2008 Healthcare Spending Massive Despite Decline in Growth Rate

By Jason M. Broderick
Published: Thursday, May 20, 2010
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As the United States descended into the Great Recession in 2008, healthcare spending slowed and the growth rate in healthcare spending dropped to the lowest it has been since 1960, according to an article in the journal Health Affairs. Despite the decline, the 4.4% growth rate in healthcare spending managed to surpass the 2.6% growth in the nominal gross domestic product (GDP). The United States spent $2.3 trillion ($7681 per person) on healthcare in 2008, with costs continuing to outstrip available resources. As a share of GDP, healthcare spending rose from 15.9% in 2007 to 16.2% in 2008.

The economic downturn reduced the growth in healthcare spending by businesses, individuals, and state and local governments. Private business healthcare spending grew only 1.2% in 2008, partly because businesses shifted more responsibility for insurance premiums to employees. Household healthcare spending growth rates declined from 5.9% in 2007 to 4.3% in 2008. Unemployed Americans’ loss of insurance coverage, in particular, affected consumer spending. State and local spending growth slowed to 3.4% in 2008, down from 6.6% in 2007. Spending reductions in these major economic segments fueled decreased spending on hospital services, physician and clinical services, retail prescription drugs, nursing homes, and private health insurance.

“Healthcare spending is usually somewhat insulated from the immediate impact of a downturn in the economy, but this recession has exerted considerable influence on the healthcare sector,” Micah Hartman, a statistician with the Centers for Medicare and Medicaid Services and co-author of the report, said in a press release.

The federal government was the only sector with a healthcare spending rate increase in 2008. Federal revenue appropriated to healthcare jumped 8% over 2007. The increase resulted in large part from the American Reinvestment and Recovery Act of 2009, which awarded states an additional $7 billion in Medicaid funds. This contributed to an 8.4% increase in federal Medicaid spending. Medicare spending reached $469.2 billion, a growth rate of 8.6%, up from 7.1% in 2007.

Both Democrats and Republicans used the study to sound off on proposed national healthcare legislation. Democrats say the public’s inability to afford rising healthcare costs necessitates reform legislation. Republicans maintain that proposed efforts to overhaul healthcare will actually increase costs. Congress continues to seek a compromise on healthcare legislation. If and when legislation will pass, and what provisions of current proposals will survive remains to be seen.

Hartman M, Martin A, Nuccio O, et al. Health Spending Growth at a Historic Low in 2008. Health Aff. 2010;29(1):147-155.

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