U.S. Health Care Spending Hits Slowest Rate of Growth Ever, CMS Office of the Actuary Reports

Health care spending in the United States grew 4% in 2009, to $2.5 trillion, or $8,086 per person, the slowest rate of growth in the 50-year history of the National Health Expenditure Accounts (NHEA), due in great part to the economic recession. The report, prepared annually by the CMS Office of the Actuary, summarizes recent trends in health spending based on the most current data sources.

Available historically since 1960, the NHEA represent the official estimates of total health care spending in the United States and measure annual health spending by the types of goods and services delivered by the programs and payers that pay for that care and by the sponsors who are ultimately responsible for financing that care.

The 4% growth in 2009 was down from 4.7% in 2008, the second slowest rate of growth in the history of the NHEA, as the recession led to slower growth in private health insurance expenditures and out-of-pocket spending by consumers, and to a reduction in capital investments. Despite the slowdown, health care spending growth continued to outpace overall economic growth, which declined 1.7% in 2009 as measured by nominal Gross Domestic Product (GDP).

However, health spending as a share of the nation’s GDP continued to climb, reaching 17.6% in 2009, up 1 percentage point from 2008, the largest 1-year increase in the history of the NHEA. In comparison to other recent recessions, the health spending share of GDP increased 0.7 percentage point in 1991 and 2001, and 0.8 percentage point in 1982.

The recession, which began in December 2007 and ended in June 2009, affected health spending as many consumers decreased their use of goods and services partially due to lost employer-based private health insurance coverage and reduced household income. This led to a deceleration in private health insurance spending, which increased only 1.3% in 2009 compared to 3.5% in 2008, that was due primarily to a 3.2% drop in enrollment.

At the same time, as more people became eligible for and enrolled in Medicaid, growth in that program’s spending accelerated to 9% in 2009 following 4.9% growth in 2008. With approximately $34 billion in enhanced federal aid for States (provided by the American Recovery and Reinvestment Act of 2009), federal Medicaid spending increased 22% and its share of total Medicaid spending reached 66% (from a 59% share in 2008). In contrast, State Medicaid spending declined 9.8% — the largest decline in the program’s history.

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