By Micah Hartman, Anne Martin, Olivia Nuccio, Aaron Catlin and the National Health Expenditure Accounts Team
Health Affairs
January 2010

In 2008, U.S. health care spending growth slowed to 4.4 percent—the slowest rate of growth over the past forty-eight years. The deceleration was broadly based for nearly all payers and health care goods and services, as growth in both price and nonprice factors slowed amid the recession. Despite the slowdown, national health spending reached $2.3 trillion, or $7,681 per person, and the health care portion of gross domestic product (GDP) grew from 15.9 percent in 2007 to 16.2 percent in 2008. These developments reflect the general pattern that larger increases in the health spending share of GDP generally occur during or just after periods of economic recession. Despite the overall slowdown in national health spending growth, increases in this spending continue to outpace growth in the resources available to pay for it.

Health care spending by households grew 4.3 percent in 2008, a deceleration from 5.9 percent growth in 2007. Despite the slowdown, households’ health spending growth in 2008 still outpaced adjusted personal income growth of 2.7 percent.

http://content.healthaffairs.org/cgi/content/abstract/29/1/147

Comment: 

By Don McCanne, MD

Although some members of the media are celebrating the lowest rate of health care spending growth in almost half of a century, a full reading of this report is sobering.

While Congress has been desperately searching for policies to slow the rate of health care spending, not even one of the worst mechanisms for reducing spending – clobbering our economy with a recession – was capable of preventing a further encroachment of our national health expenditures (NHE) on our total gross domestic product (GDP), increasing from 15.9 percent to 16.2 percent of the GDP.

It is difficult to imagine a more effective mechanism of controlling spending than to wallop our paychecks, even if not a first choice of the policy makers. Median household income fell 3.6 percent between 2007 and 2008. Yet household health care spending in 2008 still grew by 4.3 percent, even more than the 3.8 percent inflation rate for that year (which declined to 1.8 percent in 2009).

If a major hit to the economy is not going to bring our NHE under control, then how can we expect the pilot programs and the other weak cost-containment measures in the bills currently in conference to have any real impact?

The only provision that could have a major impact is the proposed Independent Medicare Advisory Board (Sec. 3402 of the Senate bill), but only if its provisions were to apply to our entire NHE. But they won’t. It’s purpose is to “reduce the per capita rate of growth in Medicare spending.” Its independent power to set the rules for Medicare spending is not extended to control over the private insurance plans.

Physicians and hospital administrators are already concerned about Medicare reimbursement rates. With spending growth in the private sector continuing to outpace the growth of the economy, it might be expected that many health care providers would walk away from the close-to-frozen prices established by the public programs, in a quest for the more lucrative rates in the private sector.

The problem of intolerable increases in our health care spending must be addressed, not just for the government, but for all of us – individuals and businesses. The current legislation feeds the rapacious appetite of the private insurance industry while threatening the stability of our most prized public health program – Medicare.

What if we had an improved Medicare program that covered everyone? An independent Medicare advisory board would certainly put the skids on spending, but not to the extent of threatening the stability of the program. Besides, don’t we want our representatives to stand up for us to be sure that our health care is not priced out of our reach? It already is for many of us, and will still be for all too many under the bills before Congress. It wouldn’t be under a single payer Medicare for all program.

Health Spending Growth At A Historic Low In 2008

By Micah Hartman, Anne Martin, Olivia Nuccio, Aaron Catlin and the National Health Expenditure Accounts Team
Health Affairs
January 2010
In 2008, U.S. health care spending growth slowed to 4.4 percent—the slowest rate of growth over the past forty-eight years. The deceleration was broadly based for nearly all payers and health care goods and services, as growth in both price and nonprice factors slowed amid the recession. Despite the slowdown, national health spending reached $2.3 trillion, or $7,681 per person, and the health care portion of gross domestic product (GDP) grew from 15.9 percent in 2007 to 16.2 percent in 2008. These developments reflect the general pattern that larger increases in the health spending share of GDP generally occur during or just after periods of economic recession. Despite the overall slowdown in national health spending growth, increases in this spending continue to outpace growth in the resources available to pay for it.
Health care spending by households grew 4.3 percent in 2008, a deceleration from 5.9 percent growth in 2007. Despite the slowdown, households’ health spending growth in 2008 still outpaced adjusted personal income growth of 2.7 percent.
http://content.healthaffairs.org/cgi/content/abstract/29/1/147

Although some members of the media are celebrating the lowest rate of health care spending growth in almost half of a century, a full reading of this report is sobering.
While Congress has been desperately searching for policies to slow the rate of health care spending, not even one of the worst mechanisms for reducing spending – clobbering our economy with a recession – was capable of preventing a further encroachment of our national health expenditures (NHE) on our total gross domestic product (GDP), increasing from 15.9 percent to 16.2 percent of the GDP.
It is difficult to imagine a more effective mechanism of controlling spending than to wallop our paychecks, even if not a first choice of the policy makers. Median household income fell 3.6 percent between 2007 and 2008. Yet household health care spending in 2008 still grew by 4.3 percent, even more than the 3.8 percent inflation rate for that year (which declined to 1.8 percent in 2009).
If a major hit to the economy is not going to bring our NHE under control, then how can we expect the pilot programs and the other weak cost-containment measures in the bills currently in conference to have any real impact?
The only provision that could have a major impact is the proposed Independent Medicare Advisory Board (Sec. 3402 of the Senate bill), but only if its provisions were to apply to our entire NHE. But they won’t. It’s purpose is to “reduce the per capita rate of growth in Medicare spending.” Its independent power to set the rules for Medicare spending is not extended to control over the private insurance plans.
Physicians and hospital administrators are already concerned about Medicare reimbursement rates. With spending growth in the private sector continuing to outpace the growth of the economy, it might be expected that many health care providers would walk away from the close-to-frozen prices established by the public programs, in a quest for the more lucrative rates in the private sector.
The problem of intolerable increases in our health care spending must be addressed, not just for the government, but for all of us – individuals and businesses. The current legislation feeds the rapacious appetite of the private insurance industry while threatening the stability of our most prized public health program – Medicare.
What if we had an improved Medicare program that covered everyone? An independent Medicare advisory board would certainly put the skids on spending, but not to the extent of threatening the stability of the program. Besides, don’t we want our representatives to stand up for us to be sure that our health care is not priced out of our reach? It already is for many of us, and will still be for all too many under the bills before Congress. It wouldn’t be under a single payer Medicare for all program.