Recession Effect Hits Spending On Health People May Be Skipping Care in a Bad Economy

According to a USA TODAY analysis of government data, health care spending this year has grown at its slowest rate in a half-century, a sign that people are forgoing medical care during the recession.

Spending on doctors, hospitals, drugs and other medical care climbed at a 2.7% annual rate per person in the first half of 2010, the smallest increase since the Bureau of Economic Analysis began tracking medical care of 1959. When inflation is taken into account, spending per person actually fell 0.2% in the first six months of the year. That’s the first decline since the government began adjusting for inflation in 1995.

The drop was not predicted in government forecasts and appears to be the result of a bad economy and high unemployment, health care experts say. “It’s the recession effect”, says Karen Davenport, health policy director at the liberal Center for American Progress. “People who’ve lost insurance, and even some with coverage, are cutting back on medical spending”, says Davenport. The drop in health care spending is a sharp contrast to the last recession in 2001, when health care costs accelerated during the downturn.

“The recession has shifted some people from private insurance to government programs”, says health care economist Robert Brook of the conservative Heritage Foundation. “That may have cut overall spending because the government generally pays lower rates than private insurers”, says Brook.

Medicare, Medicaid and other government programs paid a record 46.1% of the nation’s medical bill in the second quarter, up from 42.3% before the recession began in December 2007.

ADVOCATE will continue to provide updates as they become available.

With best regards,
Kirk Reinitz, CPA