Health care cost escalations declining in the U.S.

Health care costs in the U.S. are increasing at their lowest rate in nearly a decade, according to the latest report from the Center for Medicare and Medicaid Services (CMS), which each year reports on health care spending and offers its forecast for spending into the future.

For example:

Health care spending growth in the United States slowed for the third straight year in 2005, increasing 6.9 per cent.

This marks the slowest growth rate in health spending since 1999, when enrolment in more tightly managed care plans peaked.

And further slowing is expected when 2006 data are available.

For the most part, the mainstream media's coverage focused on the CMS' long-term projection that total health care spending will double by 2016. That does seem worrisome, but even here there is some good news buried by the press, says Investor's Business Daily (IBD). The forecast growth is down from last year's report:

Last year, the CMS projected that national health spending would consume 20 per cent of the economy by year 2015.

This year, they project that spending in 2016 will be about 19.6 per cent of the economy; not a huge difference, but certainly a notable one.

The lack of consumer involvement in the cost of health care is a key driver in the upward pressure on prices. If consumers had more of a direct financial stake in their health care decisions, the market would respond with more transparent pricing, competition on price and quality, as in other markets, says IBD.

Equally important, this lack of consumer involvement is a direct result of government policies that encourage over-reliance on insurance for routine medical bills and direct government spending, explains IBD.

Source: Editorial, Burying Good News, Investor's Business Daily, February 27, 2007.

For text: http://www.investors.com/editorial/editorialcontent.asp?secid=1501&status=article&id=257472580100703

For more on Health Issues: http://www.ncpa.org/sub/dpd/index.php?Article_Category=16

FMF Policy Bulletin/ 06 March 2007