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Senior Citizen Health & Medicine
Medicare Drug Program Helps to Slow Growth in Health
Care Spending Again
 Still, this year's $2.1 trillion spent by Americans
will double in 10 years
Feb. 21, 2007 The ability of senior citizens to
buy drugs for less through Medicare Part D, slower growth in Medicaid,
and slower growth in private health care spending will be the driving
forces in a slight dip in the rate of growth for health care spending in
the U.S. this year the fourth consecutive year of slower growth. The
6.9 percent growth in 2005, will edge down to 6.8 percent in 2006,
according to a report by Health Affairs. Still, however, the money
American's spend for health care is expected to double in the next ten
years.
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Slower Growth in Drug Spending Tempers Growth in
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January 9, 2007 A sharp deceleration in Medicaid
drug spending, changes in therapy regimens, tiered copayment benefit
plans, and increased use of generic drugs slowed the rise in
prescription drug spending to 5.8 percent in 2005, a dramatic drop from
8.6 percent in 2004 and from 18.2 percent in 1999. This was a key in
helping temper U.S. health spending growth again in 2005 to the slowest
rate since 1999, the federal government reported today in the journal
Health Affairs.
Read more...
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Health & Medicine |
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Over the next decade, U.S. health care spending is
expected to reach $4.1 trillion and consume almost twenty cents of every
dollar spent, federal forecasters report in the article in todays
Web-Exclusive edition of Health Affairs. Health spending in 2006 is
projected at $2.1 trillion, which accounts for 16 percent of the gross
domestic product.
The average annual growth in health care spending
is projected to remain relatively steady at 6.9 percent from 2006
through 2016, predict economists and actuaries from the Office of the
Actuary at the Centers for Medicare and Medicaid Services (CMS) in their
annual forecasting report.
The CMS authors say that the addition of the
Medicare drug benefit, slower projected growth in Medicaid, and slower
growth in private health care spending are among the factors
contributing to these trends.
Despite the mild expected slowdown, consumers
out-of-pocket spending on health care -- expected to reach $250.6
billion in 2006 -- is projected to climb to more than $440.8 billion by
2016, they report.
Although recent changes in health care spending
growth have been modest, some of the most dramatic changes taking place
are the shifts in payment distribution in Medicare, Medicaid, and the
private insurance industry as Medicare Part D is fully implemented,
said John Poisal, deputy director of the National Health Statistics
Group at the CMS.
As the nation moves from more traditional sources
of insurance, such as employer-based coverage, to more federal- and
state-provided health care, we will continue to face tough questions
about how we finance our health care bill.
 Medicare
Spending
The new Medicare drug benefits effects on spending
are just beginning to appear.
Total Medicare spending growth is expected
to reach $417.6 billion in 2006 with the addition of Medicare Part D, up
from $342.0 billion in 2005. Medicare spending growth in 2007 is
projected to slow to 6.5 percent, in part because of legislated Medicare
cuts in payments to managed care plans and reductions in payments to
physicians. By 2016, Medicare spending is expected to more than double
from 2006s level to almost $862.7 billion.
Medicaid Spending
Medicaid spending is expected to reach $313.5
billion in 2006, virtually the same as in 2005, as a result of a slower
growth in enrollment and a deceleration in payments to physicians and
hospitals.
Medicaid drug spending is projected to drop an
eye-popping 36 percent between 2005 and 2006 as low-income recipients
who also are eligible for Medicare began to get their drug coverage
through the new Part D program.
Although Medicaid is seeing its lowest growth rate
since the late 1990s, state and federal Medicaid spending is expected to
rebound to 7.3 percent in 2007 and grow at an average of 8.1 percent per
year throughout the rest of the projection period.
Prescription Drug Spending
 Prescription drug spending is projected to reach
$497.5 billion by 2016, more than double the expected drug spending
level for 2006.
CMS researchers predict that prescription drug
spending will grow at an average annual rate of 8.6 percent until 2016,
as increases in the generic drug dispensing rate levels off, new drugs
to treat cancer and other diseases are approved, and drugs already on
the market gain approval for new versions or treatments.
 Drug spending in 2006 is expected to grow 6.5
percent. Implementation of Part D is expected to increase prescription
drug use among beneficiaries who previously had limited or no drug
coverage. However, the expected increase as a result of Part D is
anticipated to be offset by a deceleration in drug price growth.
