Health Spending Increases Will Continue To Outpace Economic Growth, CMS Report Says

Private and public health care spending nationwide will likely grow an average of 7.3% between 2002 and 2012 but will slow to a 6.7% growth rate by 2012, according to a CMS report published online today in Health Affairs, the Wall Street Journal reports. Even so, health costs, which grew by 8.7% to $1.4 trillion in 2001, are expected to continue to consume a "growing portion" of the gross domestic product over the next decade, accounting for 18% of GDP by 2012, the study indicates (Spors, Wall Street Journal, 2/7). In 2001, the health share of GDP was 14.1% (Health Affairs release, 2/7). The 7.3% projected annual spending increase for 2002 through 2012 is higher than the 6.5% average increase per year between 1991 and 2001, the Hartford Courant reports (MacDonald, Hartford Courant, 2/7). Still, the report says that slower Medicare and private health insurance growth will contribute to declining health spending growth in 2002 and 2003. National health spending growth is expected to be 8.6% in 2002 and 7.3% in 2003, compared with 8.7% in 2001. Anticipated "rapid" growth in Medicaid and increases in hospital spending are expected to continue to drive overall spending growth over the next decade and account for 27.1% of health spending growth in 2002 (Health Affairs release, 2/6). Stephen Heffler, deputy director of CMS' National Health Statistics Group, said, "Private health insurance premiums have been rising at rapid rates, budget shortfalls exist at both state and federal levels, a softer labor market has reduced the number of people with private insurance and increased Medicaid costs and provider costs are continuing to rise" (AP/Houston Chronicle, 2/6).

Specific findings from the report include:

• Private personal health care spending growth will fall from 7.9% in 2001 to 7.4% in 2002 and decrease to 6.1% by 2012 because of declining growth in per capita income and a rise in the number of uninsured people.
  
• Private health insurance plan enrollment will continue to decrease, following the "sharp" decrease in 2001.
  
• Medicare spending growth will slow to 5.2% in 2002 and 3% in 2003 as a result of the expiration of provisions under the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 and the Medicare, Medicaid, and SCHIP Benefits Improvement Protection Act of 2000. However, by 2012, Medicare spending growth is expected to rise to 7.4% (Health Affairs release, 2/7).
  
• The report also predicts that a rise in the number of Medicaid beneficiaries will prompt growth in that program's spending by a yearly average of 8% until 2012. Medicaid spending grew an average of 6.4% per year between 1994 and 2000 (Wall Street Journal, 2/7). Medicaid experienced an 8.5% increase in enrollment in 2001 and the increase for 2002 is expected to be 5.8%.
  
• Spending on hospital services for Medicare beneficiaries grew 7.2% in 2001 and is expected to slow to 5.7% in 2002 and to 2.9% in 2003. Likewise, private hospital spending growth is thought to also decrease over the next decade, from 7.7% in 2003 to 5% by 2012. However, spending on hospital services for Medicaid beneficiaries increased 10.2% in 2001 and is thought to have increased by 11.9% in 2002.
  
• Prescription drug expenditures likely will remain the "fastest-growing sector," but still will have a slowed spending growth, from 14.3% in 2002 to 9.2% in 2012, compared to 9.9% in 2001 (Health Affairs release, 2/7).
  

Larry Akey, spokesperson for the Health Insurance Association of America, said that insurers "set premiums on experience, not projections," but added that CMS' predictions would be "good news for consumers" if they are correct, the Courant reports. Susan Pisano, spokesperson for the American Association of Health Plans, said, "I think the report still suggests a rate of growth that is going to challenge the health care system to do all of the things that we want it to do" (MacDonald, Hartford Courant, 2/7). Drew Altman, president of the Kaiser Family Foundation, said financial trends in health care will likely depend on the U.S. economy, the Journal reports. He added, "There's a history of complaining loudly about health care costs when the economy is bad. If the economy improves, even if nothing changes, employers and their employees are going to be more likely to pay the higher premiums" (Wall Street Journal, 2/7). The report is available online.