U.S. healthcare spending declines

Tuesday, January 31, 2006

BALTIMORE - The growth in healthcare spending in the United States slowed for the second straight year in 2004, according to a report released last month by CMS. Spending in 2004 rose 7.9%, slower than the 8.2% growth in 2003 and 9.1% growth in 2002.
The report was published in the journal Health Affairs. It shows that healthcare spending was $1.9 trillion in 2004, or $6,280 per person. It includes data through 2004, the most recent year for which actual numbers are available.
The share of the nation's Gross Domestic Product (GDP) spent on health care grew 0.1 percentage point to 16% in 2004. This was a smaller increase in the share of GDP than experienced in recent years as economic growth in 2004 grew at its fastest rate since 1989. Slower growth in prescription drug spending has contributed to slower overall spending growth over the past few years. Federal, state and local government spending for health care rose 8.2% in 2004.
Public spending continues to be dominated by Medicare ($309 billion in 2004), whose growth rebounded in 2004 in part due to the Medicare Modernization Act (MMA),which raised payments for physicians, capitated health plans, and rural and other providers. Combined with increases in the use of physician and home health services, these factors contributed to more than a 2% point rise in Medicare spending growth to 8.9% in 2004.