Slow Growth in U.S. Health Care Spending Continues

In 2010 U.S. health care spending grew 3.9%, according to the latest annual National Health Expenditure Accounts (NHEA). This follows record slow growth of 3.8% in 2009—the slowest rate in the NHEA's 51-year history. Total health expenditures reached $2.6 trillion in 2010, which translates to $8,402 per person, or 17.9% of the nation's Gross Domestic Product (GDP). In 1960, the first year that the NHEA was compiled, health care spending's share of GDP was 5.2%.

Analysts at the Centers for Medicare and Medicaid Services (CMS) compiled the 2010 report, which was published in the January issue of the journal Health Affairs. The NHEA documents annual U.S. expenditures for health care goods and services, public health activities, government administration, the net cost of health insurance, and investment related to health care. The data are presented by type of sponsor (households, private businesses, and governments), type of service, and sources of funding.

Household health care spending equaled $725.5 billion in 2010 and represented 28% of total health spending, slightly lower than the 29% share in 2007. In 2010 growth in total premiums for private health insurance slowed to 2.4%, compared with 2.6% growth 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 health care benefits, according to the report, with the net cost of insurance increasing in 2010 by 8.4%, or $11.3 billion. Out-of-pocket spending by consumers increased 1.8% in 2010, an increase over the .2% growth rate in 2009.

In 2010 private businesses financed $534.5 billion, or 21%, of the nation's health care spending, down from a 23% share in 2007. The federal government financed 29% of total health spending in 2010, or $742.7 billion. This represents an increase of 6 percentage points from the federal government's share of 23% in 2007. As noted in the report, part of the increase is attributable to enhanced federal matching funds for state Medicaid programs under the American Recovery and Reinvestment Act, which expired in 2011. Medicare spending grew 5.0% in 2010, a slowdown from growth of 7.0% in 2009. The rate of growth in Medicaid spending also slowed—7.2% growth in 2010, compared with 8.9% in 2009. State and local governments' share of total health spending declined to 16% in 2010, a total of $421.1 billion, in part due to the temporary assistance provided by the Recovery and Reinvestment Act.

As Medicaid and Medicare growth slowed, so did spending on freestanding home health care services, which grew 6.2%, to $70.2 billion, after growth of 7.5% in 2009. In addition, spending for freestanding nursing care facilities and continuing care retirement communities increased 3.2% in 2010, to $143.1 billion, a deceleration from growth of 4.5% in 2009.

In 2010 spending on hospital care, which accounted for roughly 30% of all spending on health care, grew 4.9%—to $814.0 billion—compared with 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. Spending on physician and clinical services in 2010, which accounted for 20% of total health care spending, grew 2.5% to reach $515.5 billion, slowing from 3.3% growth in 2009. The 2010 deceleration reflects a decline in use, driven by a drop in total physician visits between 2009 and 2010 and a less severe flu season than in 2009, the report notes.

Retail prescription drug spending, which accounted for 10% of total health care spending in 2010, grew only 1.2%, to $259.1 billion, a substantial slowdown from 5.1% growth in 2009 and the slowest rate of growth in prescription drug spending documented by the NHEA. Spending for dental services increased 2.3% in 2010, to $104.8 billion, compared with growth of only .1% in 2009. Out-of-pocket spending for dental services, which accounted for over 40% of dental spending in 2010, increased .5%, following a decline of 5.2% in 2009.

More data from this report can be accessed on the CMS Web site at www.cms.gov/nationalhealthexpenddata.