Recession expected to affect growth in national health expenditures

Growth in national health expenditures in the United States in 2009 — projected to have reached $2.5 trillion and grown 5.7% — is expected to have increased faster than the growth in the gross domestic product, according to a new report issued by the Centers for Medicare and Medicaid Services.

In 2009, national health expenditures increased from 4.4% in 2008, whereas gross domestic product (GDP) is anticipated to have declined by 1.1%.

The 2009 increase was the largest since the National Health Expenditure Accounts began tracking the figure in 1960, according to the report. As a result of the national health expenditures growth outpacing GDP growth in 2009, the health share of GDP is expected to have increased from 16.2% of GDP in 2008 to 17.3% in 2009.

Experts attributed this rise, in part, to the economic recession, elevated unemployment rates, changing demographics, baby boomers entering Medicare and faster growth in the use of health care services such as treatment sought for influenza A (H1N1).

Of note, health spending estimates for 2009 represent projections, as data for all of calendar year 2009 are not yet available.

In 2010, national health expenditure growth is expected to decelerate to 3.9%, and GDP is anticipated to rebound to 4% growth. Much of the projected slowdown may be attributed to a deceleration in Medicare spending growth (1.5% in 2010 vs. 8.1% in 2009), spurred by a 21.3% reduction in Medicare physician payment rates called for under sustainable growth rate provisions.

Under a scenario in which sustainable growth rate provisions are revised and physician payment rates remain at 2009 levels, total health spending is projected to grow 4.7% (0.8% faster than under current law) and total Medicare spending by 5.1%.

Private spending in 2010 is projected to grow just 2.8%.

The projection period of 2009 to 2019 detailed in the report showed a growth of 6.1% in average annual health care spending — a figure that is expected to outpace the average yearly growth of the economy by 1.7%. National health spending is expected to rise to $4.5 trillion by 2019 and encompass 19.3% of the GDP. Moreover, public spending is projected to grow fasting than private spending, and the public share of total health care spending is expected to rise from 47% in 2008 to more than 50% in 2010 and 52% by 2019.

The report detailed opposite trends in spending growth for Medicare and Medicaid projected to have occurred in 2009. Medicare spending is projected to have risen 8.1% in 2009 ($507.1 billion), and Medicaid similarly rose 9.9% ($378.3 billion). The researchers attributed these changes to slower growth in the hospital setting and rapidly increasing Medicaid enrollment during the recession. From 2009 to 2019, Medicare and Medicaid spending growth rates are projected to average 6.9% and 7.5%.

Spending on private insurance premiums is estimated to have increased 3.3% to $808.7 billion in 2009 — an increase that can be partly attributed to the reduced number of Americans with health care coverage caused by job losses.

Out-of-pocket spending growth estimates showed a 2.1% decrease ($283.5 billion), down from 2.8% in 2008. Between 2009 and 2019, out-of-pocket spending growth is projected to average 4.8%.

Average public spending growth rates for health care (ie, hospital, physician, clinical services, prescription drugs) are projected to surpass private spending growth during the initial four years of projections. By 2012, more than 50% of all U.S. health care spending is predicted to be generated from public spending. Spending growth for hospital services (up 5.9% to $750.6 billion), physician and clinical services (up 6.3% to $527.6 billion), and prescription drugs (up 5.2% to $246.3 billion) is expected to have increased significantly in 2009.

Two significant events have the potential to sway these projections, according to the report.

“How quickly economic growth rebounds, and to what extent, will affect the growth of health care spending over the next decade. Second, Congress is deliberating legislation that could greatly affect the health care system.”

Find detailed projection data on the CMS Web site.

Truffer JT. Health Affairs. 2010;doi:10.1377/hlthaff.2009.1074.

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