The Antidote

Counterspin for Health Care and Health News

Wednesday, January 10, 2007

Trend in health care costs still not in the right direction

I don't want to be the heavy here, but I'm hearing rosy interpretations of the modest flattening of the upward trend in health care costs, and someone's got to put her foot down.

This report from the American Hospital Association is a good example; sounds like spin to me:
Health care spending in the U.S. slowed for the third consecutive year in 2005, reaching almost $2 trillion or $6,697 per person, the Centers for Medicare & Medicaid Services reported today. By comparison, the spending growth rate in 2004, when $6,322 was spent per person, was 7.2%, and the growth rate in 2003 was 8.1%. Hospital care accounted for the largest share ($611.6 billion) of overall health care in 2005, with growth stable at 7.9% in both 2004 and 2005, and spending for physician and clinical services reached $421.2 billion in 2005, an increase of 7% from 2004. The health-spending share of the nation’s Gross Domestic Product increased to 16% in 2005 from 15.9% in 2004, which CMS attributed to the “lagged effects” of the 2001 recession and weaker growth in prescription drug spending. Growth also has been suppressed in recent years by an increase in tiered benefit plans and a decrease in new drugs, the agency said. Overall, growth in public spending outpaced private spending growth. The findings were published in Health Affairs .

Let's not kid ourselves. I'm no economist, but I did just take the general Graduate Record Exam (long story), for which I had to review basic algebra. The slope of the line representing health care costs over time is still positive (remember y = mx + b?). It is not negative, nor is it even flat. In other words, health care costs - already unacceptably high - are just not getting worse quite as quickly. Whether that's because of increased use of generic drugs (as CMS has pointed out), other market forces, or El Niño that's responsible, I don't know, but whatever it is, there isn't enough of it yet.


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