Accelerated Health Spending Increases Predicted for 2000
While health care spending slowed in the 1990s, growth rates will likely "accelerate" in the next few years, fueled largely by prescription drug spending, although they will not "approach the double-digit rates" of the 1980s and early 1990s, according to an annual HCFA study published in the March/April issue of Health Affairs. HCFA reports that the United States spent $1.2 trillion on health services in 1999 -- the last year for which figures are available -- up 5.6% from 1998 in the seventh year of spending growth less than 6%. However, Katharine Levit, director of HCFA's National Health Statistics Group, and colleagues predict "a more pronounced acceleration of health spending growth" in 2000 and 2001 -- 8.3% and 8.6%, respectively. "This accelerated growth is driven in part by rising provider costs, insurers' inability to negotiate price discounts and greater income growth that will drive increased consumer demand," Stephen Heffler, deputy director of HCFA's National Health Statistics Group, said (Health Affairs release, 3/7).
The HCFA report also found that U.S. prescription drug spending rose nearly 17% in 1999, reaching $99.6 billion, and analysts predict that spending on pharmaceuticals will jump about 12.6% per year until 2010 (Heldt/Powell, Boston Herald, 3/12). In addition, according to the report, while prescription drugs accounted for 9.4% of personal health care spending in 1999, that number will likely hit 16% by 2010 (McQueen, AP/Nando Times, 3/12). The report also found that although employers have offered employees "less restrictive" health plans in recent years, the trend will likely "change after 2002," with employers facing rising health insurance premiums and medical costs (Health Affairs release, 3/12). "When health care costs rise dramatically ... then consumers are willing to accept more restrictive choices," Levit said (Carroll, Wall Street Journal, 3/12).
The HCFA findings will likely "intensify debate" over adding a prescription drug benefit to Medicare, the Washington Post reports (Okie/Goldstein, Washington Post, 3/12). According to the Los Angeles Times, the HCFA report adds to a recent study conducted by the Congressional Budget Office, which found that annual pharmaceutical spending for seniors will likely rise from $1,989 in 2002 to $4,818 in 2011 -- 30% higher than previous estimates. The Times reports that the "sharp upward revision" will drive up the cost of a drug benefit "considerably" and "mak[e] it more difficult" for lawmakers to enact such a plan. "It's a two-edged sword," Families USA President Ron Pollack said, adding, "On the one hand, it makes clear that there's a greater urgency to help seniors. On the other hand, it shows that when you help them it's going to cost a large amount of money" (Rubin, Los Angeles Times, 3/12).
Gail Shearer of Consumers Union added, "As Congress looks at designing a Medicare prescription drug benefit, it's crucial that they look at reining in costs so that it's beneficial for the government and consumers" (AP/Nando Times, 3/12). In addition, the HCFA report also may "signal growing problems" for Medicaid, which provides pharmaceutical coverage for low-income Americans. "Spiral[ing]" drug costs have contributed to Medicaid budget shortfalls in about half of the states this year, and health commissioners have "found it increasingly difficult" to "stretch" Medicaid funding to offer additional insurance coverage (Los Angeles Times, 3/12).