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Government Spending On Healthcare Outpaces Other Sources

Much of the debate about the health reform has been on whether or not it will lead to government-run health care. But the fact is that the government’s share of health care spending already is growing at a faster rate than private spending, a trend accelerated by the recent economic recession.

A new report from Medicare’s actuaries, published in the journal Health Affairs, found that “Federal government spending for health services and supplies increased 10.4 percent in 2008 . . . and accounted for almost 36 percent of federal receipts, up considerably from 28 percent in 2007. By comparison, spending for health care by private businesses grew just 1.2 percent in 2008, in part because of a drop in the proportion of employer-sponsored insurance premiums paid for by employers” while “health care spending by households grew 4.3 percent in 2008, a deceleration from 5.9 percent growth in 2007” but still more than the adjusted personal income growth of 2.7%.

The current economic recession, the authors say, had two major impacts on health spending:

* “The economic stimulus bill shifted more federal dollars to Medicaid, causing total Medicaid spending to rise to 58.5 percent in 2008, compared with 56.5 percent in 2007, and there was slower growth in personal health care paid for by private sources of funds, which increased just 2.8 percent in 2008, the lowest rate since the mid-1990s” and
* “The low rate of private spending growth in 2008 occurred as personal income growth slowed, employment fell, and enrollment in private health insurance plans declined.”

Overall, U.S. health care spending growth slowed to 4.4% in 2008, “the slowest rate of growth over the past forty-eight years.” Yet despite the slow-down, health spending increases “continue to outpace growth in the resources available to pay for it” as the share of gross domestic product (GDP) devoted to health care increased from 15.9 percent in 2007 to 16.2 percent in 2008.

Other study highlights: In 2008 total Medicare spending grew 8.6 percent, reaching $469.2 billion, accelerating from 7.1 percent growth in 2007 mainly attributable to “increased fee-for-service (FFS) spending for hospitals and a further shift in enrollment to Medicare Advantage plans, which have higher average Medicare payments per beneficiary than FFS.” National health expenditures, public and private combined, on physician services alone “increased 4.7 percent in 2008, a deceleration from 5.5 percent growth in 2007” and “retail prescription drug spending growth decelerated to 3.2 percent, reflecting the continuation of a slowing trend that began in 2000.”

Critics of the current health reform effort often say that they are fighting to keep the federal government out of health care. But the fact is that the government’s role in paying for health care has been growing for decades. In 1970, the federal government’s share of total national health expenditures (all sources, public and private combined) was approximately 23.6%. The federal share was 28.2% in 1980; 30.8% in 2000, 33.7% in 2007, and 35% in 2008. (See this table for a detailed breakdown of annual spending on health by source of funds.) During much of this time Republicans controlled the White House and/or one or both chambers of Congress.

Enactment of health reform will surely expand the government’s role in financing health care even more, but the notion that this fight is over “keeping government out of health care” is, well, out-of-touch with the simple reality that government’s role in paying for health care has been steadily increasing over the past forty years, with the support of both political parties and, it seems, the American public.

Today’s question: What do these estimates say to you?

*This blog post was originally published at The ACP Advocate Blog by Bob Doherty*

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