Rate of Health Spend Increase in 2008 Was Lowest Since 1960

CMS report says a total of $2.3 trillion was spent on health during 2008, which is an increase of 4.4%

RECENTLY the Centers for Medicare and Medicaid Services (CMS) reported on healthcare spending for 2008. The noteworthy finding was that the rate of increase in health spending fell to 4.4% for 2008.

This is the lowest annual rate of increase in health spending since CMS first began officially tracking health expenditures in 1960. In its report, CMS noted the good news/bad news aspects of the report.

The good news was that, at 4.4%, the rate of increase for 2008 was down from the 6.0% growth rate seen during 2007. As pre- sented by CMS, the bad news was that, for 2008, healthcare spending as a share of the nation’s GDP rose to 16.2%, an increase of 0.3 percentage points when compared to 2007. This occurred because the economy only grew at a 2.6% rate in 2008, while spending on health grew by 4.4%.

$2.3 Trillion For 2008

CMS says that total spending on health in the United States during 2008 totaled $2.3 trillion. This works out to be $7,681 per person.

Authors of the CMS report explained that the slow growth rate was connected to the recession. They wrote that “The economic downturn significantly impacted health spending as more Americans could not afford to spend their limited resources on health care and instead went without care. This led to slower growth in personal health care paid by private sources of funds, which increased only 2.8% in 2008. The recession also made it difficult for many Americans to afford private health insurance coverage, leading to lower growth in private health insurance benefit spending which slowed to 3.9% in 2008.”

Federal Health Spending

Meanwhile, federal spending on health increased. CMS reported that the federal share of the nation’s medical bill reached a record high of 35%. A rise in fee-for-service Medicare expenditures led to an 8.6% increase in Medicare spending, compared to a 7.1% increase in Medicare spending during 2007. The Medicare program spent $469.2 billion in 2008.

By combining federal and state spending on both Medicare and Medicaid, CMS says total government spending grew 6.5% percent in 2008, the same rate as in 2007.

Experts pointed to the recession to explain the health sector’s stunted growth. Paul Ginsburg, President of the Center for Studying Health System Change, focused on the recession’s immediate impact on household spending. With many consumers feeling significant financial stress, Ginsburg noted that the modest rate of increased health spending should not be a surprise. “The slowdown was strictly a result of the recession,” Ginsburg said. “This isn’t some new world of healthcare spending on a slower trend.”

“Despite the overall slowdown in national health spending growth, increases continue to outpace growth in the resources available to pay for it,” CMS officials noted in the journal Health Affairs, which reported CMS’s findings.

Richard S. Foster, Chief Actuary for the CMS, wrote the report. He expressed concerns that the health care reform will not sufficiently deal with the problem of increasing costs. “There is a very serious risk that the program would become unsustainable,” wrote Foster.

A bit of irony can be found in the news that health spending in the United States increased at the lowest annual rate in 50 years. That’s because several credible experts predict that the health legislation seemingly near Congressional approval will actually cause the annual rate of health spending to increase at a faster pace.

What is problematic for clinical laboratories is the fact that utilization of lab tests continues to increase sharply even as public and private payers continually squeeze down reimbursement.

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