While overall health care spending slowed in 2009, it is the underlying trend that is more troubling: the continuing decline in private coverage and the steady increase in government health care. These trends will only accelerate under Obamacare.
According to the Centers for Medicare and Medicaid Services (CMS), total health care spending grew by 4 percent in 2009 to reach $2.5 trillion. This represents a slower rate of growth from 2008, but the slower increase still outpaced spending as an overall percentage of GDP.
The 3.2 percent decline in private coverage and the slowing of out-of-pocket spending by consumers are attributed to the recession. Fewer people with jobs mean fewer people with traditional employer-based health care coverage and less income to pay for health care.
The decline in private coverage is reportedly offset by a massive increase in Medicaid as more individuals enroll in the government health care program for the poor. According to CMS, Medicaid spending grew at a rate of 9 percent, nearly doubling from 4.9 percent in 2008. Moreover, the federal share of this spending increased 22 percent as the federal government picked up a greater share of the cost as directed under the stimulus bill.
Under the new health care law, the shift to more government-controlled health care spending will only worsen. According to former Congressional Budget Director Doug Holtz-Eakin, the new health care law will encourage more employers to drop their health care coverage in place of taxpayer-funded government health care. Holtz-Eakin and Cameron Smith estimate that 35 million people will lose their employer-based coverage under Obamacare. Government health care spending will also increase as the new law expects to add over 16 million to Medicaid and spend over $400 billion on new health care subsidies.
The health care sector has been steadily moving to a tipping point at which the federal government will control the majority of spending in the health care sector. The recession and responding policy changes have accelerated movement toward this point. And Obamacare will put the country on the fast track over the cliff.