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Public Health Spending to Hit Milestone
Wall St Jnl Feb 4 2010
from Jules: so what will this mean for HIV ART drugs, access to care, Ryan White, insurance reimbursement, ART drug development, generic ART drug use vs brand names??
For the first time, government programs next year will account for more than half of all U.S. health-care spending, federal actuaries predict, as the weak economy sends more people into Medicaid and slows growth of private insurance.
The figures show how federal and state spending is taking a bigger role while Congress hesitates over a health-care overhaul.
Over the next ten years, health spending is expected to balloon to $4.5 trillion. Despite this, the government's health overhaul has stalled, Peter Landers reports.
Government health programs are a growing burden on the federal budget, which is running annual deficits of more than $1 trillion, and rising health costs continue to batter private industry.
By 2020, according to the new projections, about one in five dollars spent in the U.S. will go to health care, a proportion far beyond any other industrialized nation.
"It's going to be a desperate issue five to 10 years out," said Gail Wilensky, the former top Medicare official in the George H.W. Bush administration. She said the U.S. will have to decide soon between raising revenue to pay for Medicare or reducing benefits.
Public funds accounted for 47% of the $2.34 trillion of national health spending in 2008, the last year for which figures are available. The federal Centers for Medicare and Medicaid Services estimates in a paper to be published Thursday in the journal Health Affairs that the proportion will rise to 50.4% by 2011. Last year, the federal actuaries had predicted the 50% mark wouldn't be reached until around 2016.
The latest estimate assumes Congress will act to prevent a sharp cut in Medicare payments to doctors, which is set to take effect in March under current law. Congress has consistently done so in earlier years.


The rise in Medicare, the federal health program for the elderly and disabled, and Medicaid, the federal-state program for the poor, is driving an increase in overall health spending.
The paper estimated that U.S. health spending hit $2.5 trillion in 2009, up 5.7% from the previous year. That represents 17.3% of gross domestic product, up from 16.2% in 2008, because the overall economy shrank last year. A decade from now, health spending is projected to hit about $4.5 trillion a year.
Link to Article:
Health Spending Projections Through 2019 (From the paper published in Health Affairs)
Growth of Medicaid accounts for much of the shift toward publicly funded health care. The paper predicted enrollment in Medicaid would rise 5.6% this year and spending would rise 8.9%.
Meanwhile, the number of people with private health insurance is falling slightly because of high unemployment.
Many states are having trouble funding their share of Medicaid. President Barack Obama's budget proposal for the fiscal year beginning Oct. 1 calls for $25 billion in federal help for covering Medicaid costs.
Over the longer term, the public share of health spending is expected to rise further because the first baby boomers will turn 65 in 2011 and become eligible for Medicare.
Also, the rising number of elderly will add to Medicaid spending on nursing homes and other services for the poor. The actuaries estimated that the public share would reach 52.6% by 2019.
Medicare and Medicaid account for the bulk of government spending on health care. Federal and state programs for veterans, children and others make up the rest.
Democratic health-overhaul bills would expand the public role further by widening eligibility for Medicaid and giving lower-income people subsidies to buy insurance.
Republicans said the bills would make the government too deeply involved in health care. The legislation is in doubt now after a Republican victory in last month's Senate election in Massachusetts.
Mr. Obama often described his health plan as an effort to counter the sharp rise in health costs.
His plan included cuts to the growth of Medicare, but Republicans noted that much of the money raised was going to new programs such as the subsidies.
House Minority Leader John Boehner of Ohio said the report illustrates that the Democrats' bill is the wrong answer to lowering health costs.
"They need to scrap it, and start working in a bipartisan way on the step-by-step reforms to lower costs that the American people want," he said.
"There is nothing inherently wrong with crossing this threshold, especially in light of the recession. These data show that government programs are working as intended," said Rep. Charles Rangel (D., N.Y.), chairman of the House Ways and Means Committee. "However, these projections do reinforce the need to enact comprehensive health reform, like the legislation passed by both chambers, that lowers costs for individuals and businesses and improves coverage."
Government spending on health care in the U.S. is estimated to have accounted for 8.4% of GDP in 2009.
That is nearly equal to total health spending—public and private—in some European countries such as Britain and Italy, according to Organization for Economic Cooperation and Development data.
Prescription Drugs
Prescription drug spending is expected to have grown 5.2 percent in 2009, an acceleration of 2.0 percentage points from 2008, and to have reached $246.3 billion (Exhibits 1 and 2). Growth in the use of prescription drugs per person is expected to rebound from an actual decrease in 2008 to 0.9 percent in 2009, driven by an increase in the use of antiviral drugs related to the H1N1 virus.20
Another factor in the expected 2009 acceleration is higher price growth for brand-name drugs, as the Consumer Price Index for prescription drugs has increased from 2.5 percent in 2008 to a projected 3.4 percent rate in 2009.21 By 2011, drug spending growth is expected to accelerate to 5.6 percent, corresponding to an upward trend in use that is due to projected improving economic conditions.
In 2012 and 2013, accelerating drug spending growth is expected to exhibit a temporary pause as many top-selling brand-name drugs lose patent protection.22 Because of the expected shift to the less expensive versions of these drugs when their patents expire, prescription drug price growth is expected to decelerate from 3.0 percent in 2011 to 1.9 percent in 2012.6 Price growth is expected to remain at lower-than-historical levels into 2013, as prices for these blockbuster drugs and their generic versions are anticipated to continue to fall as the number of generic competitors increases.23 As a result, prescription drug spending growth is projected to be 4.7 percent in 2012 and 5.4 percent in 2013.
Prescription drug spending growth is anticipated to accelerate through 2019, reaching 7.7 percent that year. Increases in drug prices are expected to account for about half of this growth. Also, expected increases in the number of new drug approvals, as well as an increase in the share of expensive specialty drugs, are projected to result in accelerating growth over this time frame.
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