Recession Contributes To Slowest Annual Rate Of Increase In Health Spending In Five Decades

Office of the Actuary, Centers for Medicare and Medicaid Services , Baltimore, Maryland, USA.
Health Affairs (Impact Factor: 4.97). 01/2011; 30(1):11-22. DOI: 10.1377/hlthaff.2010.1032
Source: PubMed


In 2009, US health care spending grew 4.0 percent--a historically low rate of annual increase--to $2.5 trillion, or $8,086 per person. Despite the slower growth, the share of the gross domestic product devoted to health spending increased to 17.6 percent in 2009 from 16.6 percent in 2008. The growth rate of health spending continued to outpace the growth of the overall economy, which experienced its largest drop since 1938. The recession contributed to slower growth in private health insurance spending and out-of-pocket spending by consumers, as well as a reduction in capital investments by health care providers. The recession also placed increased burdens on households, businesses, and governments, which meant that fewer financial resources were available to pay for health care. Declining federal revenues and strong growth in federal health spending increased the health spending share of total federal revenue from 37.6 percent in 2008 to 54.2 percent in 2009.

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    • "U.S. health care spending has increased 2.4% faster than GDP since 1970 and is expected to exceed $4.3 trillion in 2018 [29]. In 2009, health care spending hit an unprecedented 17.6 percent of GDP [33]. Prescription drug prices have been a key contributor to the rise of health care expenditures [11]. "
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    ABSTRACT: The goal of this study is to examine how four factors - level of competition, therapeutic purpose, age of the drug, and manufacturer play a role in the pricing of brand-name prescription drugs. Understanding how these factors contribute to high drug prices will allow players in this supply chain to negotiate more favorable contract terms. This can be a large benefit to society as this insight can lead to improved efficiency in pricing and increased savings, which can be passed to the consumer.We develop measures for these factors based on publicly available information. Using data on the wholesale prices of prescription drugs, we estimate a model for drug prices based on our measures of competition, therapeutic purpose, age, and manufacturer. Our analysis reveals that these factors are significant in estimating drug prices. We observe that proliferation of dosing levels tends to reduce the prices, therapeutic conditions which are both less common and more life-threatening lead to higher prices, older drugs are less expensive than newer drugs, and some manufacturers set prices systematically different from others even after controlling for other factors. These findings indicate that publicly observable factors can be used to explain drug prices.
    Full-text · Article · Sep 2013 · Socio-Economic Planning Sciences
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    • "Our results are consistent with other prior studies finding an increased burden on public payers during periods of economic downturn [31-33]. During the most recent recession in 2009, Martin and colleagues found a decrease in private health insurance enrollment, growth in out-of-pocket spending and an increase in per enrollee Medicare spending growth [33]. "
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    ABSTRACT: Background In the U.S., economic conditions are intertwined with labor market decisions, access to health care, health care utilization and health outcomes. The Veterans Affairs (VA) health care system has served as a safety net provider by supplying free or reduced cost care to qualifying veterans. This study examines whether local area labor market conditions, measured using county-level unemployment rates, influence whether veterans obtain health care from the VA. Methods We used survey data from the Behavioral Risk Factor Surveillance System in years 2000, 2003 and 2004 to construct a random sample of 73,964 respondents self-identified as veterans. VA health service utilization was defined as whether veterans received all, some or no care from the VA. Hierarchical ordered logistic regression was used to address unobserved state and county random effects while adjusting for individual characteristics. Local area labor market conditions were defined as the average 12-month unemployment rate in veterans’ county of residence. Results The mean unemployment rate for veterans receiving all, some and no care was 5.56%, 5.37% and 5.24%, respectively. After covariate adjustment, a one percentage point increase in the unemployment rate in a veteran’s county of residence was associated with an increase in the probability of receiving all care (0.34%, p-value = 0.056) or some care (0.29%, p-value = 0.023) from the VA. Conclusions Our findings suggest that the important role of the VA in providing health care services to veterans is magnified in locations with high unemployment.
    Full-text · Article · Mar 2013 · BMC Health Services Research
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    • "The proportion of health spending growth due to prices varies over time (see Exhibit 6 in Martin et al., 2011), but has been growing steadily since 2001. "
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    ABSTRACT: Health care is a very large and important industry. Hospital and physician services are a large part of the U.S. economy. In 2009, hospital care alone accounted for 5.4% of GDP – roughly twice the size of automobile manufacturing, agriculture, or mining, and larger than all manufacturing sectors except food and beverage and tobacco products, which is approximately the same size. Physician services comprise 3.6% of GDP (Martin et al., 2011). The net cost of health insurance – current year premiums minus current year medical benefits paid – was 1% of GDP in 2009. The share of the economy accounted for by these sectors has risen dramatically over the last 30 years. In 1980, hospitals and physicians accounted for 3.6% and 1.7% of U.S. GDP, respectively, while the net cost of health insurance in 1980 was 0.34% (Martin et al., 2011). Of course, health care is important not only because of its size. Health care services can save lives or dramatically affect the quality of life, thereby substantially improving wellbeing and productivity. As a consequence, the functioning of the health care sector is vitally important. A well functioning health care sector is an asset to the economy and improves quality of life for the citizenry. By the same token, problems in the health care sector act as a drag on the economy and impose a burden on individuals. As documented below, there has been a tremendous amount of consolidation among health care providers. Consolidation has also been occuring among health insurers. Con- solidation can bring efficiencies – it can reduce inefficient duplication of services, allow firms to combine to achieve efficient size, or facilitate investment in quality or efficiency improvements. On the other hand, consolidation can enhance the market power and lead to increased prices or reduced quality. The research evidence shows that providers in more concentrated markets charge higher prices to private payers, without accompanying gains in efficiency or quality. Further, the burden of higher provider prices falls on individuals, not insurers or employers. Even though individuals with private employer provided health insurance pay a small portion of provider fees directly out of their own pockets, they end up paying for increased prices in the end. Insurers facing higher provider prices increase their premiums to employers. Employers then pass those increased premiums on to their workers, either in the form of lower wages (or smaller wage increases) or reduced benefits (greater pre- mium sharing or less extensive coverage, including the loss of coverage). There is less research evidence on the impacts of consolidation in health insurance markets, but that evidence shows insurers in more concentrated markets charge higher premiums to large employers, and pay lower prices to providers. This represents a real, and serious problem. The U.S. health care system depends on private markets to deliver health care and for a large part of the financing of care. If these markets are not functioning well due to the exercise of market power this creates problems for the entire system.
    Full-text · Article · Sep 2011
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