Health Spending Growth at Historic Low in 2008

Abstract

National health spending slowed dramatically amid the worst economic recession in recent history, growing by 4.4% in 2008, its slowest rate over the past 48 years, federal analysts reported in the January issue of the journal Health Affairs. Overall health spending still reached $2.3 trillion—>$7600 per person—and continued to outpace that of the US economy. Health spending constituted 16.2% of the gross domestic product, increasing from 15.9% the previous year. According to the report by economists and statisticians at the Centers for Medicare and Medicaid Services, the deceleration was “broadly based for nearly all payers and health care goods and services, particularly hospital care.” Their analysis examined private and public spending on hospitals, physicians, pharmaceuticals, and long-term care facilities. Although the data showed a slowdown in health spending across the board, they indicated a shift in the composition of spending, including a movement from private to public sources. The American Recovery and Reinvestment Act of 2009 provided a temporary, 27-month increase in the Federal Medical Assistance Percentages used to determine federal Medicaid payments to states. As a result of this retroactive legislation provision, approximately $7 billion of Medicaid spending shifted from states to the federal government in the 4th quarter of 2008, causing the federal share of total Medicaid spending to increase to 58.5%, compared with 56.5% in 2007. Although the authors state that health care spending is often thought to be somewhat insulated from the immediate impact of the downturn in the overall economy, they note “the current economic recession appears to have exerted considerable influence on the health sector in 2008.” Expenditures for physician and clinical services reached $496.2 billion, up 5% compared with 5.8% growth in 2007 and the slowest rate of growth since 1996. Slower rate of growth in private health insurance spending, physician prices, and out-of-pocket payments contributed to the deceleration, whereas non-price factors such as the use and intensity of physician services grew 2% in 2008, slightly faster than in 2007. Out-of-pocket spending by consumers, including spending for medical expenses such as co-payments, deductibles, and services not covered by insurance, grew 2.8% in 2008 compared with 6% in 2007, the lowest rate since the mid 1990s. The authors point to economic conditions resulting in people losing jobs and health insurance and having less disposable income as likely factors. As to prescription drugs, retail drug spending growth decelerated to 3.2% in 2008, a slowing trend that began in 2000. In a 2008 Kaiser Family Foundation Health Tracking Poll, 21% of survey participants did not fill a prescription, and 15% split pills of skipped doses because of cost, factors attributable in part to the recession, the report states. “As the nation focuses attention on reforming the health care system and works to recover from a major economic recession that likely worsened in 2009, understanding and monitoring the drivers of health care spending will continue to be an important aspect of meeting the nation's health care needs with the limited resources available in an uncertain fiscal future,” the authors conclude. See: Health Affairs 2010;29:147–155.