CMS: Health Care Spending to Outstrip Growth in GDP

WASHINGTON — Growth in the nation’s health care spending
is expected to slow this year compared to 2008 but will
significantly outpace economic growth due to the recession, CMS
estimates.

According to a report from CMS’ Office of the Actuary, U.S. health care spending
growth should remain steady at 6.1 percent in 2008 but will slow to
5.5 percent in 2009. Even so, health spending as a portion of gross
domestic product is expected to climb from 16.6 percent in 2008 to
17.6 percent in 2009, its largest one-year increase in history. GDP
growth rose 3.5 percent in 2008 and is expected to drop by 0.2
percent in 2009.

The study, which projects national health expenditures through
2018, estimates health care spending at $2.4 trillion in 2008. But
that figure will hit $4.4 trillion in 2018, the report said, or
20.3 percent of the GDP.

Influenced by the recession and the baby boomers’ impending
Medicare eligibility, average annual spending growth by public
payers (7.2 percent) is expected to outpace that of private payers
(5.3 percent) over the 10-year period. As a result, the public
share of total health spending should top 50 percent by 2016 and
reach 51.3 percent by 2018, the report said.

As for durable medical equipment, CMS’ projections show spending
steady in 2008 and 2009 at $25.2 billion, with an increase to $25.9
billion in 2010. By 2015, according to the report, spending for DME
will be $32.4 billion, growing to $38.1 billion in 2018. Per capita
rates for DME will rise from $82 in 2008 to $115 in 2018.

Other findings in the report, “Health Spending Through 2018: Recession Effects Add
Uncertainty To The Outlook,” show:

• Public spending is expected to grow 7.4 percent in 2009 to $1.2
  trillion, largely as a result of faster growth in Medicaid
  enrollment and spending. As the relatively expensive aged and
  disabled eligibility groups comprise a larger share of total
  Medicaid enrollment through 2018, spending growth is expected to
  accelerate to 8.9 percent by the end of the coming decade.

• Medicare spending grew 8.1 percent in 2008 to $466 billion and
  is projected to grow another 8 percent in 2009, due mainly to
  higher spending on hospital care, physician services and the
  prescription drug benefit. Prescription drug spending is projected
  to be Medicare’s fastest-growing component, increasing from 10.9
  percent in 2007 to 14.7 percent by 2018.

• Spending on hospital care is expected to reach $1.4 trillion by
  2018, up from $746.4 billion in 2008.

• Physician spending is expected to grow 6 percent in 2009,
  compared with 6.2 percent in 2008, reaching $539.1 billion.

• Home health care spending grew 9.1 percent in 2008 to $64.4
  billion, and is projected to grow an average of 7.9 percent from
  2013 to 2018.

• Nursing home spending rose 4.6 percent in 2008 to $137.4
  billion, and is expected to grow 6.6 percent annually by 2018.

In general, the CMS report said, “the outlook for health
spending during these difficult economic times is laden with
formidable challenges for the public and private sectors.”

President Obama is expected to outline plans to deal with the
worsening economy, including rising health care costs, in an
address tonight.

View the health care spending projections as a PDF.