If you thought Medicare was stingy, think again. A new government report suggests that Medicaid and private payers make Medicare look like Santa Claus-at least last year.
Medicare spending in 1997 grew by 7.2% to $214 billion, according to a HCFA report released last week. Although that is still more than four times the rate of general inflation, which was at 1.7% last year, the rate of Medicare spending growth was significantly slower than in 1996, when it grew by 12.2%.
Continuing a downward trend that began in 1995, Medicaid spending increased by 3.8% in 1997, the lowest rate in the program's history. Medicaid spent a total of $159.9 billion in 1997.
HCFA attributed the slower Medicaid spending rate to decreases in Medicaid enrollment in 1995, 1996 and 1997 as a result of Medicaid and welfare reforms passed by Congress. Those changes made it more difficult for some groups, including legal aliens, to become eligible for Medicaid.
The HCFA study also found that spending by private payers increased by less than 4% in 1997 over 1996, to reach $348 billion. It attributed the slow growth over several years to an increase in managed care. Increases in private insurance outlays reached their lowest point in 1994, when spending increased by only 2.4%, HCFA said.
Overall, healthcare spending increased by 4.8% to about $1.1 trillion in 1997, which was the lowest rate of annual increase in almost 40 years.
But don't get used to it. In a report released in September, HCFA said total healthcare spending will begin to climb again next year and top $2 trillion by 2007 (Sept. 14, p. 2).
Hospital spending is projected to grow by 3.3% this year, by 4.1% in 1999 and by 4.9% in 2000. Total spending on hospital care grew by only 2.9% to $371 billion last year, HCFA said last week, the lowest growth rate of any healthcare sector.
Within the hospital sector, Medicare spending grew fastest, by 6.4% in 1997 to $124 billion. Medicaid spending on hospital care decreased by 2.4% to $57.6 billion. And private-payer spending on hospital care rose by 2.7% to $113 billion.
Despite ongoing hospital industry complaints about Medicare, the federal program will continue to pay for about one-third of all hospital spending through 2002 (See chart).
Still, Thomas Scully, president of the Federation of American Health Systems, which represents investor-owned hospitals, said he wasn't surprised that the growth in hospital spending had slowed. He credited Medicare as the catalyst.
"Congress keeps cutting and squeezing and slowing growth," he said."There is only so far you can go, but people on (Capitol Hill) never seem to understand that. They keep coming back to cut (hospitals) more."
Spending on physician services from all sources increased by 4.4% to $218 billion, HCFA said.
Spending has slowed dramatically in home health. As late as 1990, home health spending was growing at more than 28% annually. Yet growth in the home health sector was only 3.7% last year.