Health Spending in 2009 Grows at Slowest Rate in 50 Years

Although health spending in the United States in 2009 increased at the slowest rate in 50 years, the percentage of US gross domestic product (GDP) devoted to healthcare was the highest in the history of the National Health Expenditure (NHE) data. The 2008 growth rate was the second lowest since the Centers for Medicare & Medicaid Services (CMS) began compiling annual data in 1960, indicating the effect of the recession that lasted from December 2007 through June 2009 on the healthcare industry. Since 2002, health spending has grown at a slower rate each year, but the rates in 2008 and 2009 were significantly lower than in previous years because of the struggling economy, according to the study’s authors. The 2009 figures were released in January and published in Health Affairs [doi:10.1377/hlthaff.2010. 1032]. The study’s authors were employees in the CMS office of the actuary: Anne Martin, an economist; David Lassman, a statistician; Lekha Whittle, an economist; and Aaron Catlin, deputy director of the National Health Statistics Group. The NHE includes all spending for healthcare goods and services, such as hospital care, professional services, sales of medical products, private health insurance, Medicare, Medicaid, and investment in research and equipment related to healthcare. In 2009, national health spending reached $2.49 trillion (a 4.0% increase from $2.39 trillion in 2008) and rose to 17.6% of GDP (up from 16.6% of GDP in 2008). The additional 1.0% share of GDP was the highest 1-year increase in history and was mainly attributed to a 1.7% decline in current-dollar GDP from 2008 to 2009, the largest decrease since 1938. According to the authors, national health spending slowed in 2009 in large part due to high unemployment (10.0% in December 2009), which caused millions of people to lose their health insurance and cut back on spending. There were 46.5 million uninsured people in 2009, an increase of 3.8 million from a year earlier. Consumers’ out-of-pocket expenditures grew 0.4% in 2009 compared with 3.1% in 2008. The authors said out-of-pocket spending growth rates for dental services, nursing care facilities, continuing care retirement communities, and physician and clinical services all declined in 2009. However, because of a sharper decline in personal income, the share of personal income spent on healthcare grew from 6.0% in 2008 to 6.2% in 2009. In addition, 6.3 million enrollees dropped their private health insurance from 2008 to 2009, a decline of 3.2%. The annual average growth rate in private health insurance spending fell from 3.5% in 2008 to 1.3% in 2009. As a result of job losses and poor economic conditions, 3.5 million additional people enrolled in Medicaid in 2009, leading to a 9.0% overall increase in Medicaid spending to $373.9 million. There was a 22.0% increase in federal Medicaid expenditures but a 9.8% decline in state Medicaid expenditures, which the authors attributed to an increase in the Federal Medical Assistance Percentages (FMAP) that determine federal Medicaid spending to states. The change in FMAP was part of the American Recovery and Reinvestment Act (ARRA) of 2009, which also included other funding provisions for healthcare. The ARRA provided an additional $34 billion in federal matching funds for Medicaid in 2009, according to the authors. The ARRA also included an extension of the Consolidated Omnibus Budget Reconciliation Act premium subsidies that gave people who had lost their jobs the opportunity to continue with their employer-sponsored health insurance at a reduced rate. In addition, the authors noted that the act provided funding for health information technology, prevention and wellness programs, community health centers, and National Institutes of Health research and facilities. The federal government’s share of the NHE grew to 27% in 2009, the second highest percentage behind households, which accounted for 28% of the NHE. Declining overall revenues and higher healthcare spending led to the federal government spending 54% of its revenues on healthcare in 2009 compared with 38% a year earlier. State and local governments’ healthcare spending as a share of revenue increased slightly from 26% in 2008 to 27% in 2009. The authors mentioned the NHE was revised this year. Among the changes, the new calculation adds spending estimates for privately operated ambulance services and spending in residential mental health and substance abuse facilities and removes spending for the administration of philanthropic organizations such as foundations, voluntary health agencies, and the United Way of America. The alterations resulted in a 2.2% increase (an additional $52.6 billion) in healthcare spending in 2008. GDP was also revised this year, so healthcare spending as a percentage of GDP increased 0.4% in 2008