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Medicare Resource Center
by Tony Pugh, AARP en Nuevo México, February 24, 2009
WASHINGTON -- Six million Americans are expected to lose private health coverage by the end of next year, while Medicaid, the national health program for low-income Americans, will beef up its enrollment to pick up much of the slack, federal health analysts reported Monday.
As more workers become eligible for Medicaid after losing their jobs and health insurance in the recession, program spending will jump 9.6 percent from $352 billion last year to $386 billion this year, according to an annual report by economists and actuaries from the U.S. Department of Health and Human Services.
The 3.4 million people who are expected to lose private coverage this year -- and another 2.6 million next year -- include not only workers and their families, but also Medicare recipients who no longer can afford supplemental private coverage.
This recession-driven trend will help push more than half of all health-care expenditures onto the public sector by 2016. By 2018, government spending will account for 51.3 percent of health care outlays, analysts said.
"The recession has wide-reaching implications for the health-care sector," said HHS economist Andrea Sisko, who co-authored the report on long-term health spending trends. "Policymakers and the public will be faced with tough decisions regarding the future of the health care system."
On Monday, President Barack Obama told governors who were attending a National Governors Association meeting in Washington that he'd provide $15 billion to help cash-strapped states pay their share of growing Medicaid payments.
As Obama tries to cut the nation's $1.4 trillion budget deficit in half by 2013, rising health-care costs and the government's rising stake in health coverage will prove a difficult obstacle to maneuver around.
Slow income growth and declining job-based coverage will slow the growth in private health-care spending to a 15-year low of 3.9 percent this year. However, public health spending -- driven by Medicaid -- will increase by 7.4 percent to $1.2 trillion. Public spending will rise again after next year as the first wave of aging baby boomers, born from 1946 to 1964, becomes eligible for Medicare.
Because of the recession, the portion of the U.S. economy that's devoted to health-care spending will experience its largest annual increase ever this year, Sisko said. Total public and private health-care spending will go from nearly $2.4 trillion -- 16.6 percent of the gross domestic product last year -- to more than $2.5 trillion, or a projected 17.6 percent of the GDP this year.
The 1-percentage point jump in the share of health spending also reflects a projected 0.2 percent reduction in the GDP, the first such annual decline in 60 years.
Long-term projections are that health-care spending will grow an average of 6.2 percent a year from 2008 to 2018, while the nation's gross domestic product -- the sum total of all goods and services produced in the U.S -- is expected to average only 4.1 percent growth over that period. That means that health-care spending will account for more than 20 percent of the GDP by 2018.
In addition, higher unemployment and slower wage growth during the recession will cause a dip in payroll tax revenues that could push the insolvency date for Medicare's hospital insurance trust fund from 2019 to 2016, said Richard Foster, the chief actuary for the Centers for Medicare and Medicaid Services.
The spending projections outlined Monday cover 2008 to 2018. They don't factor in the recent expansion of the State Children's Health Insurance Program or the new economic stimulus bill and its subsidy for COBRA insurance coverage.
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