Health-Care Spending Up Only 4.4% in ’96
Spending for health care in the United States rose a moderate 4.4% in 1996, the smallest increase ever recorded, and a strong signal that the once-volatile health sector is coming under financial control, the government reported Monday.
The big political issue has shifted from controlling health-care spending to assuring that consumers receive quality care. The debates in Congress this year will be over proposals to expand patients’ powers and rights in dealing with health-maintenance organizations.
Health outlays averaged $3,759 per covered person in 1996, an increase of $126 over the previous year, according to a report by the Health Care Financing Administration published in the journal Health Affairs. Total health-care spending surpassed $1 trillion for the first time.
Recent predictions and comments by businesses indicate that corporations expect higher premium increases this year from HMOs and insurance companies. The HMOs are trying to restore profit margins after an economic squeeze. But the market is still highly competitive, and it is not clear how big the increases might be.
HMOs and insurers “would like to have higher margins, but employers have been very aggressive and very successful in holding down premiums,” said Paul Ginsburg, director of the Center for Studying Health System Change, an independent research organization.
The 1996 results are “very striking,” showing unprecedented success in controlling costs, he said.
The 4.4% increase was the slowest growth in total health outlays since the government began its annual study of health-care costs in 1960. The average growth rate since 1993 has been 5% annually, compared with a runaway figure of 11.7% a year between 1966 and 1993.
When the president offered his ill-fated health-care reform plan in 1993, there was considerable apprehension that health-care costs would gobble an ever-growing share of the national output. Since then, the economy has grown more rapidly and the acceleration of health spending has slowed. U.S. health-care outlays, although still proportionately greater than in any other nation, have remained fixed for three years through 1996, at a 13.6% share of the total national output of goods and services. A similar pattern of slow growth in health spending for businesses during 1997 will be confirmed later this week when William Mercer Inc., a major employee benefits consulting firm, issues its regular survey of health insurance costs.
There was a “continuing shift of people from indemnity care into some form of managed care,” said John Erb, a Mercer principal. Under traditional indemnity care, patients can choose any doctor or hospital. Managed-care typically restricts a person to a list of approved providers. There is a “tremendous one-time savings” as workers shift into HMOs, Erb said.
In today’s tight labor market, companies might be willing to pay higher premiums for health insurance to keep their current health plan rather than change insurers and force workers to switch doctors, Erb noted.
But the outlook on what is likely to happen this year is still “sketchy,” noted Katharine R. Levit, director of the health statistics group that prepared Monday’s report. Although private outlays might accelerate, the increase could be balanced by savings from Medicare, which is expected to slow spending because of actions taken by Congress last year, she noted.
Medicare outlays grew in 1996 by 8.1%, double the overall rate of expansion.
