Government to Pay Nearly Half of Health Tab by 2014

Times Staff Writers

The introduction of the Medicare prescription drug benefit means that soon the government will be picking up almost half of the nation’s healthcare costs, a report released Wednesday shows.

At the same time, private-sector spending on healthcare also will increase, according to economists and actuaries for the Centers for Medicare and Medicaid Services.

Writing in the online edition of the journal Health Affairs, the federal agency’s economists and actuaries predicted that the continuing increases in public and private healthcare spending would lead to “heightened pressure to find ways to slow cost growth without compromising quality of access.”

The study measured the projected effect of last year’s Medicare overhaul -- including the new prescription drug benefit -- on healthcare spending between 2004 and 2014. Unlike other industrialized democracies, whose healthcare programs cover all citizens and are highly subsidized by their governments, the United States is the only large nation in which private payments exceed government spending on medical care.

But that may change. By 2014, the authors said, government would account for 49.5% of the nation’s health spending.


At a news conference Wednesday sponsored by the Henry J. Kaiser Family Foundation, Richard Foster, the chief actuary for the Centers for Medicare and Medicaid Services, pointed out that by 2014, only the leading edge of the baby-boom generation will have reached the age of Medicare eligibility.

“In the future, it is almost without doubt that the public share will cross over [50% of total spending] and continue to grow for at least 30 years,” Foster said.

C. Eugene Steuerle, a senior fellow at the Urban Institute, a nonpartisan economic and social policy organization in Washington, said that if healthcare spending continued to increase at the rate predicted by the government actuaries, it would very soon place “enormous pressure” on the medical system.

Steuerle and Marilyn Moon, director of the health program at the American Institutes for Research, a behavioral and social science research group in Washington, said they feared that government would respond to the pressure by shifting costs to individuals, who, in turn, might forgo needed healthcare.

Dr. Steffie Woolhandler, associate professor of medicine at Harvard University, said in an interview Wednesday that the new data confirmed that Americans were paying more for healthcare but -- at least in the case of the 15.6% of those without health insurance in 2003 -- getting less.

“We are getting a very bad deal economically in terms of healthcare in this country,” said Woolhandler, a spokeswoman for Physicians for a National Health Program, a nonprofit group that advocates for government-funded health insurance. The government economists and actuaries estimated that the nation’s healthcare bill, $1.8 trillion (or $6,130 per person) in 2004, would double to $3.6 trillion by 2014. As a share of the economy, which will grow more slowly during that decade, healthcare will climb from 15.4% in 2004 to 18.7% in 2014, they predicted.

Private spending for healthcare grew faster than public spending in 2003, but the authors estimated that public-spending growth overtook private in 2004. Public spending will be particularly large in 2006, when the Medicare drug benefit begins in earnest, they said.

In that year, they forecast that the public share of the healthcare bill will leap by 12%. But even then, they predict a 3% increase in private spending.