Health Spending Sees Record Jump as Government Share of Spending Increases

Health care spending accounted for 17.3 percent of the U.S. economy in 2009, according to a report by the federal Center for Medicare and Medicaid Services, published Thursday in the journal Health Affairs. Read the report here.

That’s a 1.1 percent increase from 2008 — the biggest one-year jump in health care’s share of the economy since record keeping began in 1960. Much of the increase can be attributed to the effects of the recession, the study authors said. The economy shrank, and more people were added to Medicaid rolls as unemployment increased.

“High unemployment in 2009 and continuing high unemployment assumptions in 2010 are a driver of some of the trends,” study author Christopher Truffer said in a conference call with reporters.

In fact, private spending on health care increased by only 3 percent in 2009, a relatively slow growth rate. But public spending — mainly on Medicaid and Medicare — increased by 8.7 percent. Medicaid spending alone jumped 9.9 percent, the report’s authors estimate.

They also estimate that health care spending will continue to rise faster than the GDP over the next decade, nearly doubling from $2.5 trillion in 2009 to $4.5 trillion in 2020, at which point it will account for nearly one in every five dollars of the U.S. economy — 19.3 percent.

“It’s going to be a desperate issue 5 to 10 years out,” Gail Wilensky, former CMS director during the George H.W. Bush administration, told the Wall Street Journal.

The study’s authors also estimate that public spending will make up an ever-increasing share of that cost, inching up above 50 percent for the first time in 2012. This estimate assumes that Congress will cut Medicare’s physician reimbursement rates by 20 percent this year, as is now mandated by law. However, Congress has overridden that cut in the past, and if they do so again this year then public spending could increase to 50 percent of health care spending even sooner.

“Over time, the big programs, Medicare and Medicaid in particular, are going to constitute a greater and greater share of our health care spending — particularly as the baby boomer generation moves on to Medicare,” says Health Affairs editor and former NewsHour health correspondent Susan Dentzer.

The report also assumes that none of the health care reform legislation now stalled in Congress will go into effect.

“All that [rising medical costs and the uninsured] is still there, all that argues that some form of health care reform is still a good idea,” CMS chief actuary Richard Foster told [Reuters](http://www.reuters.com/article/idUSTRE6130IX20100204).