Blog | Tuesday, January 10, 2012

QD: News Every Day--Years later, recession cutting health care spending

The recession's aftereffects slowed health care spending for the second straight year. Continuing unemployment and the resulting loss of insurance combined with lower median household income, forcing people to forgo care or seek less expensive options.

National health spending grew 3.9% in 2010, only 0.1 percentage points more than the previous year, according to analysts at the Centers for Medicare and Medicaid Services (CMS). These two years are the two slowest growth rates since such data have been tracked, starting in 1960.

Total health spending for 2010 reached $2.6 trillion, or $8,402 per person, reports the January issue of Health Affairs.

"Medical goods and services are generally viewed as necessities, but the recession led consumers to be a lot more cautious about utilizing them," authors wrote in the article.

Other contributors to overall low growth included slow growth in private health insurance and out-of-pocket spending, and slower growth in Medicare and Medicaid spending.

The government is paying for more of health care now, too. About 45% of the nation's health bill was financed by federal and state and local governments in 2010, up from 41%. The federal government's share increased substantially in the last three years, while state and local governments paid less. The federal share of health care spending rose to 29% in 2010 ($742.7 billion), up from 23% in 2007.

Private businesses spent $534.5 billion on health care in 2010, or 21% of the nation's total health care bill. This has gradually decreased since 2001, when it was 25%.

Households spent $725.5 billion on health in 2010; this amount accounted for 28% of national health spending, a historic low. After negligible growth in 2009, household spending grew 2.8% in 2010. Consumer out-of-pocket payments, which grew just 1.8% in 2010, financed about two-fifths of all household spending on health care. Approximately one-third of household spending represented employee contributions to private health insurance premiums, which grew faster in 2010 (2.7%) after slow growth in 2009 (1.5%).

Although consumer out-of-pocket spending growth accelerated by 1.8% in 2010 compared to growth of 0.2% in 2009, it was still slower than an average annual growth of 4.8% for 2000 through 2008. Faster growth in 2010 partially reflects higher cost-sharing requirements for some employees; consumers' switching to plans with lower premiums and higher deductibles or copayments, or both; and the continued loss of health insurance coverage.

--Spending on hospital care reached $814.0 billion in 2010 and grew 4.9%, down from 6.4% in 2009.
--Spending for physician and clinical services reached $515.5 billion in 2010. But that spending grew at a historically low rate: 2.5%, down from 3.3% in 2009.
--Spending on retail prescription drugs reached $259.1 billion in 2010 and grew only 1.2%. This was driven by slower sales, more use of generics, the loss of patent protection for brand-name drugs, fewer new drugs, and an increase in the Medicaid drug rebates introduced under the Affordable Care Act.
--Home health care was one of the fastest-growing service sectors in both 2009 and 2010. In 2010, home health spending grew 6.2% and reached $70.2 billion, compared to growth of 7.5% in 2009.