WASHINGTON — The pace of national spending on health care slowed in 2004, due in part to slower growth in prescription-drug sales, new government data show.
Health spending by both public and private payers grew 7.9% in 2004, the most recent year for which complete information is available. That's the smallest increase since 2000, when it grew 6.3%. But spending continues to outpace economic growth, reaching almost $1.9 trillion in 2004, or $6,280 a person, according to a report scheduled for release today in the journal Health Affairs.
Authors of the report, from the federal agency that runs Medicare and Medicaid, highlighted a general "slowing trend" in health spending. But it's "still faster than economic growth," said Stephen Heffler, of the National Health Statistics Group at the Centers for Medicare and Medicaid Services. "To make a judgment whether we're in or out of the woods — I don't think we can do that with this report."
Spending on prescription drugs grew 8.2% in 2004, the first year of single-digit growth in that sector in a decade. The report's authors pointed to a shift toward greater use of cheaper generic and over-the-counter medications, as some relatively costly drugs came off patent. In addition, safety concerns for some drugs, and increased mail-order dispensing, contributed to the slower growth, the report said.
"There is a certain cycle to all this," said Marilyn Moon, director of the health program at the American Institutes for Research in Washington. "One area gets special attention and people go through extra efforts, but you can only keep those extra efforts up for so long."
The report didn't include the effects of the new drug insurance in Medicare, the federal health program for the elderly and disabled, which started this month.
Hospital spending was responsible for about one-third of overall spending growth in 2004, rising 8.6% after an average of 8.2% in recent years. Compensation costs were a major factor, authors said. Liability costs and higher volume of services also contributed. Bad debt and uncompensated care weren't included in the calculation.
For private health-care buyers, including employers, insurers and individuals, the slower growth in drug spending helped stabilize spending by offsetting faster growth in physician and hospital services, the report said. Private health spending grew 7.6% in 2004, compared with 8.6% the previous year. Payments for private benefits grew 8.4% in 2004, a deceleration from recent years. Premium growth also decelerated, as employers changed the types of health benefits they offer and workers switched to lower-cost options. Still, high-deductible health plans, the centerpiece of President Bush's proposals for reducing health-care costs, are being used by just 2.4 million people of the total 195 million who have private health coverage.
How to pay for greater utilization and more advanced medical treatments remains an issue, despite the 2004 slowdown. Household health spending totaled $557.2 billion in 2004, including payroll taxes and premiums for publicly funded care such as Medicare and Medicaid.
"It's encouraging that spending came down relatively, but it's still two to three times the underlying cost of living and nobody's got an idea what to do about it," said Robert Berenson, a senior fellow at the Urban Institute and a former Clinton-administration Medicare official.
Medicare spending increased 8.9% to $309 billion, compared with a 6.6% rise in 2003. The increase in part was the result of higher payments to health insurers and rural health-care providers included in the Medicare drug-benefit legislation. Greater utilization of home-health and physician services in Medicare also drove program growth in 2004.
Medicaid, the state-federal program for the poor, accounted for 15% of national health spending in 2004, reaching $290.9 billion. Medicaid spending growth slowed to 7.9% that year, compared with 8.8% in 2003, as states sharpened their focus on taming prescription-drug growth.
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