Health Spending Growth Up Slightly in 2006, Still Exceeded $2 Trillion

By Anna Boyd
13:04, January 8th 2008
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Health Spending Growth Up Slightly in 2006, Still Exceeded $2 Trillion

Medicare spending jumped 19 percent in 2006, the fastest rate of growth in 25 years, after a prescription drug benefit was added to the U.S. health-care program for the elderly and disabled, a government report published today in the journal Health Affairs said.

Overall, the nation’s health costs rose 6.7 percent to $2.1 trillion in 2006, a 6.7 percent rise from the previous year, analysts with the Centers for Medicare & Medicaid Services (CMS) said. It was a slight increase from a 6.5 percent in 2005, which meant an average of $7,026 a person, up from $6,649 in 2005.

Health care in U.S. represented 16.1 percent of the gross domestic product in 2006, the same level as the previous two years.

Costs for medical services seemed to have risen faster than wages, which made presidential candidates of both parties to promises they would work to slow health-care inflation.

“The cost of health care continues to be a real and pressing concern. Making sure we are paying for high quality health-care services, not just the number of services provided, is just one of the most critical issues facing the American public and the federal government,” said Kerry Weems, Medicare's acting administrator, in an e-mailed statement.

Spending on prescription drugs increased 8.5 percent compared with 5.8 percent the year before, after six consecutive years of slow growth. Medicare Part D, a measure introduced at the start of 2006, fueled the raise, the researchers said. The $41 billion spent on Medicare Part D helped boost overall Medicare spending to $401.3 billion in 2006, up from $338 billion the year before.

Insomnia drugs, such as Ambien CR and Lunesta knew the faster growth than any other class, the report said.

Total prescription drug spending was roughly $217 billion in 2006, from which 34 percent was paid for public-sector sources including Medicare and Medicaid, the Department of Defense and Veterans Affairs and state and local hospital subsidies, the report said.

Higher drug spending recorded because an increased consumption of drugs, not because of the price increases, according to economists.

Other factors, which led to increased drug spending, included the use of existing drugs for new purposes and the increased use of high-cost biotechnology products, the reports said.

The same report showed that spending on hospitals, doctors and nursing homes grew more slowly in 2006 than in 2005. Spending for doctors’ services grew 5.9 percent in 2006, to $447.6 billion, being the slowest rate since 1999 and reflected constraints imposed by Medicare and private insurers.

Spending on nursing homes also grew at the slowest pace since 1999, rising 3.5 percent to $124.9 billion.

The reports also revealed that the private insurance plans that provide the prescription benefit were not able to obtain discounts from drug manufacturers as deep as those that state governments got through their Medicaid programs.



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