Federal Report Finds Spending on Health Care Outpaces U.S. Economy

A.M. Best

Chris Grier

January 9, 2004

WASHINGTON, Jan 09, 2004, (A. M. Best via COMTEX) -- Spending on health care accounted for a record 15% of the nation's economy in 2002, outpacing the rate of growth in the overall economy for the fourth year in a row, according to a new report by the Centers for Medicare & Medicaid Services.

That CMS report also showed that health-care spending climbed to $1.6 trillion in 2002, the latest year for which figures are available, and that the spending grew 9.3%, which is 5.7 percentage points faster than the gross domestic product, or GDP--the value of goods and services produced in the United States and the most widely recognized yardstick to measure the economy.

The growth rate of 9.3% compares with 8.5% in 2001, the report said. That makes 2002 the sixth year in a row that growth in health-care spending accelerated and the fourth year in a row that it increased at a faster pace than growth in the overall economy, according to data from the U.S. Department of Health and Human Services.

Private health insurers paid a little more than a third of all health-care dollars--$550 billion, or 35%, the report said. And while growth in what private health insurers spent for prescription drugs slowed somewhat in 2002, out-of-pocket spending for prescription drugs increased, the effect of shifting more of the cost of drugs to consumers. Hospital care and overall prescription-drug costs, meanwhile, accounted for most of the total increase.

The $1.6 trillion figure for overall health spending is up from 2001's total of $1.4 trillion and 2000's total of $1.3 trillion, according to the CMS data. That amounts to an average expenditure per person of $5,440 in 2002, $5,021 in 2001 and $4,670 in 2000.

Spending for doctors' services hit $340 billion in 2002, an increase of 7.7%. That's down from 2001's growth rate of 8.6%. Higher Medicare spending and a change in the government's definition of "homebound" meant more became eligible for the program's services, pushing spending for home-health agencies up by 7.2%. That marks the second consecutive annual increase in that category, the report said.

Public sources accounted for the single biggest chunk of health-care spending, totaling 46%. Medicare, the federal program for the elderly and disabled, spent $267 billion, or 17%, followed by Medicaid, the joint state/federal health program for the poor, at $249 billion, or 16%.

Copyright (C) 2004 A.M. Best