Physician Costs Fuel 9.8% Jump in Health Spending

Fueled by increases in payments to doctors, national spending on health jumped 9.8% in 1987 to $500.3 billion, the Health and Human Services Department reported Friday.

The rise, which came despite years of cost-containment efforts, was the biggest since 1983 and far more than double the general national rate of inflation in 1987. The figures include spending by individuals, insurance companies, the government and all other sources.

The report said that the share of the gross national product consumed by health costs rose from 10.7% in 1986 to 11.1% in 1987, the highest level in history and the highest of any major developed nation in the world. In 1965, only 5.9% of the GNP was spent on health.

‘Not Time to Panic’

William L. Roper, head of the Health Care Financing Administration, which produces the national health spending report each year, said: “The continued rate of increase in national health spending is not good news. It is not time to panic, but it’s time to get even more serious about dealing with this problem.” He noted that Medicare physician spending increased at a compound annual rate of 15% from 1975 to 1987.

The newest rise in health outlays seems certain to spur further efforts on Capitol Hill to rein in medical costs, particularly in Medicare and Medicaid, the two giant federal programs that paid for a quarter of all health bills in 1987.

Rep. Pete Stark (D-Oakland), chairman of the House subcommittee on Medicare, said: “The cost of health care to the economy needs to be immediately addressed. The Japanese are healthier while spending about half as much of their GNP on health care.”

Rep. Bill Gradison of Ohio, senior Republican on the same subcommittee and one of those mentioned as a possible secretary of health and human services in the Bush Administration, said: “Neither the public nor the private sector has figured out how to bring health cost increases down to the level of general inflation.”

Gradison said that in view of rising costs, “Medicare once again will be revisited for budget savings” in the next Congress.

Friday’s report shows that hospital care accounted for 39% of health spending, doctor services 20%, nursing home care 8% and a variety of other services the remainder.

About 25% of all the bills were paid directly by patients, 32% by private health insurance and 41%, including Medicare and Medicaid, by the government.

The average outlay for personal health care was $1,758 per person in 1987, the report said. A comparison of outlays with 1986 shows that, although overall health spending increased 9.8%, hospitals went up only about 9%, but doctors rose more than 12% and dentists about 11%.