Good News? Recession Slowed Healthcare Spending

Wednesday, 05 Jan 2011 08:40 PM


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WASHINGTON — It sounds like good news: The recession slowed the growth of the nation's health care bill to the lowest levels ever measured.

But a government report Wednesday said medical costs still gobbled up a record share of the overall economy, meaning the slowdown did not change the nation's underlying problem with out-of-control health care spending.

Americans spent $2.5 trillion on health care in 2009, or $8,086 per person, said the new estimates by number crunchers at Medicare's Office of the Actuary.

The 4 percent increase from 2008 levels represented the slowest rate of growth in 50 years of measuring national health care spending. Much of that was the consequence of people losing jobs that came with health insurance.

Nevertheless, as the economy shrank during the 2007-2009 recession, the share of the total economic pie consumed by health care costs grew to 17.6 percent, or more than $1 out of every $6. That increase also set a record.

The figures do not reflect the impact of President Barack Obama's landmark health coverage expansion, which didn't pass until 2010. The same Medicare office has previously projected the overhaul will lead to a slight increase in total health care spending, even as it extends coverage to nearly all Americans.

The recession "profoundly influenced total health care spending in 2009," the new report said. "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."

Hospitals scaled back expansion plans, further damping the rate of cost growth.

But Medicaid spending surged as Washington pumped an additional $34 billion into the federal-state program for low-income people, partly to help those who had lost coverage because of layoffs.

One segment of the health care economy notably escaped the impact of the recession. Spending on prescription drugs rose more rapidly in 2009 than in 2008 because of robust increases in the prices of drugs as well as more prescriptions dispensed.

Americans spent nearly $250 billion on prescription drugs in 2009, an increase of more than 5 percent from the previous year.

Government's share of total health spending grew to 43 percent, counting federal, state and local programs. The federal share of the pie increased by 3 percentage points, to 27 percent. Spending by government at all levels is projected to account for more than half of the nation's health care tab in the near future, even without Obama's coverage expansion.

Most economic experts concur that policymakers will fail to get control of federal debt unless they can consistently slow the rate of increase in medical costs. But there's wide disagreement on how to do that without some limitation on services, which would trigger a debate about government rationing.

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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