Health care spending reaches $1.6 trillion in 2002

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Sunday, January 11, 2004

January 12 , 2004

WASHINGTON - Health care spending in the United States rose to $1.6 trillion in 2002, up from $1.4 trillion in 2001 and $1.3 trillion in 2000, according to a report issued by CMS last week.

The growth rate of 9.3% for 2002, the latest year for which actual spending figures are available, compared to 8.5% in 2001 and marked the 6th consecutive year in which health spending grew at an accelerated rate.

Health expenditures per person averaged $5,440 in 2002, up $419 from $5,021 in 2001. Per person spending in 2000 was $4,670.

In 2002, health spending grew 5.7 percentage points faster than the overall economy as measured by growth of the gross domestic product (GDP) – the total value of goods and services produced in the United States.

The health care share of GDP increased to 14.1% in 2001 and 14.9% in 2002, after nearly a decade in the 13.1 to 13.4 percent-of-GDP range, said an article by economists in CMS’ Office of the Actuary that appeared last week in the journal Health Affairs.

Prescription drugs continued to lead the rise in personal health care expenditures, with a 15.3% jump in 2002. However, this was down slightly from the 15.9% increase measured in 2001. Total spending for prescription drugs for the year was $162.4 billion, compared with $140.8 billion in 2001.

While the growth in private health insurance spending for prescription drugs at 16.1% slowed in 2002, out-of-pocket spending for prescription drugs sped up to 14.4% as the effect of tiered drug formulaires shifted more of the cost to consumers.

Hospital spending increased by 9.5% in 2002 to $486.5 billion, marking the fourth consecutive year of accelerated growth and the first time the rate of hospital spending outpaced overall spending rate of growth since 1991.

The resurgence in hospital spending growth since 2000 followed a period of managed care expansion that dampened growth in inpatient hospital utilization. Recent spending trends reflect growing demands for services, rising compensation and other input costs as well as the increased ability of hospitals to negotiate higher prices from private payers.

Spending for physician services reached $340 billion in 2002, an increase of 7.7% that was slightly slower than the growth rate of 8.6% in 2001.

Expenditures for free-standing home health agencies grew by 7.2% in 2002, the second consecutive year of expansion driven primarily by a rebound in Medicare spending. A change in the statutory definition of “homebound” expanded the number of beneficiaries eligible for Medicare services.

Private payers funded more than half of national health expenditures in 2002, with private health insurance contributing $549.6 billion, 35% of the total. Out of pocket payments of $212.5 billion accounted for 14% of expenditures and continued to decline as a share of total spending. More than half the increase in out-of-pocket spending for all health services came from increases in out-of-pocket spending for prescription drugs.

The public sector accounted for the remaining 46% of health payments, with the Medicaid program, funding 16% of aggregate spending, or $249 billion, nearly equaling the 17%, $267 billion, spent by Medicare.

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