Report Predicts Near-Doubling of U.S. Health Care Spending

[CAL/AAEM News Service]

Report Predicts Near-Doubling of U.S. Health Care Spending 
 
Source: California Healthline (http://www.californiahealthline.org)
Date: February 21, 2007 

  
U.S. health care spending by 2016 will almost double to $4.1 trillion and account for 20%
of every dollar spent, according to a report released on Wednesday by the National Health
Statistics Group at CMS, the Los Angeles Times reports. According to the report,
published on the Health Affairs Web site, public and private health care spending will
increase to about $12,782 per capita by 2016 from about $7,498 per capita in 2006
(Alonso-Zaldivar, Los Angeles Times, 2/21). 

The report estimated that public spending will account for 48.7% of total health care
spending by 2016, compared with 40% in 1990 and 38% in 1970. In addition, the report
estimated that total out-of-pocket health care spending will increase to $440.8 billion
by 2016 from about $250.6 billion in 2006 (Zhang/Fuhrmans, Wall Street Journal, 2/21). 

Costs for core health care services, such as hospitals and physicians until 2016 will
increase by 6% to 7% annually, or about one to two percentage points more than the
overall economy, according to the report (Los Angeles Times, 2/21). 

 
Prescription Drug Spending
Medicare, Medicaid and other public programs currently account for 40% of prescription
drug spending, compared with 28% in 2005, before the Medicare prescription drug benefit
took effect, the report found. According to the report, the increase in public
prescription drug spending could result in future problems because the Medicare
prescription drug benefit lacks a long-term financial stability. 

The report found that the Medicare prescription drug benefit has limited growth in
prescription drug spending but does not provide the same level of discounts on prices as
Medicaid (Los Angeles Times, 2/21). The report estimated that prescription drug spending
increased to $214 billion in 2006 from $201 billion in 2005 and that spending would have
increased by 0.4% more without the Medicare prescription drug benefit (Lee, Washington
Post, 2/21). 

 
Medicare, Medicaid Spending
The report estimated that total Medicare spending increased by 22% to $418 billion in
2006 from $342 billion in 2005 and that spending would increase by only 6.5% in 2007
because of reductions in reimbursements to physicians and smaller increases in payments
to Medicare Advantage plans. The report also estimated that by 2016 32% of eligible
beneficiaries will enroll in Medicare Advantage plans, compared with 13.5% in 2005. 

According to the report, Medicaid spending in 2006 totaled $313.5 billion, about the same
amount as in 2005. Medicaid prescription drug spending decreased in 2006 by 36% as a
result of the Medicare prescription drug benefit, which took over coverage for some
Medicaid beneficiaries, the report found. 

The report estimated that growth in Medicaid spending in other areas, such as hospitals
and physicians, will decrease as a result of state efforts to reduce costs and reduced
growth in enrollment. 

However, the report estimated that growth in Medicaid spending in other areas, such as
home health care, will increase. Medicaid home health care spending in 2006 increased by
20%, compared with a 14% increase in 2005, according to the report. 

The report also estimated that private health insurer spending in 2006 increased by 4.7%,
compared with a 9.5% increase in 2001. 

 
Author Conclusions
The authors of the report wrote, "We are moving incrementally away from traditional
sources of insurance, such as employer-based coverage, to a system comprising more
federal and state government-provided health care." 

John Poisal, lead author of the report, said, "We will continue to face tough questions
about how we finance our health care bill" as that shift occurs (Wall Street Journal,
2/21). 

The report did not make health care policy recommendations but warned of the possibility
"that we will have to make important sacrifices to pay for health care" and of a need for
"constant assessment of the value we associate with our health care investment" (Los
Angeles Times, 2/21). 

 
Reaction
HHS Secretary Mike Leavitt said, "America's per capita health spending is the highest in
the world. There is simply no place on the economic leader board for a nation that spends
a fifth of its domestic product on health care" (Freking, AP/Houston Chronicle, 2/21). 

Robert Bixby, executive director of the Concord Coalition, said that the cost of health
care "is really the key issue for the fiscal future of the nation," adding, "If health
care costs continue to drift up -- unless you dramatically raise taxes -- you will have
health care pushing out everything else government does. Nobody can say exactly when you
reach a point that it's unsustainable, but you can look at something and say it's
unlikely." 

Ron Pollack, executive director of Families USA said, "As health care spending increases
faster than earnings, it means more and more people will find health care unaffordable
and join the ranks of the uninsured and underinsured" (Los Angeles Times, 2/21). 

Karen Davis, president of the Commonwealth Fund, said that, although growth in health
care spending has decreased in recent years, the "cost problem isn't solved." She added,
"Now, when you look at these numbers, you realize we've got to get serious about
transforming the health care system" (Washington Post, 2/21). 

Robert Berenson, a senior fellow at the Urban Institute health care center, said, "We
need some kind of comprehensive approach to control costs" (Wall Street Journal, 2/21).  

For more  information, please visit:
http://www.californiahealthline.org/index.cfm?action=dspItem&itemID=131042&changedID=131007



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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