The pace of health spending growth slowed
in 2003, marking the first deceleration in national health spending
growth in seven years, a report by the Centers for Medicare & Medicaid
Services (CMS) Office of the Actuary shows. The annual report is
published in the January/February 2005 issue of Health Affairs.
“This is good news for the public and our health care system
and is the result of changes designed to slow down the growth in spending,” said
Health and Human Services Secretary Tommy G. Thompson. “But we
have more to do before we can declare victory over rising health care
costs.”
Health expenditures in the United States grew 7.7 percent in 2003
to $1.7 trillion, down from a 9.3 percent growth rate in 2002. On a
per capita basis, health spending increased by $353 to $5,670. Health
spending accounted for 15.3 percent of Gross Domestic Product in 2003,
outpacing growth in the overall economy by nearly 3 percentage points.
“The Administration and the Congress have taken important steps
in recent years to contain costs in our major health care programs
while improving the quality of care that patients receive,” said
CMS Administrator Mark B. McClellan, M.D., Ph.D. “And as we implement
the new Medicare law, we intend to do even more in the year ahead.”
Private payers (primarily private health insurance and payments by
individuals for co-pays, deductibles, and services not covered by insurance)
funded more than half of national health expenditures in 2003, or $913.2
billion. The public sector funded $766 billion, with the Medicaid program
funding 16 percent of aggregate health spending, or $267 billion, nearly
equaling the 17 percent, $283 billion, spent by Medicare.
Changes in public funding for health care greatly influenced overall
health spending in 2003. Total public spending growth slowed significantly
from 9.7 percent in 2002 to 6.6 percent in 2003. Driving this was a
slowdown in Medicaid spending growth, from 12.6 percent in 2002 to
6.9 percent in 2003 and the expiration of supplemental funding provisions
in the Balanced Budget Refinement Act (BBRA) and the Medicare, Medicaid
and SCHIP Benefits Improvement Act (BIPA) to Medicare providers.
Private sector spending growth decelerated only slightly as compared
with public spending, growing 8.6 percent in 2003 compared with 9.0
percent in 2002. Private health insurance premium growth decelerated
for the first time since 1996, growing 9.3 percent in 2003, a 1.4 percentage
point slowdown from the previous year. Out-of-pocket spending for health
services grew 7.6 percent in 2003, at nearly the same rate as overall
health spending growth. In 2002, out-of-pocket spending grew 6.0 percent.
Hospital spending, nearly one-third of total national health expenditures,
also saw a slowdown in spending growth as it increased by 6.5 percent,
down from 8.5 percent growth in 2002. Because hospital care comprises
the largest single share of health spending, the impact of its slowing
growth drove the deceleration in overall health spending.
Spending growth for prescription drugs decelerated significantly to
10.7 percent, down from 14.9 percent in 2002. Among factors contributing
to this spending slowdown were: a reduction in the growth of number
of prescriptions dispensed, the conversion of a popular allergy drug
to over-the-counter status, several drugs losing their patent protection,
and the expanded use of tiered co-payment plans. As a result, growth
in the number of prescriptions sold per person slowed to 1.7 percent,
about half the 2002 growth of 3.5 percent.
“The slowdown in drug cost growth in 2003 was an important step,
but we are doing more,” McClellan said. “The new Medicare
law has sped up the availability of less costly generic medicines,
and it is for the first time giving seniors without coverage access
to prices that are significantly lower than the average prices paid
by other Americans with public and private coverage.”
Spending for physician services grew 8.5 percent, up slightly from
8.2 percent growth in 2002. Private spending, which accounts for two-thirds
of payments for physician services, accelerated 1.2 percentage points
to 9.4 percent. Public spending decelerated from 8.1 percent to 6.7
percent primarily due to slower Medicaid growth.
Spending growth for freestanding home health agencies, i.e., those
not owned and contained within a hospital, increased by one percentage
point to 8.5 percent in 2003, as private spending more than offset
slowing Medicare payment increases. Legislation resulted in a 7 percent
cut in Medicare home health payments, and the expiration of a 10 percent
add-on to payments for rural home health care providers, causing Medicare
spending growth to slow from 14.7 percent in 2002 to 9.9 percent by
2003.
Detailed national health spending estimates are available at http://www.cms.hhs.gov/statistics/nhe/default.asp
