CMS REPORTS U.S. HEALTH CARE SPENDING GROWTH ACCELERATED ONLY SLIGHTLY IN 2006

BUT STILL FASTER THAN ECONOMIC GROWTH AND GENERAL INFLATION

Health care spending growth in the United States accelerated slightly in 2006, increasing 6.7 percent compared to 6.5 percent in 2005, which was the slowest rate of growth since 1999. Health care spending, however, continues to outpace overall economic growth and general inflation, which grew 6.1 percent and 3.2 percent, respectively, in 2006.

In 2006, health care spending reached a total of $2.1 trillion, or $7,026 per person, up from $6,649 per person in 2005, according to a report by the Centers for Medicare & Medicaid Services (CMS). The health spending share of the nation’s Gross Domestic Product (GDP) remained relatively stable in 2006 at 16.0 percent, up by only 0.1 percentage point from 2005.

“The cost of health care continues to be a real and pressing concern. Making sure we are paying for high quality health care services, not just the number of services provided, is just one of the most critical issues facing the American public and the federal government now and in the future,” said CMS Acting Administrator Kerry Weems. “This review of health care spending reminds us that we need to accelerate our efforts to improve our health care delivery system to make sure that Medicare and Medicaid are sustainable for future generations of beneficiaries and taxpayers."
Out-of-pocket spending grew 3.8 percent in 2006, a deceleration from 5.2 percent growth in 2005.

This slowdown is attributable to the negative growth in out-of-pocket payments for prescription drugs, mainly due to the introduction of the Medicare Part D benefit. Out-of-pocket spending accounted for 12 percent of national health spending in 2006; this share has steadily declined since 1998, when it accounted for 15 percent of health spending. Out-of-pocket spending relative to overall household spending, however, has remained fairly flat since 2003.

The CMS found that overall private spending growth slowed in 2006. Private health insurance premiums grew 5.5 percent in 2006, which was the slowest rate of growth since 1997. Benefit payment growth also slowed, from 6.9 percent growth in 2005 to 6.0 percent in 2006. The slower growth reflects, in part, a decline in private health insurance spending on prescription drugs. The ratio of net cost of private health insurance (the difference between premiums and benefits) to total private health insurance premiums was 12.3 percent in 2006, slightly lower than 12.7 percent in 2005.

At the aggregate level in 2006, businesses (25 percent), households (31 percent), other private sponsors (3 percent), and governments (40 percent) paid for about the same share of health services and supplies as they did in 2005. However, spending shifts did occur within major sponsor categories due to implementation of the Medicare Part D benefit. Medicare’s share of federal spending increased from 29 percent in 2005 to 34 percent in 2006, while Medicaid’s share decreased from 45 percent to 40 percent. For households, the share of Medicare spending attributable to payroll taxes and premiums increased slightly in response to first-time Medicare Part D premiums. Conversely, the out-of-pocket spending share decreased slightly due, in part, to the newly available prescription drug coverage through Medicare Part D.

Total Medicaid spending declined for the first time since the program’s inception, falling 0.9 percent in 2006. The introduction of Medicare Part D, which shifted drug coverage for dual eligibles from Medicaid into Medicare, contributed to the decline in Medicaid spending growth. Other reasons for the decline include continued cost containment efforts by states and slower enrollment growth due to more restrictive eligibility criteria and a stronger economy.

Hospital spending, which accounts for 31 percent of total health care spending, grew 7.0 percent in 2006, a decrease of 0.3 percentage points from 2005 and a continued deceleration from 2002 (when growth was 8.2 percent). The 2006 growth rate was partially driven by lower utilization of hospital services, especially within Medicare as fee-for-service inpatient hospital admissions declined.

Spending for physician and clinical services also slowed, increasing 5.9 percent in 2006, which is 1.5 percentage points slower than in 2005 and the slowest rate of growth since 1999. The slowdown was driven by a deceleration in price growth, fueled by a near freeze on Medicare payments to physicians (whose fee schedule update was 0.2 percent in 2006) that influenced private payers as well.

In addition, spending growth for both nursing home and home health services slowed. For freestanding nursing homes, spending grew 3.5 percent in 2006—a deceleration from 4.9 percent in 2005 and the slowest rate of growth since 1999. This deceleration is partially attributable to a reduction in nursing home price growth. Spending growth for freestanding home health care services decelerated from 12.3 percent in 2005 to 9.9 percent in 2006, also partially due to a reduction in price growth. Despite the 2006 deceleration, home health care continues to be the fastest growing component of all personal health care spending.

Source:
http://www.cms.hhs.gov/apps/media/press/release.asp?Counter=2810&intNumPerPage=10&checkDate=&checkKey=&srchType=1&numDays=3500&srchOpt=0&srchData=&srchOpt=0&srchData=&keywordType=All&chkNewsType=1%2C+2%2C+3%2C+4%2C+5&intPage=&showAll=&pYear=&year=&desc=&cboOrder=date

The health care spending data can be found on the CMS Web site at http://www.cms.hhs.gov/NationalHealthExpendData/01_Overview.asp.