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National Health Spending in 2008

By January 6, 2010Commentary

Health Affairs has an article summarizing HHS’ release of information on national health expenditures in 2008.  (Spending Article) Largely due to the recession the overall rate of growth in spending slowed from 6% in 2007 to 4.4% in 2008.  Total spending was $2.3 trillion, $7,681 per capita, and a 3.5% increase on a per capita basis.  While growth in spending was lower, there was still growth and it was still much higher than either GDP growth or the rate of inflation.  Because of this, health care costs as a percent of GDP rose to a new high of 16.2%.

Personal health spending, the largest component of overall health spending and which includes purchase of health care services and goods, rose a little faster than overall NHE, at 4.6%.  Price increases accounted for two-thirds of this increase, demonstrating the continuing pricing power of providers in the face of a very significant recession.  Health care price increases were much higher than general inflation.  Private spending on health care grew more slowly than government spending, particularly at the federal level.   Households spent 4.3% more on health, a much greater increase than their 2.7% growth in personal income, meaning that consumers are continuing to spend more of their income on health.

Hospital and physician spending grew at or above the overall rate, but prescription drug costs rose at a lower rate, likely aided by continuing increases in generic use, but also possibly reflecting consumers not filling prescriptions because of affordability.   Private insurance costs grew more slowly than provider costs and the net cost of private insurance–administration and profit–grew at less than one percent and over the last five years has declined to 11.7% of total premiums.  So much for profiteering and price-gouging by insurers.

The overall picture is quite grim.  If spending grows at this rate during a recession, it will likely only accelerate in a recovery.  Households in particular continue to spend more of their income on health care, which will cause further political disquiet.  We know that the reform bills will do nothing but accelerate costs, so if controlling health spending is in fact a national priority; it is not going to happen in the next few years.

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