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2009 Health Spending and Future Projections

By February 10, 2010Commentary

A first look at likely national health expenditures for 2009, and revised projections for the decade ahead, are presented in the current issue of health affairs.   (Health Affairs Article) The estimates come from CMS’ Office of the Actuary, do not include any effects of any reform bill which might be passed, and have one version assuming the SGR reduction in physician payments occurs and one that it does not.  Largely due to the recession, which reduced GDP, health spending, which kept growing, showed a very rapid uptick in the per cent of GDP for which it accounts, going from 16.2% in 2008 to 17.3% in 2009.  Total health spending grew about 5.7% in 2009 to $2.5 trillion.  The most notable trend is that public payment already is almost half of total spending and will grow faster than private spending in the years ahead.  Not good for taxpayers.

Spending is projected to increase 3.9% in 2010, if you persist in believing the SGR cuts will occur, or more realistically, 4.7% if payment rates stay where they are.  That is an indication of the value of those cuts in controlling the cost rises.  While spending increases may slow over the next couple of years, they begin to accelerate thereafter, partly due to economic recovery and partly due to continued population aging.  Medical price inflation will be a major factor, as providers and product manufacturers seem immune to market forces and able to raise prices at 1-2% over general inflation.  Utilization causes the remainder of the increase, with some small contribution from population growth.

Hospital and physician spending will each grow at a good rate.  Prescription spending may slow somewhat in 2011-12 as there are a large number of major patent expirations, but will resume a faster growth thereafter.  All in all, not a pretty picture, and one that indicates the need for controls or individuals will continue to be pressed to find money to pay their share of the increases and taxpayers will be called on to support more and more public spending.

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