CMS Says Health Care Spending Grew At Slowest Rate on Record During 2009

Health care spending in the United States grew 4 percent to $2.5 trillion in 2009, the slowest rate of growth in the five decades during which records have been kept, according to a report by federal analysts released late Jan. 5.

The economic recession “profoundly influenced” health spending in 2009, according to the report by analysts in the Office of the Actuary at the Centers for Medicare & Medicaid Services.

“Many consumers decreased their use of health care goods and services partly because they had lost employer-based private health insurance coverage, and partly because their household income had declined,” the report said. The annual report will be published in the January edition of the journal Health Affairs.

The historically low health spending growth rate reflects a deceleration in private health insurance spending growth, a decline in spending on structures and equipment, and slower out-of-pocket spending growth, according to the report. The slowdown was partially offset by other areas, such as increased Medicaid enrollment that fueled higher spending growth and increased prescription drug spending growth.

Health care spending grew 4.8 percent in 2008, the second-lowest rate of growth in the past 50 years.

Despite the slowdown in spending growth, the share of the gross domestic product consumed by health care spending rose 1 percentage point, to 17.6 percent. The increase is primarily because of a 1.7 percent decline in the current-dollar GDP, according to the report.

In addition, although health care spending growth slowed, the “burden of financing health spending increased for households, businesses, and governments as the resources available to pay for that care declined,” the report said. For example, households' share of personal income spent on health care increased to 6.2 percent in 2009, up from 6 percent in 2008, and health spending as a share of total federal revenue increased to 54 percent in 2009, up from 38 percent in 2008.

Effects of Recession.

In 2009, enrollment in private insurance declined 3.2 percent, as many workers lost their jobs. That decrease in coverage contributed to a deceleration in the growth rate for private insurance spending, from 3.5 percent in 2008 to 1.2 percent in 2009, according to the report.

The report also said consumer out-of-pocket spending growth slowed, from 3.1 percent in 2008 to 0.4 percent in 2009. A slowdown in out-of-pocket spending growth on dental services, nursing care facilities and continuing care retirement facilities, and physician and clinical services contributed to the overall slowdown in out-of-pocket spending growth.

In addition, providers reduced their spending on capital investments by 2.7 percent in 2009, according to the report. Investment in structures and equipment fell by 4.3 percent for private providers and by 1.1 percent for state and local government providers.

In contrast, as more people became eligible for and enrolled in Medicaid during the recession, spending growth for the program reached 9 percent in 2009, up from 4.9 percent in 2008. In addition, the federal government took on a larger share of Medicaid spending in 2009 because of a provision in the American Recovery and Reinvestment Act that increased each state's Medicaid matching rate. As a result, federal spending on Medicaid increased 22 percent and accounted for 66 percent of all Medicaid spending, compared with 59 percent in 2008. State spending for Medicaid, however, declined 9.8 percent.

Medicare and Medicaid Spending.

In 2009, Medicare spending totaled $502.3 billion, or 20 percent of national health spending, and grew at the same rate as in 2008--7.9 percent, according to the report. The report also said that enrollment in Medicare fee-for-service continued to fall, as more beneficiaries chose to participate in Medicare Advantage plans. Spending for Medicare fee-for-service was $377 billion in 2009, while Medicare Advantage spending was $125.3 billion.

For Medicaid, total federal and state spending totaled $373.9 billion in 2009. During that year, enrollment grew 7.4 percent while average per enrollee spending grew only 1.5 percent, principally because most new beneficiaries were from low-cost populations such as children or nonelderly, nondisabled adults, according to the report.

The report also found that in 2009:

• hospital spending grew 5.1 percent, down from 5.2 percent in 2008, for a total of 759.1 billion;

• physician and clinical services spending grew 4 percent, down from 5.2 percent in 2008, for a total of $505.9 billion;

• retail prescription drug spending grew 5.3 percent, up from 3.1 percent in 2008, for a total of $249.9 billion; and

• freestanding nursing care facilities and continuing care retirement facilities spending grew 3.1 percent, down from 5 percent in 2008, for a total of $137 billion.

The report is available at