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Health Care Spending Growth Stays in High-Altitude Holding Pattern in 2005
Health Affairs Study Pegs 2005 Health Care Spending Growth at 7.4 Percent; Much Faster than Growth in the Economy and Workers' Wages
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Health spending growth continued to outpace overall economic growth in 2005, despite a robust 5.4 percent increase in the overall U.S. economy as measured by per capita gross domestic product, the study found. After peaking at 10.4 percent in 2001, health care spending growth slowed to 7.8 percent in 2003, followed by a 7.5 percent increase in 2004. Spending data for the first quarter of 2006 suggest continued stabilityalbeit at a relatively high rate of growth (7.7%).
"Health care spending continues to grow at a much faster rate than workers income, making health insurance less affordable to more and more people, especially low-to-moderate wage workers and their employers," said Paul B. Ginsburg, Ph.D., president of HSC, a nonpartisan policy research organization funded principally by the Robert Wood Johnson Foundation.
"Were already seeing evidence of the growing health insurance affordability problem as more Americans become uninsured," said Ginsburg, coauthor of the Health Affairs article"Tracking Health Care Costs: Continued Stability But At High Rates In 2005"with Bradley C. Strunk and Michelle I. Banker of HSC and John P. Cookson of Milliman Inc.
Despite the stability in spending growth, the slowdown in employer-sponsored health insurance premium growth continued in 2006 as average premiums increased 7.7 percent, compared with 9.2 percent in 2005, according to the recently released Kaiser Family Foundation/Health Research and Educational Trust 2006 Employer Health Benefits Survey. The continued slowdown in premium trend likely reflects the lagged relationship between underlying cost trends and premium trends.
For the fifth year in a row, employers in 2006 increased patient cost sharing, through higher deductibles, copayments and coinsurance, as a way to cope with high premium increases. Without this so-called benefit buy down, or change in benefit structures, the premium trend would have been higher in recent years.
"Over time, premium increases cannot be lower than underlying cost trends, without benefits shrinking," Ginsburg said. "So major relief from the financial burden of rapidly rising premiums does not appear to be on the horizon, and the premium trend is unlikely to continue to decline in the coming years."
Trends in three of the five spending categories for health servicesinpatient hospital care, physician services, and other servicesaccelerated in 2005, while prescription drug spending grew at a slower rate for the sixth year in a row and hospital outpatient care spending growth slowed slightly. Key findings include:
The Center for Studying Health System Change is a nonpartisan policy research organization committed to providing objective and timely research on the nations changing health system to help inform policy makers and contribute to better health care policy. HSC, based in Washington, D.C., is funded principally by The Robert Wood Johnson Foundation and is affiliated with Mathematica Policy Research, Inc.