Healthcare spending surged 10 percent last year
By Julie Appleby
USA Today
Spending on healthcare last year grew seven times faster than the overall economy, with hospital costs eclipsing prescription drugs as the leading factor.
The money spent by insurers and consumers on healthcare rose 10 percent per capita last year, the first time it hit double digits in more than a decade, says a study by the Center for Studying Health System Change, a nonpartisan research group in Washington, D.C.
The report, published yesterday in the journal Health Affairs, confirms the bad news already felt by consumers and employers. They are struggling to keep up with rapidly rising health insurance premiums, which last year rose an average 12.7 percent. As premiums rise, workers are paying more toward their insurance — and also are being hit with higher deductibles, co-payments and other charges.
Some good news emerged from the study: healthcare spending increases have slowed in the first half of 2002.
Last year, hospital costs accounted for 51 percent of the growth in spending as more patients were admitted, more sought care at outpatient clinics and hospital charges rose.
Hospital costs were fueled mainly by an increase in spending on outpatient care, such as surgeries, emergency visits and diagnostic exams.
More patients are using outpatient centers, drawn by advertising, convenience, availability of many types of surgical procedures and by their insurers, which generally prefer outpatient care to more costly overnight stays.
Prices also are a factor. Increasingly, hospitals are able to drive hard bargains with insurers over rates because they've merged or were otherwise able to capture large market share in many areas.
"Hospitals have become astute at positioning themselves to negotiate contracts in a hard-nosed way," says James Ehlen, chief of clinical leadership for Humana.
The rising costs may lead to more scrutiny of certain outpatient procedures, particularly expensive diagnostic tests such as CT scans or magnetic resonance imaging, which can cost hundreds or thousands of dollars per exam. So many scans are ordered that insurers say they are seeing spending for such services jump by 20 percent or more a year.
In response, some insurers have hired outside firms to help them control those costs. One such company is National Imaging Associates of Hackensack, N.J. While president John Donahue says the technology is useful, 15 to 20 percent of the expensive diagnostic scans are not necessary. To control costs, his company links prescribing physicians with board-certified radiologists, who help physicians decide on the best test for each patient.
The study also found:
• Prescription drugs accounted for 21 percent of the spending increase; physician services made up the remaining 28 percent.
• The aging of the baby-boom generation plays a limited role, contrary to conventional wisdom. Those younger than 65 accounted for less than 10 percent of the overall increase in per-capita health spending.
"Increased use of healthcare services isn't necessarily bad: No doubt much of this increased use has value and improves people's lives," says economist Paul Ginsburg of the center. "But we also know that some of this care is probably unnecessary."
Fewer managed care restrictions, new technology and rising labor costs are bigger contributors to overall health spending than an aging population, Ginsburg says.
