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Rise in Health Costs Outpaces Wages

Health Care Spending Goes Up More Than 8% in 2004
WebMD Health News

June 21, 2005 -- The rise in health care costs for American workers hit a plateau in 2004, though costs continue to rise at a speed that analysts warn is unsustainable.

Health care costs for workers with private insurance went up 8.2% in 2004, an increase roughly similar to the year before, according to a report released today by the Center for Studying Health System Change, a nonprofit health policy group.

The number suggests a continuing reprieve from relentlessly accelerating health care costs seen for a decade until 2002, when costs rose more than 10% from the year before. But the 8.2% rise in costs still outpaced wages, which rose 5.3% from 2003 to 2004, according to the federal Bureau of Economic Analysis.

"Health prices will continue to grow more rapidly than workers' incomes, and that means that health care will continue to be less and less affordable over time," Bradley C. Strunk, a researcher with the center and co-author of the report, tells WebMD.

The Rising Cost of Premiums

Strunk based his analysis on large databases of employer-sponsored health coverage. They suggest that medical insurance premiums, which workers typically share with their employer, will continue to rise at about 8% to 10% per year for the next few years, he says.

Rising insurance costs are widely seen as a main driver behind expanding rolls of uninsured people. More than 45 million Americans now lack health insurance, while total average premiums for a family of four top $10,000 per year, according to the Henry J. Kaiser Family Foundation.

Analysts have expressed concerns that employers could respond to rapidly rising health costs by forcing workers to pay a larger share of health costs in addition to higher premiums.

But the other costs -- including co-payments, deductibles, and other out-of-pocket spending -- rose just 1% in the past year, Tuesday's report shows.

That could mean that employers for the moment are seeing little reason to shift more costs onto their workers, Strunk says.

Rises in spending on prescription drugs also slowed in 2004, though they still went up 7.2% for workers with private health insurance. A greater reliance on drug formularies that limit drug choices and greater use of generic drugs are driving the slowdown, the report concludes.

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