Health-Care Costs in 2000 Up 7.2%, Lifting Premiums

Health-care costs rose 7.2% in 2000, the biggest jump in a decade, according to a new study.

The nonprofit Center for Studying Health System Change, which conducted the study, said insurers are passing those costs along to employers, with premium increases averaging 11% this year.

Hospital care fueled almost half of last year’s increase in U.S. spending on health care, while prescription drug prices accounted for a quarter of the growth.

Costs have risen because aging Americans need more medical care and insurers have responded to pressure from patients by relaxing limits on care.

Employers had absorbed most of the increase because the labor market was tight. Now, companies are making workers pay more for drugs and doctor visits, a trend that may increase as the economy slows, the study showed.

“What we’ll see first is more cost-shifting to employees,” said Paul Ginsburg, president of the Washington-based research group, which is funded by the Robert Wood Johnson Foundation. “We’ve seen employers absorbing more in recent years and with a weakening economy, I don’t expect that to continue.”

Spending on hospital care accounted for 47% of the increase in health-care costs last year. Prescription drug costs continued to rise, though they made up just 27% of the overall spending increase. Health-care costs grew 7.1% in 1999.

Last year’s increase was driven by an 11.2% growth in spending on outpatient care at hospitals, following an 8.9% increase in 1999. Spending on overnight hospital stays rose 2.8%, compared with a 1.6% increase the year before.

Hospitals have used their bargaining clout to raise the prices they charge insurers, and patients are seeking more medical care with fewer managed-care restrictions.

“It’s really increasing use of hospital services that’s driving increased hospital spending,” said Carmela Coyle, a senior vice president for the American Hospital Assn., which represents about 5,000 hospitals.

Hospitals may be charging more to cover their higher labor costs, the study said. Labor accounts for almost half of hospital costs, according to the Federation of American Hospitals, which represents HCA Inc. and other for-profit companies. Costs are increasing as hospitals pay more to hire nurses and medical technicians.

Hospitals also are paying more for medical equipment, drugs, blood and other supplies, Coyle said.

Second-quarter profit rose 22% for HCA, the biggest U.S. hospital chain. Tenet Healthcare Corp., the No. 2 hospital chain, said fiscal fourth-quarter profit rose 40% and the company expects first-quarter profit to beat analysts’ estimates.