US health spending still outpacing economic growth

Last Updated: 2003-02-07 17:16:56 -0400 (Reuters Health)

NEW YORK (Reuters Health) - US health spending is projected to reach $3.1 trillion by 2012 despite a near-term slowdown, economists reported on Friday.

The spending forecast, released on the Web site of the journal Health Affairs, shows the annual rate of spending on healthcare services and supplies slowing to 8.6% in 2002 and 7.3% in 2003, after rising 8.7% in 2001.

The new figures reflect slower anticipated growth in Medicare and private personal health spending.

"That probably will surprise some people because you hear a lot of reports about how fast healthcare costs are growing," said Stephen Heffler, deputy director of the National Health Statistics Group at the Center for Medicare and Medicaid Services (CMS).

The near-term slowdown follows five consecutive years of accelerating healthcare spending, according to Heffler and co-authors at CMS' Office of the Actuary.

Over the decade-long forecast period, healthcare spending is still expected to swell at a rate that exceeds overall economic growth. The healthcare portion of the national gross domestic product, which reflects total goods and services produced in the US each year, is projected to jump from 14.1% in 2001 to 17.7% in 2012.

Prescription drugs, the fastest growing component of healthcare spending, will account for 14.5% of total health expenditures in 2012, versus 9.9% in 2001, according to the analysis.

Still, government economists expect the annual rate of growth in spending on medications to slow to 9.2% by 2012, versus a projected 14.3% rate of growth in 2002, partly reflecting the expanded use of tiered co-payments and fewer new drug introductions.

"It's still growing very fast...but slower than it has recently," Heffler explained.

Hospital spending, meanwhile, accounts for the largest slice of US healthcare spending, at 27.1% of total projected 2002 expenditures. Physician spending accounts for 16.5% overall 2002 healthcare spending.

Since the report reflects current law, any changes in Medicare physician reimbursement, say, or the creation of a Medicare drug benefit could alter US healthcare spending figures.

The aging of the baby boom generation poses another set of pressures on the healthcare system by the end of the decade.

"We don't know what the mechanisms will be (for slowing spending) over the next 10 years," Heffler said. But when healthcare has become a major cost issue in the past, "things happened to sort of slow that spending growth," he noted.

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