Health Care Spending Increased 7% in 2000, CMS Study Reports
The year 2000 saw the fastest acceleration of health care spending in 12 years, marking the "end of an era of reasonable health care cost growth," according to a new report released by CMS' National Health Statistics Group, the Los Angeles Times reports (Kemper, Los Angeles Times, 1/8). The report, released today in the January/February issue of Health Affairs, found that health care spending grew nearly 7%, to $1.3 trillion and represented 13.2% of the gross domestic product. This marks the second consecutive year that health spending growth outpaced GDP growth -- a "signal that the nine-year stability in which health care spending grew in tandem with GDP is over." The report also found:
- Hospital expenditures "drove" spending growth in 2000, with hospital spending rising to $412 billion in 2000, an increase of 5.1% over the previous year.
- Medicare spending grew 5.6% in 2000, while Medicare hospital spending grew 4.5%. Medicare spending on home health care rose 0.8%.
- Spending on CHIP programs grew to $2.8 billion in 2000, up from $1.8 billion in 1999. CHIP enrollment grew by 70% in fiscal year 2000.
- Private health care spending grew 6.9% in 2000, nearly 1% more than 1999 growth.
- Health insurance premiums reached $444 billion in 2000, up 8.4% from 1999.
- The proportion of workers covered by preferred provider organizations grew from 35% in 1998 to 41% in 2000.
- Nursing home care expenditures rose 3.3% in 2000 to reach $92.2 billion.
- Prescription drug expenditures grew 17.3% last year, the sixth consecutive year of double-digit growth. While spending on prescription drugs slowed from 1999 to 2000, the report notes that pharmaceuticals were still "the fastest-growing service" for that year. Consumer spending for outpatient pharmaceuticals was the largest single component of out-of-pocket spending.
The report notes that a "retreat from strict insurer management of medical care" was partly responsible for the growth in hospital spending. By consolidating into networks, hospitals have increased their "bargaining power" to demand higher payments from insurers. Health insurance premiums increased mainly as a result of higher benefit costs, especially for prescription drugs, the report says. It notes that the rapid escalation of health care spending and the sluggish economy could lead public and private payers to feel "increased pressure to find ways to finance accelerating health care costs" from decelerating incomes and revenue" (Health Affairs release, 1/8). In addition, according to the report, "Increased job layoffs in the slowing economy will lead to a less competitive job market, reducing private employers' incentive to shoulder rising health care costs" (Pear, New York Times, 1/8). Employees can expect to pay larger premiums and out-of-pocket health care costs next year, the report found (Appleby, USA Today, 1/8). "In this environment, employers are going to be inclined to choose less costly options for health plans," Cynthia Smith, an economist with the National Health Statistics Group, said (AP/Las Vegas Sun, 1/7). The report also found that employees "may no longer be able to afford accelerating out-of pocket costs" and may have to drop their employer-sponsored health insurance, "potentially increasing the number of uninsured persons." In addition, "Fewer employers may offer health insurance, and the recently unemployed are often left without coverage," the report found (New York Times, 1/8).