Study: Healthcare spending goes through the roof

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Tuesday, December 31, 2002

WASHINGTON - Healthcare spending in the United States increased 10% during 2001, the largest jump in more than 10 years, according to a recent study in the journal Health Affairs.

The study, conducted by the Center for Studying Health System Change, analyzed financial data from hospitals, pharmacies and physicians, and determined that an increase in hospital spending - in large part caused by greater use of hospital services and rising prices - contributed most to the increase in total healthcare spending.

For the first time since 1995, prescription drug costs were not the biggest contributor to the overall rise. Hospital spending rose 12% on average last year and made up 51% of the overall spending increase, the study found.

Spending on outpatient hospital services increased 16.3% and was the single largest factor in the rise in overall spending, accounting for 37% of the increase.

“People are getting more tests and treatments as managed care plans abandon tight restrictions on care, but higher hospital prices are playing a role as well in rising costs,” HSC President Paul Ginsberg said.

Other factors in the overall spending increase included costs for physician services, which accounted for 28% of the increase, and costs for prescription drugs, which accounted for 21% of the increase. In addition, a second HSC study found that, contrary to popular belief, the aging of the baby boom generation did not play a major role in the healthcare cost increase for people under age 65. HME

HSC found that spending on outpatient hospital services increased in large part because insurers are encouraging their members to use outpatient facilities rather than more expensive inpatient services. HME

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