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Health Costs Outclimb Insurance Premiums

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Total U.S. private health insurance premium expenditures increased more slowly in 2007 than overall national health expenditures increased.

The insurance premium expenditure increase also lagged behind the total health expenditure increase in 2006.

Researchers with the Office of the Actuary at the Centers for Medicare and Medicaid Services published the health care and health insurance expenditure figures in a report published in Health Affairs, a health policy journal.

The analysis of the 2007 figures is the latest analysis available from the CMS Office of the Actuary.

Spending on private health insurance premiums rose 6% in 2007, to $775 billion, the researchers at the office report. The 2006 rate of increase was also 6%.

Total U.S. health care spending increased 6.1%, to about $2.2 trillion. The rate of increase fell from 6.7% in 2006.

Population growth accounted for some of the increase. Total U.S. health care spending averaged $7,421 per person in 2007, up only 5.1% from the 2006 average.

Total health care spending amounted to 16.2% of the U.S. gross domestic product, up from 16% in 2006.

Despite reports about employers pulling back from efforts to shift more responsibility for paying for care to employees, consumers’ out-of-pocket health care spending increased 5.3%, to $269 billion, up from a rate of increase of 3.3% in 2006, according to the CMS researchers.

America’s Health Insurance Plans, Washington, says the new national health expenditure report shows that health insurance premiums reflect the underlying cost of medical care.

“As Congress pursues health care reform, reducing the rate of growth of health care costs must be a top priority,” AHIP President Karen Ignagni says in a statement.

Other expenditure report findings:

- The CMS researchers found that health research laboratories are continuing to face tight budget constraints.

Excluding the cost of research on prescription drugs and durable medical equipment, health research expenditures increased just 2.7% in 2007, to $42 billion. The rate of increase was down from 11% in 2004 and down from an average rate of increase of about 10% that prevailed from the 1970s to the 1990s.

- Growth rates for different sources of health care funding have converged.

In 2006, year-over-year changes in the amount of spending funded by various sources, such as Medicaid, Medicare, private health insurance and consumers’ own pockets, ranged from a 1.6% drop in federal Medicaid spending up to an 18.5% increase in Medicare spending.

In 2007, year-over-year growth rates for each of the funding sources listed ranged from 5.3% to 7.2%.


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