Study Warns of Fallout in Rising Health Costs

With less money available to pay for increasing health care costs, politicians, employers and consumers face difficult choices in the year ahead, government statisticians said Monday.

Health care costs grew from 1999 to 2000 at the fastest annual rate in 12 years, signaling the “end of an era of reasonable health care cost growth” and the beginning of a period of serious belt-tightening, according to economists at the Centers for Medicare and Medicaid Services. The slow economy contributed to the problem.

“All the different payers are going to be under pressure to make difficult choices in terms of what [health care services] they’re able to pay for,” said Katharine Levit, director of the centers’ National Health Statistics Group and an author of the report, in a telephone news conference.

The government report on health care inflation, published today in the journal Health Affairs, bolsters previously released studies by private groups. Studies analyzing preliminary 2001 numbers have found that health care costs increased by more than 10% last year, far more than the 6.9% jump in 2000 cited in the government report.

And like some other analyses, the new study identified hospital spending and prescription drug costs as the primary forces driving the increase. Spending for prescription drugs grew 17.3% in 2000, making medicines the fastest-growing health care cost. But hospital care accounts for the largest single category of health care spending, and its cost jumped 5.1% from 1999 to 2000, the largest annual increase since 1993.

Released at the beginning of an election year, the numbers point to health care’s continuing prominence as a political issue.

The Bush administration, which early last year promised a prescription drug benefit for Medicare beneficiaries and expanded patients’ rights, now is faced with a sluggish economy and federal coffers drained by a large tax cut and unanticipated expenses for the war and anti-terrorism measures.

“Consumers will be paying more for their health services . . . and they may face benefit packages that look slightly different,” said economist Cynthia Smith, another of the report’s authors.

Paul Dennett, vice president for health policy at the American Benefits Council, a trade association that represents large companies, agrees that cost shifting from employers to employees is “very likely in the short term if employers are faced with 15% to 20% premium increases.”

The only “light at all visible at the end of a pretty dark tunnel,” Dennett said, comes from those working to give consumers more of a say in their health care choices. Most large employers “are only now beginning to look at how to do that,” he said.