HEALTHCARE SPENDING GROWTH RATE CONTINUES TO DECLINE IN 2004
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HEALTHCARE SPENDING GROWTH RATE CONTINUES TO DECLINE IN 2004
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MEDICARE NEWS
For Immediate Release
CMS Office of Media Affairs
January 10, 2005
HEALTHCARE SPENDING GROWTH RATE CONTINUES TO DECLINE IN 2004
Drug Spending Growth One-Half of Rate Five Years Ago
The growth in health care spending in the U.S. slowed for the second
straight year in 2004, according to a report released Tuesday by the Centers for
Medicare & Medicaid Services (CMS). Spending in 2004 rose 7.9 percent, slower
than the 8.2 percent growth in 2003 and 9.1 percent growth in 2002.
While the growth rate is declining, the cost of health care continues to be
a concern for government, business, individuals and families,” HHS Secretary
Mike Leavitt said. We must build on steps already taken -- the new Medicare
prescription drug benefit, advancing health information technology and
encouraging a prevention-oriented society -- to find innovative, market-based ways
to control costs.
“As we move forward, the new Medicare law and the new prescription drug
coverage will help even more to keep costs in line while improving quality,” said
CMS Administrator Mark B. McClellan, M.D., Ph.D.
The report, issued annually by CMS’ Office of the Actuary, was published
today in the journal Health Affairs. It shows that health care spending was
$1.9 trillion in 2004, or $6,280 per person. It includes data through 2004, the
most recent year for which actual numbers are available. A report on
projected spending will be published in the coming months.
The share of the nation’s Gross Domestic Product (GDP) spent on health care
grew 0.1 percentage point to 16.0 percent in 2004. This was a smaller
increase in the share of GDP than experienced in recent years as economic growth in
2004 grew at its fastest rate since 1989.
Recent trends reflect a shift in growth between hospital and prescription
drug spending. In the mid-to-late 1990s, managed care coupled with the effects
of the 1997 Balanced Budget Act suppressed hospital spending growth.
Slower growth in prescription drug spending has contributed to slower
overall spending growth over the past few years. In 2004, prescription drugs
accounted for only 11 percent of the growth in national healthcare expenditures,
smaller than its share of the increase in recent years. In addition, the rate
of growth in prescription drug spending - at 8.2 percent in 2004 - is slower
in absolute terms than in previous years.
The share of personal health care spending growth associated with
prescription drugs has declined since 2000, coincident with a higher share of spending
growth for hospital, physician, and home health services. Prescription drug
spending had accounted for 23 percent of the growth in personal health
spending between 1997 and 2000, but by 2002-2004 it accounted for only 14 percent.
On the other hand, hospital spending accounted for 28 percent of the growth
in personal health spending between 1997 and 2000 and increased to 38 percent
by 2002-2004. Spending for physician services accounted for 29 percent of
the total growth in personal health spending in 2004, up from an average 25
percent share in the 2000-2002 period.
In 2004, private payers played a greater role in slowing spending than
public payers. Private spending growth slowed to 7.6 percent in 2004 compared
with 8.6 percent in 2003.
Out of pocket payments grew 5.5 percent in 2004, slower than aggregate
health spending growth and slower than private insurance premiums, both in
aggregate and on a per enrollee basis.
In comparison with 2004 per enrollee private health insurance premium growth
of 8.4 percent, growth in 2002 was 11.5 percent and in 2003, 10.4 percent.
Federal, state, and local government spending for health care rose 8.2
percent in 2004. Public spending continues to be dominated by Medicare ($309
billion in 2004), whose growth rebounded in 2004 in part due to the Medicare
Prescription Drug, Improvement and Modernization Act of 2003 (MMA) that raised
payments for physicians, capitated health plans, and rural and other providers.
Combined with increases in the use of physician and home health services,
these factors contributed to more than a 2-percentage point rise in Medicare
spending growth to 8.9 percent in 2004.
Medicaid spending reached $291 billion in 2004, comprising 15 percent of
national health spending. In contrast to the acceleration in Medicare’s
spending, Medicaid spending growth decelerated from 8.8 percent in 2003 to 7.9
percent in 2004, reflecting continued cost containment efforts from states that
contributed to a marked slowdown in spending growth for prescription drugs.
Hospital spending, nearly one-third of total national health expenditures,
increased 8.6 percent in 2004. Public spending for hospital care increased
7.9 percent in 2004, up from an increase of 6.2 percent in 2003 as both
Medicare and Medicaid hospital spending grew faster than in the previous year.
