National health spending growth held to record-breaking low

The recession also helps produce the lowest increase in spending on physician care since 1996, federal actuaries report.

By Doug Trapp — Posted Jan. 17, 2011

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The most recent economic recession slowed the growth of national health spending to 4% in 2009 -- the slowest rate since at least 1960. Patients delayed elective care and limited out-of-pocket spending, in part because millions of people lost private health coverage.

However, the percentage of the nation's gross domestic product devoted to health care increased to 17.6% in 2009, a full percentage point higher than in 2008, because health spending grew at a faster pace than the economy as a whole. Overall health spending reached $2.49 trillion, according to an annual report on national health spending by the Centers for Medicare & Medicaid Services Office of the Actuary, published online Jan. 5 in the journal Health Affairs.

"The slowdown was widespread among all health care goods and services," said Anne Martin, CMS economist and report co-author.

But the recession -- which officially lasted from December 2007 to June 2009 -- particularly affected physicians, dentists and nursing facilities, and it did so faster than in previous recessions, she said.

Total spending on physicians and clinical services increased by only 4% in 2009, reaching $506 billion, because patients sought less care and less intensive care, according to government actuaries and physicians. This is the slowest growth rate for this spending since 1996, when the rate was the same.

However, spending on the clinical services portion, which includes community health centers and retail clinics, increased faster than spending on physician care. That reflects the growing popularity of retail clinics, said David Lassman, a CMS statistician and report co-author.

American Medical Association President Cecil B. Wilson, MD, said policymakers should focus on reforms that will put physicians on solid financial footing, including an overhaul of the Medicare physician payment formula. Still, he said, the AMA is committed to helping construct and test innovative payment reforms that improve patient care and slow the growth of total health care costs.

Federal health care spending increased to 27% of all health spending in 2009, a three percentage point increase from 2008. Medicaid spending increased by 9% in 2009, nearly twice the rate of 2008, to reach $373.9 billion. Medicaid spending growth was largely driven by additional enrollment, not more intensive use of services, Martin said.

Medicare spending grew by 7.9% in 2009, the same rate as in 2008, reaching $502.3 billion. Enrollment in fee-for-service Medicare continued to decrease as more seniors opted for Medicare private plans. However, faster growth in Medicare fee-for-service spending on inpatient and outpatient services -- including physician care -- helped maintain the steady overall growth rate for the program, the report concluded.

The two major exceptions to restrained spending increases in 2009 were retail prescription drugs, which rebounded from historically low growth in 2008, and home health care. Drug spending growth was driven by higher drug prices and increased utilization, partly because of the influenza A (H1N1) pandemic.

Tighter wallets for health spending

Patient out-of-pocket spending experienced a historic deceleration in 2009, growing by only 0.4%, or 2.7 percentage points slower than in 2008. This was driven partly by the first decline in dental spending since at least 1960 but also by slower growth in spending on physicians and clinical services, nursing care and other sectors of the health system, the report found.

Patients are probably delaying elective care, such as certain orthopedic surgeries and cosmetic procedures, said Charles Cutler, MD, chair of the American College of Physicians' board of governors.

Some cosmetic surgeons' incomes declined by as much as 50% during the recession, said Mark Berman, MD, outgoing president of the American Academy of Cosmetic Surgery. Some cosmetic surgeons are still performing the same number of procedures, but at lower prices. Patients also are opting for less costly procedures. "It's a market-driven industry," he said.

Dr. Berman said more physicians who normally don't provide minor cosmetic procedures -- such as Botox injections and other skin treatments -- are starting to offer them to supplement their income. The variety of cosmetic procedures has increased in general, further spurring competition, but the market for cosmetic care has been helped by baby boomers' interest in anti-aging procedures, he said.

Some patients have delayed orthopedic surgeries, and others who knew their health coverage was ending moved up surgeries to beat that deadline, said Stanley Askin, MD, an orthopedic surgeon in solo practice in Elkins Park, Pa., near Philadelphia. He said some of his colleagues have been supplementing their incomes by performing physical therapy. Dr. Askin received a law degree in 2003 and has been handling Social Security and disability claims cases. He reports that legal work now accounts for 20% of his income.

Spending on dental services decreased 0.1% in 2009, the first such decline documented in federal health spending statistics, after an increase of 5.1% in 2008. Patients cut back on elective dental care, including cosmetic procedures and orthodontics, said Matthew Messina, DDS, a consumer adviser for the American Dental Assn.

Patients are less likely to invest in their teeth if they feel pessimistic about their futures, as many did during the recession, Dr. Messina said.

"Everybody was very unsure," he said. "I think that sense of confidence is going to come back very slowly."

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Coverage loss drives spending slowdown

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Click to see data in PDF.

Spending on physicians and clinics in 2009 grew at the slowest rate since 1996 because of job and health coverage losses during the recession. That helped keep national health spending growth to its lowest level in recorded history. The two major exceptions to industrywide restraint in spending growth were in retail prescription drugs and home health care services.

National health spending (in billions)
Category 2005 2006 2007 2008 2009
Hospital care $606.5 $648.3 $686.8 $722.1 $759.1
Physician and clinical services $419.6 $441.6 $462.6 $486.5 $505.9
Prescription drugs $201.7 $219.8 $230.2 $237.2 $249.9
Nursing facilities $112.1 $117.0 $126.5 $132.8 $137.0
Other residential/personal care $96.5 $102.1 $108.3 $113.3 $122.6
Dental services $86.8 $91.4 $97.3 $102.3 $102.2
Home health care $48.7 $52.6 $57.8 $62.1 $68.3
Professional services $53.1 $55.4 $59.5 $63.4 $66.8
Nondurable medical products $37.2 $38.7 $41.1 $42.3 $43.3
Durable medical equipment $30.4 $31.9 $34.4 $35.1 $34.9

Note: Other residential/personal care category includes care provided at community centers, schools and senior centers. Professional services category includes services not provided by physicians or dentists

Source: Centers for Medicare & Medicaid Services, Office of the Actuary

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External links

"Recession Contributes To Slowest Annual Rate Of Increase In Health Spending In Five Decades," abstract from Health Affairs, January (link)

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