U.S. Health Care: $2.1 Trillion in '06

Spending Is Growing at Slower Rate Than in Late 1990s, but Experts fear Slowdown Won't Last

Medically Reviewed by Louise Chang, MD on January 08, 2008
From the WebMD Archives

Jan. 8, 2008 -- The United States spent a record $2.1 trillion on health care in 2006, nearly 7% more than the year before, according to federal data released Tuesday.

Overall, the annual figures show that the nation's health care spending is growing more slowly that it did in the late 1990s. But some experts are warning that the slowdown won't last.

The $2.1 trillion figure represents the total spent by insurance companies, businesses, families, and individuals, as well as federal, state, and local governments. Overall, the nation spent $7,026 for every American man, woman, and child in 2006. That's up from per capita spending of $6,649 in 2005.

Meanwhile, American households spent $612 billion on health care in 2006, more than 6% more than they spent the year before. Much of the increase comes from new premiums charged by Medicare's prescription drug benefit, which began at the start of 2006, according to the report.

The report comes as health care costs continue to play a major role in presidential debates. Most candidates, including all of those contending in today's primary in New Hampshire, have proposed plans they say will cut health care costs and improve access to medical insurance.

Medicare Part D's Effects

Government officials say that a large jump in spending on prescription drugs offset slower spending increases on hospitals, doctors services, and nursing homes.

The start of Medicare Part D caused "major shifts in who pays for prescription drugs," says Cathy Cowan, an economist with the federal Centers for Medicare and Medicaid Services (CMS), which issued the report.

The government paid for 34% of all prescription drugs in 2006, up from 28% the year before Part D went into effect.

But for consumers and their spending, the effect was minimal, according to the report. While prescription drug spending has dropped for many Medicare beneficiaries, increases in overall drug usage and Part D premiums have made up much of the difference, according to the report. Overall, households still financed about 30% of all American health care in 2006, the same amount as in 2005, according to an article published in the policy journal Health Affairs.

'Don't Break Out the Champagne'

Health care spending grew at more than 9% in 2001, so Tuesday's 6.7% growth rate was welcome news to many experts.

But Paul B. Ginsburg, president of the Center for Studying Health System Change, warns in another Health Affairs article that U.S. health care spending was likely to soon increase. Several factors, including obesity, could soon drive spending growth back up, he concludes.

A possible looming economic slowdown could cause government programs like Medicaid to once again increase spending, he warns.

"Concerns about cost trends are likely to only increase," Ginsburg writes in the article, which is titled, in part, "Don't Break Out the Champagne."

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SOURCES: Catlin, A. Health Affairs, Jan. 8, 2008; vol 27: pp 14-29. Cathy Cowan, economist, Centers for Medicare and Medicaid Services. Paul B. Ginsburg, president, Center for Studying Health System Change, Washington, D.C. Ginsburg, P. Health Affairs, Jan. 8, 2008; vol 27: pp 30-32.

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