CMS Says Health Expenditures Will Jump 5.5 Percent
in 2009 as National Economy Shrinks
Prescription drug spending will lead Medicare
spending into the future
Feb. 24, 2009 The U.S. economy may be sinking but
health expenditures are growing right along, according to a report by
the Centers for Medicare & Medicaid Services. When the final numbers are
tallied for 2008, health spending will hit $2.4 trillion, up 6.1
percent. This year CMS sees health expenditures jumping 5.5 percent,
while the gross domestic product shrinks .2 percent. Prescription drug
spending will pace Medicares growth.
Growth in national health expenditures (NHE) in the
United States is expected to significantly outpace economic growth in
2008 and 2009 due to the recession, according to the report issued today
by CMS. The report was prepared by CMSs Office of the Actuary and
published online by the journal Health Affairs.
In 2008, growth in national health expenditures is
expected to be 6.1 percent, as health spending increases from $2.2
trillion in 2007 to $2.4 trillion in 2008, while growth in the economy,
as measured by the gross domestic product (GDP) is anticipated to be 3.5
percent.
For 2009, health spending is projected to increase
5.5 percent while GDP is expected to decrease 0.2 percent. The health
share of GDP is expected to increase from 16.2 percent in 2007 to 16.6
percent in 2008 and to 17.6 percent in 2009. This represents about
one-third of the total increase in the health share of GDP for 2008
through 2018.
Over the period 2008-2018, average annual health
spending growth (6.2 percent) is anticipated to outpace average annual
growth in the overall economy (4.1 percent).
By 2018, national health spending is expected to
reach $4.4 trillion and comprise just over one-fifth (20.3 percent) of
GDP.
Private vs Public Health Spending
Over the projection period, average annual spending
growth by public payers (7.2 percent) is expected to outpace that of
private payers (5.3 percent). As a result, the public share of total
health care spending is expected to rise from 46.2 percent in 2007 to
over 50 percent by 2016, and then reach 51.3 percent by 2018.
Private health spending growth, which includes
growth in private health insurance spending and out of pocket payments,
is projected to decelerate from 5.8 percent in 2007 to 5.3 percent in
2008. It is then projected to reach a 15-year low of 3.9 percent by
2009, driven by expected slower income growth and a decline in the
number of people covered by private health insurance.
Related to projected faster growth in Medicaid
enrollment and expenditures, public spending growth on health care is
projected to accelerate from 6.4 percent in 2007 to 7.0 percent in 2008
and to 7.4 percent by 2009.
Hospital Spending
Hospital spending growth is expected to edge
downward from 7.3 percent in 2007 to 7.2 percent in 2008, and then
decelerate further in 2009 to 5.7 percent. Driving the expected
deceleration in hospital spending growth is projected slowing growth in
use associated with the recession and projected slower income growth. In
addition, hospital price growth is expected to decelerate to the slowest
rates since 2000 (2.9 percent in 2008 and 2.6 percent in 2009), also
associated with the effects of the recession.
Prescription Drug Spending
Prescription drug spending growth is projected to
slow to 3.5 percent in 2008, down from 4.9 percent in 2007, as many
consumers fill fewer prescriptions or become more willing to switch to
lower-cost generic drugs in response to projected slower income growth
associated with the recession. Prescription drug spending growth is
expected to rebound to 4.0 percent in 2009 as projected double-digit
accelerations in Medicare and Medicaid growth more than offset a
continuing recession-related deceleration in private prescription drug
spending growth.
Prescription Drugs to Lead Medicare Spending
Within Medicare, prescription drugs are projected
to be the fastest growing component of the programs spending over the
projection period, with the prescription drug share of Medicare spending
increasing from 10.9 percent in 2007 to 14.7 percent by 2018.
Physician, Clinical Services
Physician and clinical services spending is
expected to grow 6.2 percent in 2008, compared with the 6.5 percent
growth experienced in 2007. In 2009, physician and clinical spending is
projected to grow at 6 percent.
2010 National, Medicare Spending
In 2010, growth in national health expenditures is
projected to decelerate to 4.6 percent, down from 5.5 in 2009. This
trend is largely attributable to a projected decline in Medicare
spending growth (8.0 percent in 2009 to 2.5 percent in 2010) due
principally to a 21-percent cut to Medicare physician payment rates
required under the Sustainable Growth Rate (SGR) formula called for in
2010 under current law.
CMS notes, however, that in every year since 2002,
Congress has acted to override application of the SGR formula to reduce
physician payments. If Medicare physician payment rates are not cut in
2010 and remained at 2009 levels, projected Medicare spending growth in
2010 would be 6.4 percent, 3.9 percentage points faster than the
current-law projection of 2.5 percent.
And projected total growth in national health
expenditures would be 5.4 percent in 2010, 0.8 percentage point higher
than the current-law projection of 4.6 percent.
Slowing in 2011
Growth in national health expenditures is
anticipated to begin accelerating in 2011 under current law and
eventually reach 7.2 percent by 2018. Based on a projected economic
recovery beginning in 2010, private health spending growth is expected
to rebound from 4.2 percent in 2010 to 6.1 percent by 2018. Public
spending growth is also projected to accelerate, from 5 percent in 2010
to 8.2 percent in 2018, in large part due to baby boomers becoming
eligible for Medicare. Medicare spending growth is projected to
accelerate from 6.2 percent in 2011 to 8.6 percent by 2018.
Medicaid Slowing
Medicaid spending growth is expected to slow from
9.6 percent in 2009 to 7.8 percent in 2012 due to projected improving
economic conditions. However, as the relatively expensive aged and
disabled eligibility groups comprise a larger share of total Medicaid
enrollment through 2018, spending growth is expected to accelerate to
8.9 percent by the end of the coming decade.