Hospital spending growth by private payers was stable, rising 9.6 percent in
2004. The 2004 growth in hospital spending accounted for 33 percent of the
overall increase in health spending, greater than its 30 percent share of
aggregate spending.
Prescription Drugs-Spending for prescription drugs increased 8.2 percent in
2004 compared to growth of 10.2 percent in 2003 and 14.3 percent in
2000-2002. As spending growth for prescription drugs nearly converged with that of
overall health spending, it accounted for a steady 11 percent of aggregate
health spending.
Factors contributing to this slowing trend were rapid growth in use of
lower-priced generic drugs through tiered benefit plans, increased
over-the-counter use of anti-ulcerants and antihistamines, a shift towards greater mail
order dispensing, and reduced consumption of certain drugs due to concerns
about their safety.& In contrast to the overall trend, growth in
out-of-pocket spending for drugs outpaced private health insurance spending growth for
drugs in 2003 and 2004.
Spending for physician services grew 9.0 percent in 2004, nearly the same as
the 8.6 percent increase experienced in 2003. Public spending growth
accelerated from 8.9 percent in 2003 to 9.9 percent in 2004, in large part due to
increased use of Medicare services.
Spending for freestanding home health agencies rose more rapidly than any
other service category, increasing 13.3 percent in 2004. Public spending rose
17.6 percent for home health services, accounting for 74 percent of such
spending. Double-digit growth in Medicare spending for home health services (a
19.3 percent increase in 2004) stems in part from rapid growth in home-based
hospice services that averaged annual growth of 27 percent between 2000 and
2004. Medicare spending for freestanding home health services that excludes
hospice has grown an average of 12.5 percent per year since 2000.
Medicare spending for services provided by skilled nursing facilities (SNFs)
rose 4.3 percent in 2004. Medicaid, however, is the largest public source
of funding for nursing homes and accounts for nearly 40 percent of such
spending. Medicaid spending has been influenced by upper payment limit financing
methods that have recently been restricted. This caused Medicaid spending
for nursing homes to slow from an average 5.9 percent during 2000-2002 to
growth in 2004 that is close to the average 3.2 percent growth experienced in
1994-1999.
For Immediate Release
CMS Office of Media Affairs
January 10, 2005
HEALTHCARE SPENDING GROWTH RATE CONTINUES TO DECLINE IN 2004
Drug Spending Growth One-Half of Rate Five Years Ago
The growth in health care spending in the U.S. slowed for the second
straight year in 2004, according to a report released Tuesday by the Centers for
Medicare & Medicaid Services (CMS). Spending in 2004 rose 7.9 percent, slower
than the 8.2 percent growth in 2003 and 9.1 percent growth in 2002.
While the growth rate is declining, the cost of health care continues to be
a concern for government, business, individuals and families,” HHS Secretary
Mike Leavitt said. We must build on steps already taken -- the new Medicare
prescription drug benefit, advancing health information technology and
encouraging a prevention-oriented society -- to find innovative, market-based ways
to control costs.
“As we move forward, the new Medicare law and the new prescription drug
coverage will help even more to keep costs in line while improving quality,” said
CMS Administrator Mark B. McClellan, M.D., Ph.D.
The report, issued annually by CMS’ Office of the Actuary, was published
today in the journal Health Affairs. It shows that health care spending was
$1.9 trillion in 2004, or $6,280 per person. It includes data through 2004, the
most recent year for which actual numbers are available. A report on
projected spending will be published in the coming months.
The share of the nation’s Gross Domestic Product (GDP) spent on health care
grew 0.1 percentage point to 16.0 percent in 2004. This was a smaller
increase in the share of GDP than experienced in recent years as economic growth in
2004 grew at its fastest rate since 1989.
Recent trends reflect a shift in growth between hospital and prescription
drug spending. In the mid-to-late 1990s, managed care coupled with the effects
of the 1997 Balanced Budget Act suppressed hospital spending growth.
Slower growth in prescription drug spending has contributed to slower
overall spending growth over the past few years. In 2004, prescription drugs
accounted for only 11 percent of the growth in national healthcare expenditures,
smaller than its share of the increase in recent years. In addition, the rate
of growth in prescription drug spending - at 8.2 percent in 2004 - is slower
in absolute terms than in previous years.
