A new report on health spending in 1994 shows private marketplace reforms are working, providers say. But the numbers will renew pressure on Congress to reduce federal health spending.
Federal government figures released last week showed total health spending continued to moderate in 1994, rising only 6.4%. The 1994 increase marked the slowest total growth rate in 30 years, according to the journal Health Affairs, which published the data.
From 1988 to 1992, growth averaged more than 10% a year. The rate of increase was about 7% in 1993, the report said.
However, 1994 spending on Medicare rose by more than 11%, compared with a 4% increase in the private sector, which likely will fuel Congress' desire to reduce federal health spending.
Total hospital spending rose only 4.4% to $338.5 billion in 1994 after increasing by 6.2% in 1993, the report said. That marked the fourth consecutive year the rate of growth in hospital spending declined. About 3.6% of the 4.4% increase in spending was attributable to price inflation, the report concluded.
Physician spending increased $8.3 billion, or 4.6%, to $189.4 billion in 1994 after growing only 3.7% in 1993.
The slower rate of spending growth is due primarily to increases in the use of managed care and low overall inflation, according to the authors of the study. They cautioned that the slower growth rates may not continue because moving people to managed-care plans may create only a onetime savings in the first year after the switch.
"It is still too early to state categorically that the long-term surge in healthcare costs is over just based on this two-year analysis," said Katherine Levit, one of the authors of the report.
"The temptation is to use these aggregate figures to imply that Medicare is less able than private health insurance to control costs," the report said. "However, aggregate figures mask important underlying differences."
The fastest growing healthcare sector, according to the data, was home care, which rose to $26.2 billion in 1994 from $23 billion in the previous year, an increase of nearly 14%. Nursing home care grew by nearly 8% to $72.3 billion (See chart).
Hospital and physician groups argue that they have been successful in holding down costs and that lawmakers should focus on sectors such as home care and nursing homes, which have seen a more rapid rise. However, they acknowledged that ballooning Medicare costs make them a tempting target.
"It is all well and good that total spending is slowing down. But Congress only cares about the budget, and as long as (Medicare and Medicaid) continue to grow faster than the private sector they are going to look to us for cuts," said one provider lobbyist who asked not to be identified.