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CMS: Healthcare spending increased to $2.5 trillion in 2009

January 10, 2011--The recession slowed healthcare spending in 2009, according to a Centers for Medicare & Medicaid Services (CMS) report on national health expenditures. However, sectors including prescription medications and freestanding home healthcare services logged increases.

Although U.S. healthcare spending increased 4.0 percent in 2009, this represented a drop from the 4.7 percent increase in 2008. Total health expenditures reached $2.5 trillion, or $8,086 per person in 2009—17.6 percent of the nation’s gross domestic product (GDP), according to the report.

Hospital spending increased 5.1 percent to $759.1 billion in 2009, compared to 5.2 percent growth in 2008.

Growth in 2008 and 2009 was much slower than the trend between 1999 and 2007, when spending increased an average of 7.2 percent per year.

The slower growth in 2009 was influenced by decelerating private health insurance spending and slower price growth. Partially offsetting these factors was an increase in Medicaid spending, as Medicaid enrollment increased considerably in 2009, CMS stated.

Spending on physician and clinical services increased 4.0 percent in 2009 to $505.9 billion, a deceleration from 5.2 percent growth in 2008. Slower growth in the use and intensity of services in 2009 was partially offset by increasing prices. Spending for other professional services, such as physical therapy, chiropractic medicine, and mental health, also decelerated in 2009, increasing 5.3 percent to $66.8 billion. Spending in this area increased by 6.6 percent in 2008.

Spending for residential and personal care services accelerated in 2009, increasing 8.3 percent to $122.6 billion compared to 4.6 percent growth in 2008.

This category includes expenditures for medical services delivered in non-traditional settings, such as schools or community centers, ambulance providers, and residential mental health and substance abuse facilities.

In addition, spending for freestanding home healthcare services increased 10 percent in 2009, to $68.3 billion, following growth of 7.5 percent in 2008.

Spending for freestanding nursing care facilities and continuing care retirement communities increased 3.1 percent in 2009 to $137.0 billion, a deceleration from growth of 5.0 percent in 2008.

Prescription drug spending accelerated in 2009 to $249.9 billion, increasing 5.3 percent after 3.1 percent growth in 2008, driven by faster growth in both prices and utilization, according to the report.

Spending for durable medical equipment, which includes items such as eyeglasses and hearing aids, decreased 0.8 percent to $34.9 billion after increasing 2.3 percent in 2008.

Spending for other non-durable medical products, such as over-the-counter medicines, decelerated in 2009, increasing 2.2 percent to $43.3 billion compared to 3.1 percent growth in 2008.

Medicare spending grew 7.9 percent in 2009 to $502.3 billion, the same rate of growth as in 2008. Spending for fee-for-service (FFS) Medicare accelerated in 2009, increasing 5.5 percent, compared to 4.4 percent growth in 2008.

Medicare Advantage (MA) spending increased 15.8 percent in 2009 following 21.4 percent growth in 2008 and was primarily attributable to a continuation of significant increases in MA enrollment. Total Part D spending (which includes spending for benefits, government administration, and the net cost of health insurance) increased 9.3 percent to $54.5 billion in 2009.

Total Medicaid spending grew 9.0 percent in 2009 to $373.9 billion, an acceleration from 4.9 percent growth in 2008, and was driven by a 7.4 percent increase in Medicaid enrollment.

Federal Medicaid expenditures increased 22 percent, while state Medicaid expenditures declined 9.8 percent. This difference in growth is due to a significant increase in the Federal Medical Assistance Percentages (FMAP) used to determine federal Medicaid payments to states—a provision of the American Recovery and Reinvestment Act of 2009 (ARRA).

Private health insurance premiums grew 1.3 percent in 2009, a deceleration from 3.5 percent growth in 2008. Benefit payment growth also slowed, from 4.4 percent in 2008 to 2.8 percent in 2009.

“These trends were heavily influenced by the recession as private health insurance enrollment declined.

"In 2009, spending for benefits increased faster than premiums, and as a result, the net cost of private health insurance (or the difference between premiums and benefits) fell to an 11.1 percent share of total private health insurance spending from 12.4 percent in 2008—a continuation of its recent decline,” CMS stated.

Out-of-pocket spending grew 0.4 percent in 2009, a deceleration from 3.1 percent growth in 2008, as these expenditures declined for dental services, nursing care facilities and continuing care retirement communities, and physician and clinical services, according to the report.