Health Care Spending Rose at Twice the Rate of Inflation in '05


Spending on health care rose at twice the rate of general inflation in 2005, with consumers facing increased deductibles and co-pays finding themselves spending more of their own money, government researchers said in a report out Tuesday.

Spending went up 6.9%, with the total amount spent by individuals, insurers and the government on health care hitting almost $2 trillion, or $6,697 per person. That's the slowest rate since 1999, when spending rose 6.2%.

Hospital spending continued to be a main factor in spending growth, growing at nearly 8%, with increases in both in-hospital care and out-patient services.

A slower rate of growth in spending was attributed to a drop in spending on prescription drugs, mainly from a growing use of lower-cost generics and the safety-related withdrawal from the market of some expensive pain relievers such as Vioxx, government economists say in their annual report, published Tuesday in the journal Health Affairs.

"This might be an encouraging sign for the individuals, businesses and governments that finance health care; however, it is unclear whether this … is temporary or indicative of a long-term trend," says the report by the Centers for Medicare and Medicaid Services, Office of the Actuary.

Economist Paul Ginsburg of the Center for Studying Health System Change, who did not work on the report, says the growing economy could lead to higher spending in the coming years.


"We have a strong growth in jobs and sharp pay increases," says Ginsburg. "These are the conditions that will lead to a cyclically higher rate of spending, say in '08 or '09."

Health insurance premium rates went up by 6.6% in 2005, continuing a moderating trend seen in the past couple of years and well below the double-digit increases seen in the late 1990s and early 2000s.

Employers continued to shift some of those costs to workers by adding deductibles, co-payments or eliminating coverage for specific treatments or certain drugs.

Those moves helped push so-called out of pocket spending up, by 5.8%, an increase over the 5% reported in 2004. At the same time, increases in overall premiums outpaced that growth, the report says, meaning out of pocket costs for workers as a share of total spending fell.

The report also found:

• Spending on prescription drugs increased 5.8%, to $200.7 billion, well down from the peak increase of 18.2% noted in 1999. Reasons included slower growth in spending by state Medicaid programs, which had instituted cost-control programs, and increased use of generic drugs and the withdrawal of Vioxx and Bextra over safety concerns.

• Overall drug prices rose by 3.5%, about the same rate as in 2004, although brand-name drugs prices rose 6%.

•Hospital spending continued as the largest piece of the health spending pie, accounting for 31% of all money spent on medical care. Spending on hospital rose nearly 8%.


Articles in this issue:


  • Masthead

    Editor-in Chief:
    Kirsten Nicole

    Editorial Staff:
    Kirsten Nicole
    Stan Kenyon
    Robyn Bowman
    Kimberly McNabb
    Lisa Gordon
    Stephanie Robinson

    Kirsten Nicole
    Stan Kenyon
    Liz Di Bernardo
    Cris Lobato
    Elisa Howard
    Susan Cramer

Leave a Comment

Please keep in mind that all comments are moderated. Please do not use a spam keyword or a domain as your name, or else it will be deleted. Let's have a personal and meaningful conversation instead. Thanks for your comments!

*This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.