Growth in spending for both physician services and pharmaceuticals slowed last year, even though overall healthcare costs accelerated by 7.2%--their fastest rate in a decade--according to an analysis by the not-for-profit Center for Studying Health System Change.
The rapid increase came from an unlikely source: hospitals. Washington-based HSC, funded by the Robert Wood Johnson Foundation, cautions that the rising costs, when factored in with higher insurance premiums and a weakening economy, could lead to even greater healthcare cost inflation and leave more Americans uninsured.
"These are striking changes which certainly bode ill for future trends," says Paul Ginsburg, president of the center. He is co-author of the sixth annual study, published late last month.
Spending for hospital-based outpatient care soared 11.2% in 2000, the largest jump since 1992, and accounted for 37% of the overall healthcare cost increase, HSC reported. Inpatient costs, which were nearly flat, were responsible for 10% of the total uptick. In contrast, spending for physician services accelerated by 4.8% and made up one-quarter of the total increase last year. In 1999, physician costs made up one-third of the total increase.
Richard Coorsh, spokesperson for the Federation of American Hospitals, a Washington-based lobby group, says, "We have noted since December of last year that hospital costs are indeed far exceeding Medicare rate increases."
Pharmaceutical cost acceleration slowed to 14.5% last year, down from 18.4% in 1999, as no blockbuster medications were released in 2000 and health insurers placed greater emphasis on generics as part of three-tiered pharmacy benefit plans, HSC says. Drug spending made up 27% of total healthcare cost inflation in 2000, compared to 41% in 1999.
Data for the first five months of 2001 suggest that the softening economy has not had much effect on the healthcare sector. The survey says that payroll costs increased by 3.1% in 1999 and 4.7% in 2000 but soared by 7% from January through May 2001 from the same period a year earlier. In large part, the pay spike reflects the current nationwide nursing shortage.