The share of personal health care spending growth associated with
prescription drugs has declined since 2000, coincident with a higher share of spending
growth for hospital, physician, and home health services. Prescription drug
spending had accounted for 23 percent of the growth in personal health
spending between 1997 and 2000, but by 2002-2004 it accounted for only 14 percent.
On the other hand, hospital spending accounted for 28 percent of the growth
in personal health spending between 1997 and 2000 and increased to 38 percent
by 2002-2004. Spending for physician services accounted for 29 percent of
the total growth in personal health spending in 2004, up from an average 25
percent share in the 2000-2002 period.
In 2004, private payers played a greater role in slowing spending than
public payers. Private spending growth slowed to 7.6 percent in 2004 compared
with 8.6 percent in 2003.
Out of pocket payments grew 5.5 percent in 2004, slower than aggregate
health spending growth and slower than private insurance premiums, both in
aggregate and on a per enrollee basis.
In comparison with 2004 per enrollee private health insurance premium growth
of 8.4 percent, growth in 2002 was 11.5 percent and in 2003, 10.4 percent.
Federal, state, and local government spending for health care rose 8.2
percent in 2004. Public spending continues to be dominated by Medicare ($309
billion in 2004), whose growth rebounded in 2004 in part due to the Medicare
Prescription Drug, Improvement and Modernization Act of 2003 (MMA) that raised
payments for physicians, capitated health plans, and rural and other providers.
Combined with increases in the use of physician and home health services,
these factors contributed to more than a 2-percentage point rise in Medicare
spending growth to 8.9 percent in 2004.
Medicaid spending reached $291 billion in 2004, comprising 15 percent of
national health spending. In contrast to the acceleration in Medicare’s
spending, Medicaid spending growth decelerated from 8.8 percent in 2003 to 7.9
percent in 2004, reflecting continued cost containment efforts from states that
contributed to a marked slowdown in spending growth for prescription drugs.
Hospital spending, nearly one-third of total national health expenditures,
increased 8.6 percent in 2004. Public spending for hospital care increased
7.9 percent in 2004, up from an increase of 6.2 percent in 2003 as both
Medicare and Medicaid hospital spending grew faster than in the previous year.
Hospital spending growth by private payers was stable, rising 9.6 percent in
2004. The 2004 growth in hospital spending accounted for 33 percent of the
overall increase in health spending, greater than its 30 percent share of
aggregate spending.
Prescription Drugs-Spending for prescription drugs increased 8.2 percent in
2004 compared to growth of 10.2 percent in 2003 and 14.3 percent in
2000-2002. As spending growth for prescription drugs nearly converged with that of
overall health spending, it accounted for a steady 11 percent of aggregate
health spending.
Factors contributing to this slowing trend were rapid growth in use of
lower-priced generic drugs through tiered benefit plans, increased
over-the-counter use of anti-ulcerants and antihistamines, a shift towards greater mail
order dispensing, and reduced consumption of certain drugs due to concerns
about their safety.& In contrast to the overall trend, growth in
out-of-pocket spending for drugs outpaced private health insurance spending growth for
drugs in 2003 and 2004.
Spending for physician services grew 9.0 percent in 2004, nearly the same as
the 8.6 percent increase experienced in 2003. Public spending growth
accelerated from 8.9 percent in 2003 to 9.9 percent in 2004, in large part due to
increased use of Medicare services.
Spending for freestanding home health agencies rose more rapidly than any
other service category, increasing 13.3 percent in 2004. Public spending rose
17.6 percent for home health services, accounting for 74 percent of such
spending. Double-digit growth in Medicare spending for home health services (a
19.3 percent increase in 2004) stems in part from rapid growth in home-based
hospice services that averaged annual growth of 27 percent between 2000 and
2004. Medicare spending for freestanding home health services that excludes
hospice has grown an average of 12.5 percent per year since 2000.
Medicare spending for services provided by skilled nursing facilities (SNFs)
rose 4.3 percent in 2004. Medicaid, however, is the largest public source
of funding for nursing homes and accounts for nearly 40 percent of such
spending. Medicaid spending has been influenced by upper payment limit financing
methods that have recently been restricted. This caused Medicaid spending
for nursing homes to slow from an average 5.9 percent during 2000-2002 to
growth in 2004 that is close to the average 3.2 percent growth experienced in
1994-1999.
Citation
“HEALTHCARE SPENDING GROWTH RATE CONTINUES TO DECLINE IN 2004,” Digital Resource Foundation for Orthotics and Prosthetics, accessed November 24, 2024, https://library.drfop.org/items/show/225991.
