Health-Care Spending Slows in U.S. as Recession Curbs Coverage

by Lesley Politi on February 26, 2009

By Aliza Marcus

Feb. 24 (Bloomberg) — Health-care spending in the U.S. this year will grow 5.5 percent, the least since 1997, as the recession erodes incomes and leaves fewer people with private health insurance, government economists said.

The projected increase, to $2.5 trillion, compares with annual gains of 6.1 percent in 2008 and 2007, the economists reported online today in the journal Health Affairs. The calculations include stepped-up government spending to cover more elderly and poor through programs such as Medicare and Medicaid, efforts that are likely to keep expanding, the authors said.

The U.S. sank into a recession in December 2007, and payrolls have continued to decline. With slower growth in personal incomes, people cut back on filling prescriptions, going to the doctor and having surgery, according to the report.

“The recession has wide-reaching implications for the health-care sector,” Andrea Sisko, an economist at the Centers for Medicare and Medicaid Services, the agency that compiled the data, said in an e-mailed statement yesterday. “Policy makers and the public will be faced with tough decisions regarding the future of the health-care system.”

The slump has pummeled shares of Zimmer Holdings Inc., the world’s biggest maker of artificial hip and knee joints, which forecast Jan. 29 that sales would drop this year. Allergan Inc., maker of the wrinkle-smoother Botox, said this month it was firing 460 sales and marketing workers.

More Coverage

A stimulus measure signed last week by President Barack Obama provides more than $111 billion to bolster private and public health insurance. Obama this week will propose ways to broaden coverage to bring in the 46 million Americans who lack insurance.

Health-care spending will still grow faster than the U.S. economy over the decade, increasing to more than 20 percent of gross domestic product in 2018 from 16 percent in 2007, according to the economists. Government health-care spending will probably more than double to $2.23 trillion in 2018, swelling to more than half of all health spending in that final year of the survey period, the economists wrote.

Obama has warned that the U.S. faces continuing strain on the budget because the costs for programs such as Social Security, Medicare and Medicaid will keep rising as the U.S. population ages. Those programs now consume about 40 percent of federal spending, and White House budget director Peter Orszag said yesterday that the “the path to fiscal responsibility must run directly through health care.”

Medicare, Medicaid

Dealing with Medicare and Medicaid will succeed only by “slowing the overall growth rate of health-care costs,” Orszag said at a White House gathering focused on the strains on the budget.

Generic drugs will probably provide less of a brake on health-care spending costs. Drug spending is expected to accelerate in 2014, growing 8.6 percent by 2018, as new, costlier specialty medicines reach the market, the authors wrote. That compares with an increase of 3.5 percent in 2008.


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