Health Spending Rose in ’09, but at Low Rate

The New York Times reports:

“WASHINGTON — Total national health spending grew by 4 percent in 2009, the slowest rate of increase in 50 years, as people lost their jobs, lost health insurance and deferred medical care, the federal government reported on Wednesday.

Still, health care accounted for a larger share of a smaller economy — a record 17.6 percent of the total economic output in 2009, the report said. The economy contracted while health spending continued to grow.

The nation spent $2.5 trillion on health care in 2009, for an average of $8,086 a person, and the recession had a profound influence.

“Many consumers decreased their use of health care goods and services, partly because they had lost employer-based private health insurance coverage and partly because their household income had declined,” said Anne B. Martin, an economist and principal author of the report, issued by the office of the actuary at the Centers for Medicare and Medicaid Services.

In many cases, Ms. Martin said, people decided to “forgo health care services they could not afford.”

The number of visits to doctors’ offices apparently declined. Many hospitals reported fewer admissions, as patients put off medical procedures. Spending on dental services declined slightly. Many hospitals and other health care providers reduced their capital investments. Spending on doctors’ services in 2009 increased at the slowest pace since 1996, according to the new federal study, being published in the journal Health Affairs.

Partly offsetting the slowdown in private health spending was a rapid increase in Medicaid spending, driven by the addition of 3.5 million people to the rolls.

Medicaid, created in 1965 to provide health care for low-income people, is financed jointly by the federal government and the states. The economic stimulus program approved in February 2009 temporarily increased the federal share, to help states in dire fiscal straits cope with a growing need.

“Federal Medicaid spending increased 22 percent in 2009, the highest rate of growth since 1991,” Ms. Martin said, while “state spending decreased 9.8 percent, the largest decline in the program’s history.”

Federal officials emphasized that none of the data reflected the impact of the new health care law, which President Obama signed in March 2010.

Spending on health care by private insurance companies grew a modest 1.3 percent in 2009, as the number of people with private coverage declined by 3.2 percent, or 6.3 million people. At the same time, out-of-pocket spending by consumers rose just four-tenths of 1 percent, compared with an increase of 3.1 percent in 2008.

Despite the economy’s downturn, retail spending on prescription drugs “increased more rapidly in 2009 than in 2008, as a result of more rapid growth in the prices of drugs and in the number of prescriptions dispensed,” the report said.

Retail purchases of prescription drugs account for $1 of every $10 spent on health care, almost $250 billion of the $2.5 trillion total in 2009.

Medicaid spending accounted for 15 percent of all health spending and totaled $373.9 billion in 2009, the report said. Many of the new Medicaid recipients are relatively healthy children and adults of working age. The new health care law calls for a major additional expansion in Medicaid eligibility, starting in 2014.

The recession ran from December 2007 to June 2009. Even after it ended, the economy was sluggish, and unemployment continued to rise. So the growth of health spending outpaced the growth of the overall economy in 2009, federal officials said.

The share of the economy devoted to health care rose one percentage point in 2009, the largest one-year increase in a half-century of record-keeping.

Health spending, as tracked by the government, has grown at a slower rate every year since 2002, when it increased 9.5 percent. The slowdown was more pronounced in 2008 and 2009 because of the recession.

Out-of-pocket spending by consumers — which includes deductibles, co-payments and the purchase of goods and services not covered by insurance — accounted for 12 percent of all health spending and totaled almost $300 billion in 2009, the report said.

In addition, it said, health insurance premiums increased more slowly in 2009 than per-person spending on medical benefits under private health plans. Insurers spent more on prescription drugs and “more on benefits for existing enrollees,” it said.

Republicans pounced on the new numbers. “No one should take solace in the fact that health spending grew at a lower rate in 2009,” said Senator Orrin G. Hatch of Utah, who is in line to be the senior Republican on the Finance Committee.

Mr. Hatch said the new health care law could lead to “crushing increases in health costs and premiums.”

By contrast, the chief Medicare actuary, Richard S. Foster, has estimated that the new law will lead to an increase of only nine-tenths of 1 percent in national health spending over 10 years.

Uninsured people who gain coverage will use more health care, Mr. Foster said, but the law is also supposed to reduce the growth of Medicare payments to many health care providers.

Medicare spending reached $502 billion in 2009, meaning that the program, for older Americans and the disabled, accounts for $1 of every $5 spent on health care. Enrollment in the traditional fee-for-service Medicare program declined, as some beneficiaries chose to enroll in private Medicare Advantage plans, federal officials said.

Over all, Medicare spending rose 7.9 percent in 2009, the same rate as in 2008, while enrollment grew about 2 percent, the report said.

Medicare spending increased an average of 2.3 percent for each person in a private Medicare Advantage plan and 6.9 percent for each person in the traditional program.

The new health care law cuts Medicare payments to private plans. Many studies have found that Medicare spends more on people in such private plans than it would spend for the same beneficiaries in the original Medicare program.

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