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Health Cost Increase Outstrips Out-Of-Pocket Increase

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U.S. spending on private health insurance premiums rose 8.6% in 2004, to $658 billion.

Economists with the National Health Statistics Group at the Centers for Medicare and Medicaid Services have included those figures in a health care spending report published in Health Affairs, a health policy journal.

Total U.S. health care spending increased 7.9% in 2004, to $2 trillion, and the rate of increase slowed from 8.2% from 2003, the economists write.

The 2004 total averages $6,280 per person and amounts to 16% of the U.S. gross domestic product.

The economists say successful efforts to control prescription drug spending by private payers and Medicaid plans appear to be responsible for much of the moderation in health care spending.

Drug spending growth slowed to 8.2% and was below 10% for the first time in a decade, and state efforts to control Medicaid prescription drug spending slowed Medicaid spending growth to 7.9%, from 8.9% in 2003, according to the CMS economists. Medicaid spending totaled $293 billion in 2003.

Increases in home health and physician spending caused Medicare spending to increase 8.9%, to $309 billion, up from a growth rate of 6.6% recorded for 2003.

Commercial health plans have made well-publicized efforts to use higher deductibles and personal health accounts to give consumers “more skin in the game,” and the media have published many articles about the burden of health care costs on consumers.

Perhaps surprisingly, consumer spending on health care is growing significantly more slowly than overall spending.

Consumers’ out-of-pocket health care spending increased only 5.5% in 2004, to $236 billion, according to the CMS economists.

Karen Ignagni, president of America’s Health Insurance Plans, Washington, issued a statement welcoming the CMS health spending report.

“This report confirms that consumers are benefiting from the widespread adoption of health insurance plans’ prescription drug tools and techniques,” Ignagni says in the statement.

To further control health care spending, the government needs to reform the medical malpractice system, and all players in the health care system need to support efforts to compare the effectiveness of new treatments with existing treatments and to promote use of “evidence-based medicine,” or use of treatments shown by scientific studies to be both effective and cost-efficient, Ignagni said.


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