NCPA - National Center for Policy Analysis

Growth Slows In Health Spending

September 3, 2010

Health care spending this year has grown at its slowest rate in a half-century, a USA Today analysis of government data finds.

  • Spending on doctors, hospitals, drugs and other medical care climbed at a 2.7 percent annual rate per person in the first half of 2010, the smallest increase since the Bureau of Economic Analysis began tracking medical care in 1959.
  • When inflation is taken into account, spending per person actually fell 0.2 percent in the first six months of the year -- the first decline since the government began adjusting for inflation in 1995.

The drop was not predicted in government forecasts and appears to be the result of a bad economy and high unemployment, health care experts say.  This is a sharp contrast to the 2001 recession, when health care costs accelerated during the downturn.

Medical spending is down this year in key areas:

  • Prescription drugs: Americans spent 1.6 percent per person less after adjusting for inflation.
  • Hospitals: The American Hospital Association attributes the spending decline -- a 1.1 percent drop -- to patients forgoing care during the recession.
  • Dental care: Americans spent 0.9 percent less at the offices of dentists and orthodontists.

The recession has shifted some people from private insurance to government programs, which may have cut overall spending because the government generally pays lower rates than private insurers, says health care economist Robert Brook of the Heritage Foundation.

  • Medicare, Medicaid and other government programs paid a record 46.1 percent of the nation's medical bill in the second quarter, up from 42.3 percent before the recession began in December 2007.
  • Medicare has grown to 47 million enrollees since 2007 (an increase of 3 million), the program's actuary estimates.
  • Medicaid and the Children's Health Insurance Program cover 59 million people, up 7 million from 2007.

Source:  Dennis Cauchon, "Growth slows in health spending," USA Today, September 2, 2010.

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