Spending on Health Care Slows in U.S.

Federal Study Shows Recession Helped Slow Rate of Spending on Health

From the WebMD Archives

Jan. 5, 2010 -- Spending on health care in the U.S. grew only 4.4% in 2008, the slowest rate in nearly a half century, reflecting the nation's sluggish economy, federal analysts report.

Still, overall health spending, which reached $2.3 trillion in 2008, or $7,681 per person, increased faster than the overall economy, which grew at an annual rate of 2.6% as measured by gross domestic product (GDP), according to a report by the Centers for Medicare and Medicaid Services (CMS).

The report appears today in the health policy journal Health Affairs.

"This report contains some welcome news and yet another warning sign," says Jonathan Blum, director of CMS' Center for Medicare Management. "Health care spending as a percentage of GDP is rising at an unsustainable rate."

The 4.4% growth rate in health spending was down from 6% in 2007, the report says, noting that spending slowed for most health care goods and services, particularly for hospitals. But health spending as a share of the nation's GDP reached 16.2% in 2008, up from 15.9% in 2007, the report says.

Generally, larger increases in health spending as a share of GDP occur during or just after periods of economic recession.

The recession significantly affected spending on health care by Americans, who the analysts say could not afford to spend their limited resources during such a severe downturn on health, and thus went without.

The CMS report says the recession resulted in slower growth in personal health care paid by private sources, which increased a mere 2.8% 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," CMS says in a news release.

In addition, the analysts say, the American Recovery and Reinvestment Act of 2009 led to about a $7 billion shift of Medicaid payments from states to the federal government for the last three months of 2008.

The report also says that:

  • Hospital spending grew 4.5% to $718.4 billion in 2008, down from 5.9% growth in 2007 and the slowest rate since 1998.
  • Retail prescription drug spending growth slowed to 3.2% in 2008 as use of prescription drugs declined slightly, mainly due to the impact of the recession. Other factors included a low number of new product introductions last year.
  • Total health care spending by public programs, such as Medicare and Medicaid, grew 6.5% in 2008, the same as in 2007.
  • Medicare spending grew 8.6% to $469.2 billion in 2008. That compared to a 2007 growth rate of 7.7%.
  • Private health insurance premiums grew 3.1% in 2008, down from 4.4% growth in 2007.
  • Spending for physician and clinical services reached $496.2 billion, up 5%, the slowest growth rate since 1996.
  • Spending on nursing-home care hit $138.4 billion in 2008, a 4.6% increase over 2007's 5.8% rise.
  • Out-of-pocket spending growth for health care services rose only 2.8% in 2008, compared to 6% the previous year. The report says the slower growth may be due to increased unemployment, which has caused millions to lose health insurance and put a dent in disposable income.


"Health care spending is usually somewhat insulated from the immediate impact of a downturn in the economy," CMS statistician Micah Hartman, a co-author of the report, says in a news release. "But this recession has exerted considerable influence on the health care sector."

The data in the report show a slowdown in health spending across the board, according to the authors, who include economists Anne Martin, Olivia Nuccio, and Aaron Catlin.

WebMD Health News Reviewed by Louise Chang, MD on January 05, 2010



News release, Centers for Medicare and Medicaid Services.

News release, Health Affairs.

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