Health spending consumed record portion of economy in 2009, report says

National health spending accounts for the largest share of the U.S. economy since federal auditors began tracking the data in 1960, according to a new report authored by the Office of the Actuary, an independent auditing body at the Centers for Medicare and Medicaid Services (CMS) and published online by the journal Health Affairs.

In 2009, national health spending made up a record 17.3 percent of the gross domestic product, a 1.1 percentage point increase from 2008, the largest-ever one-year increase reported, the CMS actuaries report based on preliminary estimates.

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Total health spending grew 5.7 percent to $2.5 trillion last year. That rate of growth is faster than the 4.4 percent in 2008 but still less than the 6 percent reported in 2007. The 2008 figure was the lowest growth rate since the CMS actuaries began issuing these reports 50 years ago.

Between 2009 and 2019, the actuaries project that health spending will increase at an average of 6.1 percent each year, which is 1.7 percentage points higher than predicted GDP growth of 4.4 percent. By 2019, the actuaries project that national healthcare spending will compose 19.3 percent of the economy.

“Under current law, healthcare spending will on average grow faster than the overall economy and that the public share of health spending will continue to increase over the next decade,” said CMS actuary Christopher Truffer.

An increase in healthcare spending combined with a decline in the U.S. economy produced the results for 2009, the actuaries said. GDP itself declined 1.1 percent last year.

Due to the recession, increased unemployment and people losing their health benefits, enrollment and spending on Medicaid increased as did spending on COBRA health insurance assistance for the newly jobless. In addition, treatments for H1N1 flu patients contributed to higher spending.

The result of those factors is that government healthcare spending increased by 8.7 percent to $1.2 trillion, or nearly half of total national healthcare spending. By 2012, the government’s share of healthcare spending will exceed half, the auditors predict.

This year, the actuaries expect healthcare spending growth to slow to 3.9 percent and predict the economy will grow by 4 percent, which would ameliorate the consequences of 2009. Those projections, however, assume that Congress will not step in to prevent a 21.3 percent cut in Medicare payments to doctors, which is not likely. Were lawmakers to block those steep cuts, healthcare spending would grow by 4.7 percent this year.

Private-sector healthcare spending this year will increase by 2.8 percent, according to the actuaries. The chief reasons are expected continuing loss of health coverage due to unemployment and the expiration of the COBRA subsidies enacted by the stimulus bill.

The report does not consider what effect the pending healthcare reform bills would have on national healthcare spending.