CMS Reports Health Spending Growth at Historic Lows

January 10, 2012 ( - U.S. healthcare spending experienced historically low rates of growth in 2009 and 2010, according to the annual report of national health expenditures (NHE) published in the January issue of the journal Health Affairs

Analysts at the Centers for Medicare & Medicaid Services (CMS) report in the article that the increase in spending for 2009 represents the lowest rate of increase in the entire 51 year history of the NHE.   The low rate of growth, the data shows, reflects lower utilization in healthcare than in previous years. The report notes that U.S. healthcare spending grew only 3.9% in 2010, reaching $2.6 trillion or $8,402 per person, just 0.1 percentage point faster than in 2009.      

In 2010, as health spending growth remained low, growth in U.S. economy—as reflected in gross domestic product (GDP) (4.2%)— rebounded. As such in 2010, the health spending share of the overall economy was unchanged at 17.9%. In the past, this share has increased, rising over time from 5.2% in 1960.  

Household healthcare spending equaled $725.5 billion in 2010 and represented 28% of total health spending, slightly lower than its 29% share in 2007.  Growth in total private health insurance premiums slowed in 2010 to 2.4% from 2.6% in 2009, continuing a slowdown that began in 2003.  Despite this deceleration, for the first time in seven years, the growth in premiums exceeded the growth in insurer spending on healthcare benefits, with the net cost of insurance increasing by 8.4% or $11.3 billion in 2010. Out-of-pocket spending by consumers increased 1.8% in 2010, accelerating from 0.2% growth in 2009.

Other findings reported include: 

  • Retail prescription drug spending (10% of total healthcare spending) grew only 1.2% to $259.1 billion in 2010, a substantial slowdown from 5.1% growth in 2009 and the slowest rate of growth for prescription drug spending recorded in the NHE.   
  • The federal government financed 29% of the nation’s healthcare spending in 2010, an increase of six percentage points from its share in 2007 of 23%, and reached $742.7 billion. Part of that increase came from enhanced Federal matching funds for State Medicaid programs under the American Recovery & Reinvestment Act which expired in 2011. Medicare spending grew 5% in 2010, a deceleration from growth of 7% in 2009. 
  • Medicaid spending increased 7.2% in 2010, slowing from 8.9% growth in 2009.  
  • The state and local government share of total health spending declined from 18% in 2007 to 16% in 2010 and totaled $421.1 billion, in part due to the temporary assistance in the Recovery Act. 
  • Hospital spending, which accounted for roughly 30% of total healthcare spending, grew 4.9% to $814.0 billion in 2010, compared to growth of 6.4% in 2009.  
  • Growth in private health insurance spending for hospital services, which in 2010 accounted for 35% of all hospital care, slowed considerably in 2010.  
  • Physician and clinical services spending, which accounted for 20% of total healthcare spending, grew 2.5% to reach $515.5 billion in 2010, slowing from 3.3% growth in 2009.  
  • Private businesses financed $534.5 billion, or 21% of total health spending in 2010, down from a 23% share in 2007.