on Health Care Increased Sharply in 2001
By Robert Pear for the
TimesWASHINGTON, Jan. 7 Spending on health care is
increasing at the fastest rate in a decade, reflecting greater use of hospitals
and prescription drugs and the declining influence of managed care, the
government reported today.
The steep increase in spending has put
immense new pressures on consumers, employers and public programs.
In 2001, health spending rose 8.7 percent,
to $1.4 trillion, and accounted for 14.1 percent of the total economy, the
largest share on record, the report said.
Spending averaged $5,035 for each person in
the United States. The increase came even as the nation slipped into a
recession, exacerbated by the terrorist attacks of Sept. 11, 2001.
Experts say the rapid growth may lead to
new efforts to rein in health costs.
"Historically, increases of this size have
been closely followed by government policy changes or private sector
initiatives to put the brakes on health care spending growth," said Katharine
R. Levit, an economist who supervises preparation of the government's annual
report on health spending.
The steep increase adds to the burden on
states, wrestling with severe fiscal problems, and private businesses,
struggling with a soft economy. It also intensifies pressure on Congress to
move health care to the top of its agenda.
The major reason for the increase in health
spending, Ms. Levit said, was an increase in the amount of medical goods and
services purchased to care for an aging population.
"There was some increase in prices, but it
was not as large as the increase in quantity," Ms. Levit said. The increase in
quantity took many forms: more days spent in hospitals, more outpatient
services, more diagnostic tests, more prescriptions and greater use of new
technology, which has the potential to extend life and improve its quality.
At the same time, consumers have flocked to
looser forms of managed care, which impose fewer restrictions than health
"Managed care's influence has waned in the
last few years, contributing to acceleration in hospital and overall health
spending," Ms. Levit said.
Medicare spending, for the elderly and
disabled, rose 7.8 percent in 2001, while spending under Medicaid, the
federal-state program for low-income people, soared 10.8 percent. The growth of
Medicaid was driven by an increase in enrollment, resulting from the recession
and from state efforts to expand coverage.
The report, published today in the journal
Health Affairs, describes prescription drugs as the fastest-growing category of
health spending. The nation spent $140.6 billion on such medicines in 2001, up
15.7 percent from the prior year. In 2001, for the first time, spending on
drugs exceeded spending on nursing homes and home health care combined.
Representative Jim McCrery, Republican of
Louisiana, said the surge in health spending was alarming. "If we don't find a
way to reduce the rate of increase in health costs," Mr. McCrery said, "we'll
end up with a government-controlled health care system in which we control
costs by rationing."
Democrats said the new data to supported
their view that Medicare was more efficient than private insurance.
"Medicare increased payments to providers
such as hospitals, home health agencies and nursing homes and still managed to
keep overall spending growth to 7.8 percent in 2001," said Representative Pete
Stark, Democrat of California. "Meanwhile, private insurance premiums went up
10.5 percent. Given these results, I cannot understand why Republicans continue
to devise plans for turning Medicare over to private health insurers and
But Republicans said that consumers had
little incentive to shop for bargains in the health care market because they
were insulated from most costs. Of every $100 spent on health care, consumers
pay $14 from their own pockets, for co-payments and deductibles and items not
covered by insurance.
Even though 41 million Americans are
uninsured, the United States devotes more of its economy to health care than
other industrial countries. In 2000, health accounted for 10.7 percent of the
gross domestic product in Switzerland, 10.6 percent in Germany, 9.5 percent in
France and 9.1 percent in Canada, according to the Organization for Economic
Cooperation and Development.
From 1992 to 2000, while the United States
experienced the longest economic expansion in its history, health spending grew
rapidly, but so did the economy. As a result, health care accounted for a
stable share of the gross domestic product, 13.1 percent to 13.4 percent. But
in 2001, the share grew eight-tenths of a percentage point, the largest
increase on record.
The increase is a "warning signal," Ms.
Levit said, adding: "We can move about two-tenths of a percent of our economic
output to health care each year without too much pain. But when we see these
sudden spikes, the adaptation we have to go through in order to pay for it is
usually more than we can bear."
The growth in drug spending eased in 2001,
after increases of 16.4 percent in 2000 and 19.7 percent in 1999, as fewer new
drugs entered the market and employers raised co-payments in a successful
effort to encourage greater use of generic drugs.
Pharmaceutical companies say prescription
drugs still account for a relatively modest share of total health spending, 9.9
percent in 2001, compared with hospitals and doctors, which together account
for more than half.
Spending on hospitals rose at the fastest
clip since 1991, reaching $451.2 billion in 2001, up 8.3 percent from the prior
In 2001, spending for doctors and clinical
services rose 8.6 percent, to $313.6 billion, the government reported. Ms.
Levit said the growth probably resulted from increases in imaging procedures
and in visits to doctors' offices. Drug advertising, she said, prompts some
people to visit doctors to get prescriptions.