Hospital Spending
By 2016, the cost of hospital care is projected to
climb to more than $1.2 trillion, compared with the $651.8 billion level
expected for 2006. Total hospital spending is expected to grow 6.6
percent in 2006, falling from 7.9 percent in 2005 and slowing for the
first time since 2003.
The decline in the growth of spending is largely
attributable to slower growth in public spending. However, a rebound in
public and private spending trends is expected to spur an average annual
growth rate in hospital spending of 7.0 percent during the next decade.
Other Highlights From The Report
Out-of-pocket spending. Consumers are
expected to spend less than 1 percent more out of pocket, or $250.6
billion, on health care in 2006, according to preliminary data. That
level is expected to climb to $440.8 billion by 2016. The out-of-pocket
share of private personal health care spending is expected to decline
from 27.3 percent in 2005 to 26.4 percent in 2006, the year Medicare
Part D began. The portion of private personal health care spending paid
for out of pocket is expected to decline to about 25.0 percent by 2016.
Private health insurance. Private health
insurance premiums are expected to grow 4.4 percent in 2006, a
significant drop from a high of 11.0 percent growth in 2002. The drop is
due to slower growth in projected medical benefits per enrollee, changes
to consumers out-of-pocket spending, and variation in the net costs of
private health insurance, also known as the underwriting cycle.
Excluding the effects of Medicare Part D, premiums are expected to grow
6.0 percent in 2006, down from 6.5 percent in 2005.
Physician services. Growth in total
physician and clinical spending is projected to decelerate from 7.0
percent in 2005 to 6.1 percent in 2006, driven by slow price growth.
However, price growth is expected to accelerate to 4.5 percent by 2016.
CMS researchers predict that physician spending will reach almost $819.9
billion by that date, even with restraints on Medicare physician
reimbursement called for under current law, compared with a projected
$447.0 billion in physician spending for 2006.
Nursing homes. Driven by Medicaid and
Medicare costs, nursing home spending growth is expected to decelerate
from 6 percent in 2005 to 3.4 percent in 2006. Medicaid spending growth
on nursing home care is expected to slow from 3.9 percent in 2005 to 1.3
percent in 2006 as a result of states efforts to control costs. Nursing
home spending growth is expected to remain steady at about 5 percent
from 2007 through 2010 before it gradually accelerates to about 5.5
percent by 2016, when spending on nursing home care is projected to
reach $210.9 billion, compared with $126.1 billion in expected spending
in 2006.
Home health. Home health spending is
projected to jump 1.4 percentage points in 2006 to 12.5 percent --
reaching $53.4 billion and making it the fastest-growing area of health
care, although representing a relatively small piece of the spending
pie.
The increase is fueled by faster growth in Medicaid
spending in this sector, with a projected growth rate of 19.8 percent
for Medicaid home health spending in 2006. CMS analysts forecast that
total growth in this area is expected to average 7.6 percent per year
from 2007 through 2016, when spending is expected to reach $111.1
billion.
Concluding Comments
"Despite rising costs, consumers continue to
purchase costly existing and new health care technologies. At the same
time, Medicare is expanding, and 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
(45.4 percent in 2005, projected to reach 48.7 percent by 2016).
"The decade-long projection detailed here expects
that nearly twenty cents of every dollar spent will be devoted to health
by 2016. Such a projection indicates that our society will continue to
address the key issues regarding the potential to sustain our current
path, the possibility that we will have to make important sacrifices to
pay for health care, and the constant assessment of the value we
associate with our health care investment."
Editor's Notes:
The authors expressed thanks to other members of
the National Health Expenditure Accounts Projections Team: Randal
Matsunaga, M. Kent Clemens, and Kevin Lyons. The opinions expressed here
are the authors' and not necessarily those of the Centers for Medicare
and Medicaid Services. The authors also thanked Richard Foster, Stephen
Heffler, Mark Freeland, and Jonathan Cylus.
>> The abstract of this article is available
online
click here
Health Affairs, published by Project HOPE, is the
leading journal of health policy. The peer-reviewed journal appears
bimonthly in print with additional online-only papers published weekly
as Health Affairs Web Exclusives at
www.healthaffairs.org.
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