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Spending on health care in 2008 grew at the slowest rate in 48 years of federal record keeping, but it still became a bigger chunk of the economy, ballooning to $7,681 per person, according to a new government report.
Health care spending includes everything from hospital visits and prescription drugs to insurance premiums and medical equipment, according to the federal Centers for Medicare and Medicaid Services. And it has become a larger share of the economy for years - 16.2 percent of the gross domestic product in 2008 compared with 15.7 percent in 2005 and 7.2 percent in 1970.
The statistics, released annually by the Centers for Medicare and Medicaid Services, were published this week in the journal Health Affairs. As a follow-up to the report, the federal government will release projections next month of health spending for the coming decade.
That health spending grew more sharply in 2008 than the economy is a cyclical change seen in other recessions in 1981-82, 1990-91 and 2001. But the longer trend shows the same effect - health spending is becoming a greater percentage of the nation's output whether the economy is up, down or flat.
"There are a few periods when we've had a leveling off of that increase, but basically it's been on an upward trend since we started tracking in 1960," said Micah Hartman, a statistician with the federal Centers for Medicare and Medicaid Services.
Health insurers see the growth as justification for Congress to address runaway medical costs in health reform legislation, which neither the Senate bill nor House bill does, said Robert Zirkelbach, a spokesman for the trade group America's Health Insurance Plans.
Some projections of health spending show an average annual growth rate of 6.2 percent for the next decade, but if that figure could be cut to 4.7 percent, the difference would be more than $2 trillion in savings, Zirkelbach said.
"It shows how important these rates-of-growth numbers really are," he said.
Susan Millerick, Aetna's director of communications, said, "While the data released by CMS have some hopeful signs, the fact remains that projected increases in health care spending are just not sustainable. Bending the cost curve has never been more important, and as we consider health reform and its impacts, improving access for millions will only be a hollow win if we don't take on the issue of affordability for millions of Americans."
America's Health Insurance Plans has said that the underlying reason for health spending isn't administrative costs paid to insurers, but rather medical costs charged by physicians and hospitals. The government report offers some credence to that suggestion. Administrative costs paid to health insurers are a diminishing percentage of the premiums paid by employers and individuals, and it has been a dwindling percentage since 2003. For example, the net cost of private health insurance - premiums paid minus medical expenses - decreased by $2.6 billion, or 2.75 percent, between 2007 and 2008.
But hospitals have accounted for a smaller part of all health spending in recent years and decades as other factors became larger expenses, such as pharmaceuticals, medical equipment and home health care.
Hospitals were struck by the recession, losing millions on investments that tend to complement operating income, said Stephen Frayne, senior vice president of health policy for the Connecticut Hospital Association, which represents 29 of 30 facilities in the state.
Additionally, three-quarters of the people who lost their jobs during the recession have sought some sort of state-sponsored health care, Frayne said. Hospitals typically lose money treating people who have state-sponsored insurance, and the extra cost is pushed onto bills paid by those with private insurance.
"We really need more people getting back to work, getting insurance through their employers," Frayne said. "And while we're grateful for these back-up systems ... those programs by design are not able to cover their own costs."
Matthew Sturdevant
Source: The Hartford Courant January 2010
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