Report shows U.S. healthcare spending growth slows

WASHINGTON Tue Jan 5, 2010 6:34am EST

Hussain Gilani, Resident M.D. (C) reads over a patients electrocardiogram results in the hallway of the emergency room at Ben Taub General Hospital in Houston, Texas, July 27, 2009. REUTERS/Jessica Rinaldi

Hussain Gilani, Resident M.D. (C) reads over a patients electrocardiogram results in the hallway of the emergency room at Ben Taub General Hospital in Houston, Texas, July 27, 2009.

Credit: Reuters/Jessica Rinaldi

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WASHINGTON (Reuters) - U.S. healthcare spending rose at the lowest rate on record in 2008 due to the recession, but still reached $2.3 trillion and devoured 16.2 percent of the U.S. economy, government analysts said in a report on Tuesday.

The report, issued by the government's Centers for Medicare and Medicaid Services (CMS), illustrated anew the huge burden that healthcare costs place on the United States, which spends more on such care than any other country in the world.

President Barack Obama and Democratic congressional leaders are aiming for Congress to pass landmark legislation in the coming weeks aimed at overhauling the U.S. healthcare system.

The report showed that U.S. healthcare spending rose 4.4 percent in 2008. That was the slowest growth rate in nearly 50 years of federal tracking of such spending and was lower than the 6 percent growth increase recorded a year earlier, CMS analysts reported in the journal Health Affairs.

CMS, the part of the U.S. Department of Health and Human Services responsible for the massive Medicare and Medicaid government health insurance programs, said federal healthcare spending increased 10.4 percent in 2008 over 2007 levels.

The agency said healthcare accounted for almost 36 percent of federal spending in 2008, up from 28 percent of federal spending the prior year. CMS said that the $2.3 trillion spent on healthcare in 2008 translated to $7,681 per person.

Despite the slowdown in the rate of growth, healthcare spending made up 16.2 percent of U.S. gross domestic product in 2008, up from 15.9 percent the year before, according to the agency's annual spending report.

Overall spending slowed for nearly all healthcare goods and services, particularly for hospital care, CMS said.

FEWER WITH PRIVATE INSURANCE

While spending on government health insurance programs increased, the report showed that enrollment in private health insurance dropped to 195.4 million people in 2008 from 196.4 million in 2007 partly because of jobs lost in the manufacturing and finance sectors amid the recession.

The increase in federal healthcare spending was driven mainly by two factors -- a temporary shift of $7 billion in additional federal funds to Medicaid, the state-federal health insurance program for the poor, to help financially strapped states, and growth in Medicare, the report said.

Spending on Medicare, the federal health insurance program for the elderly and disabled, hit $469.2 billion in 2008, a growth of 8.6 percent over 2007 levels. That growth rate was a faster pace than in 2007.

Spending on Medicaid grew 4.7 percent to $329.4 billion in 2008, a slower rate of growth than in 2007, the report said.

"The recession that began in December of 2007 seems likely to be one of the longest and most severe since 1933. As such, this event has had a significant impact on health spending in 2008," Micah Hartman, a CMS statistician who worked on the report, told reporters in a telephone briefing.

Overall spending for hospital care grew 4.5 percent in 2008 to $718.4 billion, down from 5.9 percent growth in 2007. Retail prescription drug spending growth slowed to 3.2 percent in 2008, continuing a slowing trend that began in 2000.

Democrats this week are launching a final drive to get healthcare reform legislation through Congress. The Senate and House of Representatives have passed their own versions of the bill. Democrats now must meld the two versions together into a single bill that Congress would have to pass again and send to Obama to sign into law.

"I wouldn't take a lot of comfort in the fact that health spending grew by only 4.4 percent in 2008 especially since the overall economy grew considerably slower than that," said Ron Pollack, who heads the advocacy group Families USA, which supports Obama's healthcare reform goals.

The U.S. Chamber of Commerce, which opposes the Democratic healthcare measure, said there is a lesson in the report that the federal government should heed.

"Interestingly enough, it (the report) shows that while Americans were tightening their belts and conserving their funds, the federal government was spending more and more money," James Gelfand, the chamber's senior manager of health policy, said in a telephone interview.

(Editing by Will Dunham)

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