Record Share Of Economy Spent on Health Care

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By Marc Kaufman and Rob Stein
Washington Post Staff Writers
Tuesday, January 10, 2006

Rising health care costs, already threatening many basic industries, now consume 16 percent of the nation's economic output -- the highest proportion ever, the government said yesterday in its latest calculation.

The nation's health care bill continued to grow substantially faster than inflation and wages, increasing by almost 8 percent in 2004, the most recent year with near-final numbers.

Spending for physicians and hospitals shot up considerably faster than in recent years, while drug costs grew at a slower rate than over the past decade.

Even as health care costs continue to escalate, however, many Americans -- especially minorities and the poor -- still do not receive high-quality care, according to two other federal reports yesterday. The quality of health care is improving slowly and some racial disparities are narrowing, the reports found, but gaps persist and Hispanics appear to be falling even further behind.

"We can do better," Health and Human Services Secretary Mike Leavitt said at a Washington conference on racial and ethnic disparities in health care. "Disparities and inequities still exist. Outcomes vary. Treatments are not received equally."

Political, medical and economic leaders and experts have long warned that health care cost trends will gradually overwhelm the economy, and many companies now complain that employee and retiree health costs are making them less competitive. Yesterday's report added new reasons to worry.

The overall cost of health care -- everything from hospital and doctor bills to the cost of pharmaceuticals, medical equipment, insurance and nursing home and home-health care -- doubled from 1993 to 2004, said the report from the Centers for Medicare and Medicaid Services. In 2004, the nation spent almost $140 billion more for health care than the year before.

In 1997, health care accounted for 13.6 percent of the gross domestic product.

"Americans rejected the tougher restrictions of managed care in the late 1990s, and yet they want all the latest advances in medical technology," said Drew Altman, president of the nonpartisan Kaiser Family Foundation, which researches health issues. "Since government regulation of prices and services is not in the cards, the inevitable result is higher costs."

The health care increase of 7.9 percent in 2004 was almost three times the overall national inflation rate, which was 2.7 percent. The average hourly wage for workers in private companies was essentially unchanged that year, according to the U.S. Department of Labor.

After a sharp jump in health care costs earlier in the decade, the health inflation rate appears to be plateauing, officials added.

The best news involved spending on pharmaceutical drugs, which increased by less than 10 percent for the first time in more than a decade.

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© 2006 The Washington Post Company

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