Rate of Growth of Health Care Spending for U.S. Residents With Private Insurance Decreased in 2003, Study Finds

U.S. health spending per privately insured person increased 7.4% in 2003, a slower rate than in 2002 but still about twice as fast as the overall world economy, according to a study released Wednesday by the Center for Studying Health System Change, USA Today reports (Appleby, USA Today, 6/9). Health spending increased 9.5% in 2002 and 10% in 2001 (Agovino, AP/Las Vegas Sun, 6/9). Spending in all four major health care categories -- outpatient hospital care, inpatient hospital care, physician services and prescription drugs -- increased at slower rates in 2003 than in 2002 (Yu, Dallas Morning News, 6/9). The study, published as a Web exclusive article in the journal Health Affairs, uses data from the Bureau of Labor Statistics, the Milliman USA Health Cost Index, the National Business Group on Health/Watson Wyatt Ninth Annual Survey and the Towers Perrin 2004 Health Care Cost Survey (AP/Las Vegas Sun, 6/9).

The study notes spending in the major health care categories:

• Inpatient and outpatient hospital services: Overall hospital utilization increased 0.9% in 2003, compared with 5.3% the year before. The report found that hospitals, with "formidable power to demand large payment rate increases" from health plans, raised overall hospital prices 8% in 2003, from 5.2% in 2002. Last year's increase is the highest in six consecutive years of rising prices (Dallas Morning News, 6/9). According to the New York Times, the increase in hospital spending comes "after a long period in which hospitals were unable to force health plans to pay much more." However, recent hospital mergers have created "powerful networks" that have "the upper hand in negotiations with health insurers," the Times reports (Abelson, New York Times, 6/9). In 2003, outpatient hospital care spending increased 11%, the largest increase in the study. In 2002, outpatient spending increased 12.9% (AP/Las Vegas Sun, 6/9). Inpatient spending increased 6.5% in 2003, compared with 8.4% the year before (Kowalczyk, Boston Globe, 6/9). The report found that overall hospital spending, which accounts for the "lion's share of health costs," accounted for 53% of the total increase in health care spending in 2003, Reuters reports (Dixon, Reuters, 6/9).
  
  
• Physician services: Spending on physician services in 2003 increased 5.1%, down from a 6.5% increase in 2002, according to the study (Dallas Morning News, 6/9). Physician services spending was the slowest-growing health spending category for the third straight year, the study said (AP/Las Vegas Sun, 6/9).
  
  
• Prescription drugs: Spending on prescription drugs increased 9.1% in 2003, down from a 13.2% increase in 2002 and a high of 18.4% in 1999. The report found that more use of generic medications, more cost sharing by patients and expired patents helped slow drug spending, Reuters reports (Reuters, 6/9). In addition, fewer new drugs introduced to the market helped decelerate spending, the Dallas Morning News reports (Dallas Morning News, 6/9).
  
  

Study coauthor Paul Ginsburg, president of HSC, said that the 2003 results are "a significant slowdown," but he added that "it's a mixed story because the costs are still pretty high" (Boston Globe, 6/9). Ginsburg said that health care costs are increasing faster than wages, meaning that "increasingly, people at the low end of the income scale won't be able to afford health insurance" (USA Today, 6/9). Ginsburg added, "Employers don't see [health care spending increases] as sustainable. This year's results are not going to convince (people) that the affordability crisis is over" (Reuters, 6/9). Coauthor Bradley Strunk added, "Research is clear that over the long haul the key long-term driver of medical cost trends is new technology" (Dorschner, Miami Herald, 6/9).

Helen Darling, president of the National Business Group on Health, said that the hospital price increases are "irresponsible" (New York Times, 6/9). However, hospital representatives contend that rising costs for labor and new medical technologies are driving the price increases, the AP/Sun reports. "All progress comes at a price and sometimes we forget that," Caroline Steinberg, vice president of trends and analysis for the American Hospital Association, said (AP/Las Vegas Sun, 6/9). Hospital representatives added that much outpatient care is provided by free-standing centers, many of which are doctor-owned and are competing with hospitals, the Times reports (New York Times, 6/9). The study is available online.