U.S.Health Spending Hits Record

The United States spent nearly $1.7 trillion on health care in 2003, devoting a record 15.3 percent of total economic output to medical care, according to government figures released Tuesday.

The annual figures show that yearly expansions in spending slowed for most areas of health care, including prescription drugs, hospital services, and payouts by private insurers. But at the same time they also show an acceleration in consumers’ out-of-pocket spending for medical services, an indication that patients are being forced to shoulder an increasing share of the rising cost of their care, analysts say.

The year 2003 marked the first time in history that national health spending topped 15 percent of the gross domestic product, with the nation now spending $5,760 per capita for medical care, according to the figures released by the federal Center for Medicare and Medicaid Services.

Money that consumers spend out of pocket for insurance premiums, deductibles, and other expenses grew 7.6 percent in 2003 after growing at 6 percent in 2002. It was the fastest expansion in patient spending since the 1980s, the report shows.

Meanwhile, private insurers drastically slowed the amount they paid for prescription drugs and some other services, a trend that in part translated to higher profits for insurers and higher costs for consumers.

But analysts say that they were surprised by an apparent nationwide slowdown in spending on prescription drugs. While Americans spent a record $179 billion for prescriptions in 2003, the number grew more slowly than it has in the past.

Government economists partly attributed the slowdown to the shift from prescription to over-the-counter status for popular drugs, including the allergy medication Claratin. The slowdown is also due to stricter insurance rules that ask patients to carry more costs, which drives down overall drug use, says Cynthia Smith an economist who helped generate the figures.

“It’s a rather striking change,” she says. Spending on prescriptions went up 10.7 percent in 2003 after rising nearly 15 percent the year before.

Overall, U.S. health spending rose 7.7 percent in 2003, though the expansion was slower than the previous year’s for the first time since 1996, according to the report. Analysts say that they can not yet speculate on whether the slowdown marked an expected longer-term reduction in health spending or a momentary respite from constantly expanding prices.

“One year does not a trend make. This is not necessarily the beginning of a trend,” Smith says.

But the slowdown in spending growth may reflect rapidly rising growth in the number of Americans without health insurance, says Leighton Ku, PhD, a health analyst with the Center for Budget and Policy Priorities, a Washington budget watchdog group.

Nearly 1.5 million Americans lost their health coverage between 2002 and 2003, bringing the total to nearly 45 million nationwide.

“That in and of itself slows health care spending because people get less health care when they’re uninsured,” Ku tells WebMD.

Medicaid Hit

Tuesday’s figures also show drastic cuts in the growth of spending on the Medicaid health program for the poor. Total spending on the program grew just 7.1 percent in 2003 after increasing more than 12 percent the year before. Smith attributed the slowdown to budget shortfalls, which spurred 34 states to cut Medicaid benefits or tighten eligibility for the program last year.

Medicaid’s rolls also grew by approximately 7.1 percent during the same time, though inflation and rising health costs mean that the increase in spending was not able to pay for full benefits for low-income people using the program, Ku says.

Government analysts pointed to the nation’s improving economy and employment outlook while speculating that pressure on state Medicaid programs could soon abate.

“Hopefully that will alleviate some stress that’s being felt,” Ku adds.

President Bush is widely expected to call for cuts in federal contributions to the Medicaid program when he unveils his fiscal 2006 budget some time in early February.

By Todd Zwillich, reviewed by Brunilda Nazario, MD

SOURCES: “Health Spending Growth Slows in 2003,” Center for Medicare and Medicaid Services, published inHealth Affairs Jan. 11, 2004. Cynthia Smith, economist, CMS. Leighton Ku, health analyst, Center for Budget and Policy Priorities.