Healthcare Spending Reaches 17.3% of GNP, Largest 1-Year Rise Ever Recorded

Independent actuaries working for the CMS reported that the healthcare sector's share of the economy grew by 1.1 percent in 2009, the largest one-year increase ever reported, according to a report in Health Affairs.


The healthcare sector's rising share of the economy, magnified by a contraction in other sectors, reached 17.3 percent of the gross domestic product and is expected to reach 19.3 percent of GDP by the end of the decade.

Looking at another measure, healthcare spending growth, 2009 was not a record year. Healthcare spending grew by 5.7 percent to $2.5 trillion last year, higher than the 4.4 percent it logged in 2008 but lower than the 6 percent reported in 2007. This year, the actuaries expect healthcare spending growth to slow to 3.9 percent.

Factors for the 2009 increase included increased spending on Medicaid, which rose 10 percent in 2009, increased spending on COBRA health insurance for the newly jobless, a large number of baby-boomers entering Medicare and treatments for H1N1 patients.

Government healthcare spending in 2009 rose by 8.7 percent to $1.2 trillion, or nearly half of total national healthcare spending. By 2012, the government’s share of healthcare spending will exceed half, compared with one quarter 50 years ago, before Medicare and Medicaid were created.

Private-sector healthcare spending did not grow as fast as government spending and is expected to increase by 2.8 percent in 2010, a slow-down caused by continuing loss of health coverage due to unemployment and the expiration of the COBRA created by the stimulus bill.

The Los Angeles Times quoted analysts who were dismayed by the healthcare sectors's increases.

Stuart Butler, an analyst at the Heritage Foundation, said the figures show that more aggressive cost controls are needed. "The only way to do this is to simply spend less," he said.

Len Nichols, health policy director at the New America Foundation, added: "If you believe that much medical care is unnecessary, as I do, then it is criminal that we are spending so much."

Read Health Affairs' report on healthcare spending.

 

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