Health Spending Continues to Rise
Overnight the CMS actuaries released their annual totals for national health expenditures. The full report is available through Health Affairs (subscription required), and additional information can be found on the CMS website. This year’s release covered 2009, which was marked by the effects of the recession and the federal “stimulus.” Note that the 2009 data do NOT reflect the impact of the health care law (which was signed in March 2010).
Several interesting nuggets of note:
- While health spending rose by only 4 percent nationally, its share of the economy rose by “the largest one-year increase in the history of the national health accounts,” from 16.6% to 17.6% of GDP. This jump in health care spending’s share of GDP was due largely to other sectors of the economy contracting (despite the Administration’s “stimulus”).
- Federal spending on Medicaid grew by a whopping 22 percent, even as state Medicaid spending fell by 9.8%. That situation was largely due to the federal Medicaid bailout for states included in the “stimulus,” which will end in July 2011. (In other words, if states had a difficult time paying for their Medicaid programs last year, when their share of spending fell by nearly 10%, how will they handle the expansions contemplated under the health care law?)
- The recession also impacted health spending in other ways – for instance, out of pocket spending increased by only 0.4 percent in 2009, due largely to consumers deciding to delay or forego care.
- When it comes to health insurance, the Health Affairs article includes the following interesting excerpt:
Per enrollee, private health insurance premiums increased 4.7 percent in 2009, accelerating slightly from a growth rate of 4.5 percent in 2008. This indicates that the loss of enrollment during the recession was the driving factor in the deceleration of total private health insurance spending growth. However, growth in per enrollee spending on benefits (6.3 percent in 2009) increased more rapidly than premiums, as spending on prescription drugs accelerated and as plans spent more on benefits for existing enrollees. As a result, the net cost of private health insurance (or the difference between premiums and benefits) fell from 12.4 percent of total private health insurance spending in 2008 to 11.1 percent in 2009, continuing a decline that began in 2004.
In other words, even as the Administration embarked in mid-2009 upon its demonization campaign against health insurers for their “obscene” overhead and profits, health insurers continued to become more efficient in 2009 – devoting an increasing premium dollars toward medical claims, as they have every year since 2004.
Two final points: First, the CMS survey includes revisions (which the actuary notes are made every five years) to the methodologies for determining national health expenditures. Those revisions had the effect of significantly lowering the percentage of health spending attributable to government sources – CMS’ estimates for 2008, released last year, indicated that 47.3 percent of health spending was by federal, state, and local governments, whereas this year’s report indicates that 43 percent of health spending in 2009 was from the public sector (and revises the 2008 and prior year data to show smaller public percentages of public spending). It is unclear from the Health Affairs piece what specific changes prompted these significant adjustments to the government’s estimated share of health spending.
Finally, it’s worth reiterating the fact that the CMS actuaries who compiled this report also estimate that national health spending will RISE by an additional $310,800,000,000 as a result of the health care law’s enactment. In other words, if you think this year’s report was bad…