NHEA report also cited a deceleration in consumer out-of-pocket spending growth as an important contributor to slowing growth. Along these lines, Martin and colleagues argued that steadily declining household income contributed to the average individual spending 6.2 percent of income on health, up from 6.0 percent the previous year.

While the national share of health spending by financiers (businesses, households, government and private sponsors) remained steady, the federal government's stake grew from 24 to 27 percent between 2008 and 2009, more than offsetting the 1 percent decline in state and local governments' share.

The researchers observed an atypical trend in the recession's almost immediate impact on healthcare spending, whereas in previous slowdowns health spending's responses tended to lag behind the economic slumps. "Although healthcare spending has grown at a slower rate every year since 2002, the deceleration, or slowdown in the rate of growth, was more pronounced in 2008 and 2009 because of the severe economic recession," Martin and colleagues wrote in Health Affairs.

A minor drop in hospital spending growth between 2008 and 2009 from 5.2 percent to 5.1 percent, as well as a 1.2 percent drop in spending on physician and clinical services and a smaller dip in spending on dental care were seen as major forces in the slowing trend. Partly offsetting these languishing sectors, multiple percentage-point accelerations in spending took hold in prescription drugs, home health, and residential, personal care and other health spending.