Did health care spending decline as a result of the financial collapse? Not quite, but the growth got reduced, especially in the private sector, where providers and insurers needed to gain efficiencies. The New York Times reports on 2008’s numbers for the first year of the recession:
Health spending grew in 2008 at the slowest pace in 48 years as the recession throttled back the explosive growth of health costs, the federal government reported Monday.
Health spending topped $2.3 trillion in 2008, up 4.4 percent from the previous year. But the rate of growth in 2008 was down from 6 percent in 2007 and an average increase of 7 percent a year in the decade from 1998 to 2008. Health care accounted for 16.2 percent of the gross domestic product in 2008, up from 15.9 percent in 2007, according to the report, by the Department of Health and Human Services.
By slowing the growth of health spending, the recession achieved what a generation of public officials tried unsuccessfully to accomplish. But in their annual report on the topic, federal officials said the deceleration in health spending was a result of the soft economy, and they did not cite any factors that would alter the long-term outlook for continued increases in health spending as baby boomers age and doctors make greater use of new medical technology to treat patients.
Yes, it’s amazing what happens when price signaling and consumer choice gets put into play. Even with the third-party payer system distorting the rational pricing system of the market, consumers knew enough to reduce their own health-care spending in the middle of a recession. In fact, once one strips out the government health coverage customers, the reduction looks even better:
While federal spending on health care surged, consumers and private employers retrenched.
“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 paid by employers,” Mr. Hartman said. “Private business’s health spending remained relatively flat as a share of compensation at 7.9 percent.”
Moreover, the report said, “private health insurance premiums and benefits grew in 2008 at their slowest rate since 1967, 3.1 percent and 3.9 percent, respectively.” The slowdown was tied to a drop in the number of people with private health insurance, to 195.4 million in 2008, from 196.4 million in 2007.
And in case the point isn’t obvious enough:
While the growth of total health spending slowed in 2008, Medicare spending increased at a brisk pace, rising 8.6 percent, to a total of $469 billion, the report said.
Medicaid spending increased because of increased unemployment, which drove people into the state plans. Medicare doesn’t have anything to do with unemployment or even economic recessions. People become eligible through age or disability, which means that either the increase in Medicare came from more eligibility (longer life spans and aging populations) or less efficient decisions on care and coverage. The private sector seems to have done a much better job in adjusting to the changing economic conditions.
Yet the Democrats want to offer even more government intervention and coverage as a way to curtail cost hikes in health-care coverage. Exactly when has that worked? Oh, yes …. never. Not even during a recession.
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