Health Care Costs Approach $2 Trillion

Rise in Costs Slows, but Families Paying More, Gov't Says

Medically Reviewed by Louise Chang, MD on January 08, 2007
From the WebMD Archives

Rise in Costs Slows, but Families Paying More, Gov't Says

Jan, 8, 2007-- In 2005, the nation's health care spending grew at its slowest rate since 1999, but there are clear signs American consumers are being forced to shoulder a greater share of their own costs, the government reported Tuesday.

Spending on medical care set a new record of $1.99 trillion in 2005. That figure makes up a full 16% of the nation's economic output, reported the Centers for Medicare and Medicaid Services, which tracks health spending each year.

Overall spending was up 6.9% from the year before. Despite the staggering dollar figure, that is a far slower rate than the double-digit increases seen in the late 1980s and early 1990s.

Last year marked the first time since the 1990s that the nation's economy roughly kept pace with its health care bills.

Officials said a slowdown in the rise of insurance premiums and prescription drug costs were responsible for the overall deceleration in medical spending. Prescription costs grew at the slowest rate since 1993, the report showed.

"At least for now, health spending and economic growth are comparable," Aaron Catlin, an economist at the National Health Statistics group, told reporters.

Federal and state governments now pay about 40% of all health bills. American households pay 31% through private insurance premiums, deductibles, taxes, and other "out-of-pocket" costs.

Higher Costs to Come

Businesses, consumers, and the government all see their costs go up as the total cost of medical care and insurance coverage rises.

But there are signs consumers are being forced to spend a bigger chunk of their budget on their health care, the report showed.

Spending on insurance premiums and deductibles went up to 5.8% in the average U.S. household, after holding steady at roughly 5% for several years.

Richard Foster, Medicare's chief actuary, said that overall, health costs, wages, and the economy appear to be in a "dead heat." But he warned that the condition is almost certainly temporary.

New medical tests, drugs, and other technologies tend to drive up prices because they are more expensive.

Also, economists expect the growing ranks of senior citizens to continue to push spending upward.

"We don't really see much that's going to change that for a long time to come," Foster says.

In an interview, Sen. Max Baucus (D-Mont.), chairman of the Finance Committee, praised the slowdown in health spending but warned that a spending crisis is not over.

"For families, health care costs are way too high," he said.

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SOURCES: Catlin, Aaron. Health Affairs, "National Health Spending in 2005: The Slowdown Continues," January/February, 2007. Aaron Catlin, economist, National Health Statistics Group, Centers for Medicare and Medicaid Services. Richard Foster, chief actuary, Centers for Medicare and Medicaid Services. Sen. Max Baucus (D-Mont.).

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