Coming Around the Bend: Growth in Health Spending at Historic Lows

After years of health policy experts speculating about ways to "bend the health care cost curve," new government statistics for 2009 and 2010 provide some good news. The health spending growth rate in 2009 was the lowest in the 51-year history of the National Health Expenditure report. The 2010 growth rate of 3.9 percent was just 0.1 percentage point higher than the low 2009 rate according to the article by government analysts published in the January issue of the journal Health Affairs.

More good news was that health care spending as a share of the U.S. economy was unchanged at 17.9 percent in 2010.

While one year does not make a trend and the analysts point out that the lower growth reflects lower utilization, probably caused by the recession and not necessarily all good news if necessary care is avoided, this year’s numbers may be a glimmer of hope that the health spending juggernaut can be reversed.

Other key findings of particular interest to CSG readers are:

  • The state and local government share of total health spending declined from 18 percent in 2007 to 16 percent in 2010 and totaled $421.1 billion, in part due to the temporary assistance in the Recovery Act.
  • Medicaid spending increased 7.2 percent in 2010, slowing from 8.9-percent growth in 2009.Medicaid spending increased 7.2 percent in 2010, slowing from 8.9-percent growth in 2009.
  • The federal government financed 29 percent of the nation’s health care spending in 2010, an increase of six percentage points from its share in 2007 of 23 percent, and reached $742.7 billion. Part of that increase came from enhanced Federal matching funds for State Medicaid programs under the American Recovery & Reinvestment Act which expired in 2011. Medicare spending grew 5.0 percent in 2010, a deceleration from growth of 7.0 percent in 2009.
  • Private businesses financed $534.5 billion, or 21 percent of total health spending in 2010, down from a 23-percent share in 2007
  • Household health care spending equaled $725.5 billion in 2010 and represented 28 percent of total health spending, slightly lower than its 29 percent share in 2007. Growth in total private health insurance premiums slowed in 2010 to 2.4 percent from 2.6 percent in 2009, continuing a slowdown that began in 2003.
  • Out-of-pocket spending by consumers increased 1.8 percent in 2010, accelerating from 0.2-percent growth in 2009.
  • Retail prescription drug spending (10 percent of total health care spending) grew only 1.2 percent to $259.1 billion in 2010, a substantial slowdown from 5.1-percent growth in 2009 and the slowest rate of growth for prescription drug spending recorded in the NHE.
  • Hospital spending, which accounted for roughly 30 percent of total health care spending, grew 4.9 percent to $814.0 billion in 2010, compared to growth of 6.4 percent in 2009.