Health Care Spending To Reach $4T by 2015

[CAL/AAEM News Service]

Health Care Spending To Reach $4T by 2015

Source: California Healthline (http://www.californiahealthline.org)
Date: February 22, 2006
 

U.S. health care spending will increase by an average of 7.2% annually until
2015, when spending will reach $4 trillion and account for 20% of the gross
domestic product, according to a report released on Tuesday by the National
Health Statistics Group at CMS, the Los Angeles Times reports
(Girion/Alonso-Zaldivar, Los Angeles Times, 2/22). The report appeared on the
Web site of the journal Health Affairs.

NHSG Deputy Director John Poisal said, "We can expect to have slight drops (in
health care spending) in 2006 and 2007, followed by a slight bump up in 2008
and then a gradual growth after that" (Higgins, Washington Times, 2/22).

The report estimates that public and private health care spending will reach
about $12,320 per capita in 2015, compared with $6,683 in 2005 (Pugh, Miami
Herald, 2/22). In addition, the report estimates that health care spending
increased by 7.4% in 2005, compared with 7.9% in 2004 (Corbett Dooren, Dow
Jones, 2/22).


Prescription Drug Spending
The report, which does not account for the recently enacted fiscal year 2006
budget reconciliation bill that will affect Medicare and Medicaid spending,
also estimates that prescription drug spending will increase by an average of
8.2% annually until 2015, a lower rate of increase than in recent years (Lueck,
Wall Street Journal, 2/22). According to the report, prescription drug spending
will reach $446 billion in 2015, compared with $188 billion in 2004 (Dow Jones,
2/22).

The report attributes the lower rate of increase in prescription drug spending
in recent years in part to decreased use of medications, increased copayments
for individuals with private health insurance and additional restrictions
implemented by employers. The new Medicare prescription drug benefit likely
will not lead to new spending on medications because rebates and discounts
offered by pharmaceutical companies are larger than expected, according to the
report (Wall Street Journal, 2/22).


Medicare, Medicaid Spending
According to the report, Medicare spending will increase by 25.2% in 2006, in
large part because of the launch of the prescription drug benefit, which will
shift some medication costs from the private sector to Medicare. The report
also estimates that Medicare spending will increase by 5.4% in 2007 and by an
average of 7.5% annually between 2008 and 2015 (Dow Jones, 2/22).

Medicare spending will reach $792 billion in 2015, compared with $309 billion
in 2004, according to the report (Freking, AP/Long Island Newsday, 2/22). The
report also estimates a lower rate of increase in Medicaid spending in 2006
because of the shift of some prescription drug costs to Medicare.

However, the report estimates that Medicaid spending will increase by an
average of 8.6% annually between 2008 and 2015 (Dow Jones, 2/22). According to
the report, Medicaid spending will reach $670 billion in 2015, compared with
$293 billion in 2004 (AP/Long Island Newsday, 2/22).


Additional Results
The report also finds:
Hospital spending increased by 7.9% in 2005 and will double by 2015.


Private health insurance spending increased by 6.8% in 2005, compared with 8.4%
in 2004.


Nursing home spending increased by 5.6% in 2005, compared with 4.3% in 2004
(Dow Jones, 2/22); nursing home spending will increase from $121.7 billion in
2005 to $216.8 billion in 2015 (AP/Long Island Newsday, 2/22).


Home health spending increased by 13.2% in 2005 to almost $49 billion (Dow
Jones, 2/22); home health spending will reach $103.7 billion in 2015 (AP/Long
Island Newsday, 2/22).



Effect of HSAs, Disease Management Programs
The report states that the "net impact" of health savings accounts and disease
management programs on "cost containment is likely to be far smaller than that
seen from the massive shift toward managed care during the mid-1990s" (Appleby,
USA Today, 2/22).

Poisal said, "We don't expect HSAs to proliferate so dramatically that we would
have an impact similar to that of the managed care era of the '90s."

The report also states that increased health care spending "could force payers
and providers to re-examine fundamental questions regarding the delivery and
financing of health care services" (AP/Long Island Newsday, 2/22).


Reaction
Paul Ginsburg, president of the Center for Studying Health System Change, said,
"When spending on health care goes up faster than earnings, lower-paid people
are priced out of the health insurance market" (Miami Herald, 2/22). Ginsburg
also said that the report was "optimistic" because the authors are "only
following current laws on the books, which means they assume there will be
continued physician payment cuts in Medicare," adding, "But people don't expect
that to happen" (Washington Times, 2/22).

Paul Fronstin, an economist at the Employee Benefit Research Institute, said,
"It's hard to see where we will see sustained savings" in health care (Los
Angeles Times, 2/22).

Stephen Heffler, director of NHSG, said that the short-term estimates in the
report are "relatively accurate," although the long-term estimates could change
as a result of potential revisions to the law or the state of the economy. In
addition, Heffler cited the Medicare prescription drug benefit as the "poster
child of difficulty" for long-term estimates (Washington Times, 2/22).

For more information, please visit:
http://www.californiahealthline.org/index.cfm?Action=dspItem&itemID=118891



Cyrus Shahpar & Brian Potts 
Managing Editors, CAL/AAEM News Service
University of California, Irvine

The CAL/AAEM Archives are available at: http://maillists.uci.edu/mailman/public/calaaem/


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