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2009 Health Spending

By January 13, 2011Commentary

The official report on 2009 national health spending is in and summarized in a Health Affairs article.   (HA Article) One of the initially interesting items is that the spending accounts have been revised, as they are periodically, to reformulate definitions, refine what is included in various categories and make other changes.  These revisions result in 2008 spending being increased by $52.6 billion over what was initially reported.  The grand total for 2009 is $2.5 trillion, $8086 per capita and 17.6% of GDP, with the percent increase being affected in large part by the recession.   The recession has had a faster, more severe and longer-lasting impact on health spending, particularly out-of-pocket spending by consumers, than did other recent recessions.

Private health insurance spending slowed dramatically, while government spending in Medicaid and Medicare accelerated.  While private insurance spending only increased 1.3%, Medicaid spending went up by 9% and Medicare’s by 8%.  Prices continued to increase for most services at rates well above inflation and GDP growth and accounted for 60% of the overall 4.6% increase in spending.  Much of this was due to drug price increases.  While consumers spent less on health care, they spent more as a percent of personal income, because personal income dropped.

Hospital spending was $759 billion; physician and clinical services increased to $506 billion and drug expenditures to $250 billion.   Medicare spending topped $502 billion; with the fee-for-service program increasing 6.9% per enrollee and the Medicare Advantage program only 2.3% per enrollee.  Maybe Congress should rethink its moves to discourage Medicare Advantage use.   The bottom line is that while spending appears to have slowed, when considering what happened to the overall economy and peoples’ personal income, it was still growing far more rapidly than GDP, inflation or personal income.

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