Health Care Spending Growth Falls to Lowest Rate Since 1960
In 2008, the U.S. spent $2.3 trillion on health care, an increase of 4.4% from spending levels in 2007, according to an annual government report published Monday in the journal Health Affairs, the New York Times reports.
The report -- prepared by CMS analysts -- also noted that the growth rate in 2008 was down from 6% in 2007, representing the slowest growth on record since the agency began tracking the data in 1960 (Pear, New York Times, 1/5).
Although the spending growth rate had decreased, health care accounted for 16.2% of the U.S. gross domestic product, up from 15.9% in 2007.
The growth rate also exceeded the overall GDP growth for the year, which was 2.6% before adjustment for inflation.
According to the report, the slowdown in spending came from drops in out-of-pocket spending, private insurance premiums and hospital spending.
New enrollments in private health insurance plans decreased to 195.4 million in 2008 from 196.4 million in 2007 (Werner, AP/Atlanta Journal-Constitution, 1/5). Health spending per U.S. resident in 2008 averaged $7,681, an increase of 3.5% from the previous year, the report said.
The report also found that:
- Spending in 2008 for health services and supplies grew by 10.4%, accounting for the largest share of total health care spending since 1987, when HHS first started analyzing sources of health spending.
- Spending in 2008 by state and local governments increased by 3.4%, accounting for 24% of state and local revenues, which was unchanged from 2007.
- Federal spending on Medicaid grew by 8.4% in 2008 as more U.S. residents faced with unemployment turned to the government program for help, marking the highest growth rate since 2003. State spending on Medicaid decreased by 0.1% as more states faced budgetary constraints.
- Health care spending by private businesses increased by 1.2% in 2008, partly because of an increase in the share of insurance premiums paid by employers. Meanwhile, "private health insurance premiums and benefits grew in 2008 at their slowest rate since 1967, 3.1% and 3.9%, respectively," the authors wrote.
- Total spending on Medicare in 2008 increased by 8.6% to $469 billion, based in part on a jump in Medicare Advantage plan enrollees. Spending on MA plans increased by 21% to $108 billion.
- Retail spending on prescription medications grew by 3.2% in 2008 in a "continuation of a slowing trend that began in 2000," according to the report. Spending on prescription drugs amounted to $234 billion, or about 10 cents of every dollar that was spent on health care (New York Times, 1/5).
Officials in the Obama administration on Monday pointed to the growth in health care spending as a reason for the need for health care reform, CQ Today reports.
Jonathan Blum, director of CMS' Center for Medicare Management, said, "Health care spending as percentage of GDP is rising at an unsustainable rate," adding, "It is clear we need health insurance reform now."According to CQ Today, Democrats and Republicans in Congress agree that there is need to rein in spending growth in health care but "disagree sharply" on how to achieve that goal and whether health reform legislation (HR 3962, HR 3590) would have an adequate impact (Wayne, CQ Today, 1/5). This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.