CMS: Healthcare spending slowed in 2005 - for 3rd straight year

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According to new numbers from the Centers for Medicare & Medicaid, the rate of healthcare spending in the United States slowed for the third straight year in 2005, increasing just 6.9 percent. This is a drop from the 7.2 percent seen in 2004 and 8.1 percent in 2003, CMS said.

The 2005 increase is the slowest healthcare spending has grown since 1999, which saw 6.2 percent growth. Overall, the spending in 2005 amounted to $2 trillion, which translates to $6,697 per person, up from $6,322 per person in 2004.

The health spending share of the nation’s gross domestic product (GDP) went up only slightly, going from 15.9 percent in 2004 to 16 percent in 2005. According to CMS, this is due in part to the anticipated lagged effects of the 2001 recession, and slower than expected growth in prescription drug spending.

Other report highlights:

  • Growth in retail prescription drug sales decelerated for the sixth consecutive year, increasing just 5.8 percent in 2005 following 8.6 percent growth in 2004 and 10.6 percent in 2003;
  • Spending for hospital care accounted for the largest share of overall healthcare in 2005, reaching $611.6 billion, with growth stable at 7.9 percent in both 2004 and 2005;
  • Spending for physician and clinical services reached $421.2 billion in 2005, an increase of 7.0 percent over 2004. Payments by public sources for physician services, including Medicare and Medicaid, grew more slowly in 2005;
  • Medicare growth for physician services was 9.5 percent in 2005 (slightly slower than the 10.4 percent growth in 2004);
  • Expenditures for freestanding home healthcare agencies grew the fastest among all services in 2005, increasing 11.1 percent to $47.5 billion;
  • Growth in freestanding nursing home expenditures increased 6.0 percent in 2005, following growth of 4.1 percent in 2004, to $121.9 billion;
  • Medicare spending rose 9.3 percent to $342.0 billion in 2005, following growth of 10.3 percent in 2004;
  • Medicare spending for prescription drugs grew 19.7 percent in 2005, and although it outpaced overall Medicare growth, it represented only a 1.2 percent share of total Medicare spending;
  • Medicaid spending growth continued the deceleration that began in 2002, increasing 7.2 percent to $311 billion in 2005, compared with 7.5 percent in 2004;
  • For the $1,085 billion spent by private payers in 2005, private health insurance contributed $694.4 billion (64 percent), out-of-pocket payments contributed $249.4 billion (23 percent), and other private funds made up the remaining $141.2 billion (13 percent);
  • Growth in private health insurance premiums slowed from 7.9 percent in 2004 to 6.6 percent in 2005; and
  • Out-of-pocket payments accelerated slightly in 2005 (from 5 percent in 2004 to 5.8 percent in 2005). However, because growth in out-of-pocket expenditures was slower in 2005 than for overall health spending (6.9 percent), the out-of-pocket share of total health spending fell slightly in 2005.

The full findings can be found in a report by CMS’ Office of the Actuary, released in the Journal of Health Affairs.