Health spending, GDP head in two directions

April 10, 2009
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Taxpayers are expected to pick up more than half of health care costs by 2018, according to a recent report from the Centers for Medicare & Medicaid Services.

The report, published online by the journal Health Affairs, showed that annual growth in spending by public payers is expected to average 7.2 percent, compared to 5.3 percent for private payers through 2018. Taxpayers picked up 46.2 percent of the tab in 2007, and that is expected to grow to 51.3 percent by 2018.

Overall health spending will grow an average of 6.2 percent a year, outstripping an average growth in the Gross Domestic Product of 4.1 percent annually, the report projected.

For 2009, the report paced overall health spending to increase by 5.5 percent compared to an anticipated GDP decline of 0.2 percent. Health is expected to account for 17.6 percent of the GDP, up from 16.2 percent in 2007.

In 2008, national health spending saw growth of 6.1 percent, to $2.4 trillion, from $2.2 trillion in 2007.

The report also predicted that spending growth by private payers will slow as the number of people they cover dwindles, thanks to job losses. A 5.8 percent increase in 2007 is expected to drop to 3.9 percent, the lowest level of private health spending growth in 15 years.

Due to expanding Medicaid enrollment, the growth in public health spending is predicted to be 7.4 percent in 2009, up from 6.4 percent in 2007.

The recession is expected to slow both growth in hospital spending and in hospital prices, the report projected. Expansion in hospital spending was 7.3 percent in 2007 but is expected to drop to 5.7 percent this year. Hospital prices will increase at the slowest pace in the 21st century, at a rate of 2.6 percent, for 2009, the report said.

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