CMS Issues Annual Report On National Health Spending

Hospital Spending Through 5 Years
According to CMS, spending slowed on nearly all fronts including hospital spending.
Source: National Health Expenditure Accounts.

Nominal health spending in the United States grew 4.4% in 2008, to $2.3 trillion or $7,681 per person. This was the slowest rate of growth since the Centers for Medicare & Medicaid Services (CMS) started officially tracking expenditures in 1960. Despite slower growth, however, health care spending continued to outpace overall nominal economic growth, which grew by 2.6% in 2008 as measured by the Gross Domestic Product (GDP).

“This report contains some welcome news and yet another warning sign,” Jonathan Blum, director of CMS’ Center for Medicare Management, said in a press release. “Health care spending as a percentage of GDP is rising at an unsustainable rate. It is clear that we need health insurance reform now.”

The 4.4% growth in 2008 was down from 6% in 2007, as spending slowed for nearly all health care goods and services, particularly for hospitals.

However, health spending as a share of the nation’s GDP continued to climb, reaching 16.2% in 2008, up 0.3% from 2007. Larger increases in the health spending share of GDP generally occur during or just after periods of economic recession.

The economic downturn significantly impacted health spending as more Americans could not afford to spend their limited resources on health care and instead went without care. This led to slower growth in personal health care paid by private sources of funds, which increased only 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% in 2008.

Health spending was also impacted by the American Recovery and Reinvestment Act of 2009, which provided a temporary 27-month increase in Federal Medical Assistance Percentages used to determine the federal Medicaid payments to states. The legislation led to approximately $7 billion of Medicaid spending shifting from states to the federal government for the last quarter of 2008.

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