CMS: Physician payment cuts in 2010 will help curb Medicare spending

In 2010, growth in national health expenditures is projected to decelerate to 4.6 percent, down from 5.5 in 2009, due to a projected decline in Medicare spending growth as a result of a 21-percent cut to Medicare physician payment rates, according to a healthcare spending projection report issued by the Centers for Medicare & Medicaid Services (CMS), prepared by CMS's Office of the Actuary and published online in Health Affairs.

The cuts, required under the Sustainable Growth Rate (SGR) formula, are called for in 2010 under current law.

"We note, however, that in every year since 2002, Congress has acted to override application of the SGR formula to reduce physician payments. If Medicare physician payment rates are not cut in 2010 and remained at 2009 levels, projected Medicare spending growth in 2010 would be 6.4 percent, 3.9 percentage points faster than the current-law projection of 2.5 percent. And projected total growth in national health expenditures would be 5.4 percent in 2010, 0.8 percentage point higher than the current-law projection of 4.6 percent," according to CMS.

The report also projected that the national health expenditure (NHE) growth in the United States is expected to significantly outpace economic growth in 2008 and 2009 due to the recession, as health spending increases to $2.4 trillion in 2008 (6.1 percent) from $2.2 trillion in 2007. Economic growth, measured by the gross domestic product (GDP), is expected to only reach 3.5 percent.

For 2009, health spending is projected to increase 5.5 percent while GDP is expected to decrease 0.2 percent. The health share of GDP is expected to increase from 16.2 percent in 2007 to 16.6 percent in 2008 and to 17.6 percent in 2009, representing about one-third of the total increase in the health share of GDP for 2008 through 2018.

From 2008-2018, average annual health spending growth (6.2 percent) is anticipated to outpace average annual growth in the overall economy (4.1 percent). By 2018, national health spending is expected to reach $4.4 trillion and comprise just over one-fifth (20.3 percent) of GDP.

Turning its eye to payors, CMS has projected that average annual spending growth by public payors (7.2 percent) is expected to outpace that of private payors (5.3 percent). As a result, the public share of total healthcare spending is expected to rise from 46.2 percent in 2007 to over 50 percent by 2016, and then reach 51.3 percent by 2018.

The public and private sectors are also forecasted to see different growth patterns; private health spending growth, which includes growth in private health insurance spending and out of pocket payments, is projected to decelerate from 5.8 percent in 2007 to 5.3 percent in 2008, reaching a "15-year low of 3.9 percent by 2009, driven by expected slower income growth and a decline in the number of people covered by private health insurance," according to CMS.

Meanwhile, public spending growth on healthcare is projected to accelerate from 6.4 percent in 2007 to 7.0 percent in 2008 and to 7.4 percent by 2009.

Due to the effects of the recession, hospital spending growth is expected to edge downward from 7.3 percent in 2007 to 7.2 percent in 2008, and then decelerate further in 2009 to 5.7 percent. In addition, hospital price growth is expected to decelerate to the slowest rates since 2000 (2.9 percent in 2008 and 2.6 percent in 2009).

Physician and clinical services spending is expected to grow 6.2 percent in 2008, compared with the 6.5 percent growth experienced in 2007. In 2009, physician and clinical spending is projected to grow at 6 percent.

If the economy starts to rebound in 2010, CMS has projected that private health spending growth, public spending growth and Medicare spending growth will see accelerated growth.

The healthcare spending projection data can be found on the CMS website.