Health Care Costs, Spending Up

Prescription drug spending rose in 2004 but at a slower rate than in 2003. Higher copayments may have steered some consumers to lower-cost drugs.
Prescription drug spending rose in 2004 but at a slower rate than in 2003. Higher copayments may have steered some consumers to lower-cost drugs. (By Nati Harnik -- Associated Press)
By Ceci Connolly
Washington Post Staff Writer
Tuesday, June 21, 2005

After hints that the rapid growth in health care spending was slowing, a report being released today suggests the brief reprieve has stalled and the soaring costs are likely to force more people out of the market.

Health spending by privately insured Americans rose 8.2 percent in 2004, virtually the same increase as the previous year, according to analysts at the Center for Studying Health System Change, a nonpartisan research group.

More significantly, for the eighth straight year the growth in medical costs far outpaced the growth of wages -- by nearly four times in 2004 -- a trend that suggests more Americans will be unable to afford their health insurance, said the group's president, Paul Ginsburg.

"This is very worrisome to me," said Ginsburg, one of three authors of the study being published by the journal Health Affairs. "If the cost trend stays at the level it is today -- well above the trend of earnings -- this could lead to a substantial decline in the [percentage of] people with insurance."

About 45 million people, or close to 15 percent of the population, were uninsured in 2003, according to the most recent data from the U.S. Census Bureau. The figure would be higher, Ginsburg said, were it not for expansion in Medicaid and the State Children's Health Insurance Program, both of which are government-sponsored.

As health costs have risen over the past decade, more businesses have scaled back or dropped coverage entirely. The first group hit were poor workers, but Ginsburg said the trend is continuing into higher-wage groups.

"Low-income people got priced out of private insurance a long time ago," he said. "Now it's working into the middle class."

The Health Affairs article pointed to several factors driving the rising medical spending, most notably a jump in the use of outpatient services such as X-ray imaging, angioplasty to open clogged arteries and minimally invasive procedures such as arthroscopic knee surgery.

Spending on outpatient care rose 11.3 percent in 2004 and represented 54 percent of the total increase, the study found.

In some instances, the use of modern technology has improved health outcomes and lowered the cost per patient, Ginsburg said, "but one of the things that happens, as procedures involve less disability and pain, less risk, more of them are done."

While prescription drug spending continued to rise, the rate of growth slowed. In 2004, pharmaceutical costs climbed 7.2 percent, compared with an 8.9 percent increase the year before.

"The manufacturers have had a dearth of new blockbuster drugs in recent years," Ginsburg said. And insurers and employers, by raising copayments, have steered many patients toward lower-cost drugs. Safety concerns about other medications, including hormone replacement therapies and the COX-2 anti-inflammatory drugs such as Vioxx, also had an impact.

A related survey released yesterday by the Center for Health Solutions, a research arm of the financial consulting firm Deloitte & Touche USA, found that 83 percent of employers increased the amounts their employees contributed for health coverage last year.

The Deloitte group found that two-thirds of the companies surveyed implemented some type of wellness program for workers, such as smoking cessation, workplace gyms and diet programs, and an overwhelming majority cited rising costs as a "major factor" in their decision.


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