Health Care Costs Up Due to Premiums, Prescriptions

Growth in the nation’s health care bill accelerated in 1998, driven by rising costs for prescription drugs and rising insurance premiums.

Total health care spending rose 5.6% in 1998, compared with 4.7% in 1997, according to an annual report from the Health Care Financing Administration.

It was the biggest increase since an 8.7% jump in 1993.

“This is signaling some changes that appear to be imminent,” said Katharine Levit, one of the report’s authors.

“We do think health care spending will begin to increase, but not back to the rates that we saw in the early 1990s.”

The report appears in the public policy journal Health Affairs, which is to be released today.

Private health care spending increased by 6.9% in 1998, compared with a 4.8% rise in 1997.

Growth in government spending--on programs such as Medicare, for the elderly and disabled--slowed to 4.1%.

Overall, health care spending rose to $4,094 per person in 1998, or a total of $1.1 trillion--from $3,912 per person in 1997.

Spending on prescription drugs grew more than any other category. It climbed by 15.4% in 1998 to $90.6 billion.

Growth in drug costs has been steadily accelerating since 1993, the report said. Because new drugs are being brought to market more quickly, HMOs have offered people prescription coverage at lower out-of-pocket costs, and the government has allowed more advertising of brand-name drugs.

Meanwhile, private insurance premiums have begun to rise again after a lull when HMOs and other managed care companies offered discounts to lure customers away from traditional insurance.

Insurance premiums rose 8.2% in 1998, more than double the increases in each of the three previous years--3.5% in 1997, 3.3% in 1996 and 2.8% in 1995.

Government costs for Medicaid health insurance for the poor grew by 6.6% in 1998, compared with 4.6% in 1997.