The Rate Of Health Care Spending
Last week, the Centers for Medicare and Medicaid Services (CMS) released its annual health care spending projections. The CMS actuaries and economists project:
- Between 2009 and 2019, national health costs will grow at an average annual rate of 6.1 percent. This rate is about 2 percentage points faster than the projected growth of the gross domestic product, which is expected to average 4.4 percent. As a result, national health expenditures will grow from an estimated 17.3 percent of GDP in 2009 to 19.3 percent by 2019
- Private health insurers’ administrative costs will continue to fall, from 11.7 percent of premiums in 2008 to 11.2 percent in 2009. (In comparison, administrative costs were 13.7 percent of premiums in 2003.) Projections for administrative costs in 2009 are $4.3 billion lower than in 2007
- Private health insurance premiums will grow at a rate of 3.3 percent in 2009, up from 3.1 percent in 2008 and down from 4.4 percent in 2007. The rate of growth will decline to 2.5 percent in 2010
- Public health funds will account for 50.4 percent of all health care spending by 2011 – the first year government programs will account for more than half.
The report, published last week in Health Affairs, notes that the “two primary drivers of growth are medical prices and utilization.” It includes these proof points:
- Hospital spending growth is projected to have accelerated from 4.5 percent in 2008 to 5.9 percent in 2009
- Spending growth for physician and clinical services is expected to have accelerated to 6.3 percent in 2009, up from 5 percent in 2008
- Prescription drug spending is expected to have grown 5.2 percent in 2009, an acceleration of 2 percentage points from 2008.
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