The excitement generated by the federal government's announcement last week that the growth of national healthcare spending appeared to pick up speed in 2000 proves that sometimes it isn't so much what is said as who says it.
National healthcare spending swelled to $1.3 trillion in 2000, an increase of 6.9% from the year before, according to an annual study released by the Centers for Medicare and Medicaid Services. Comparing the 6.9% growth rate with the 5.7% increase registered in 1999-an acceleration of spending growth that hasn't been seen in 12 years-CMS economists declared "the end of an era of reasonably affordable healthcare cost growth."
But the numbers and trends aren't new. In fact, last March the CMS projected that 2000 spending and the overall growth rate would be slightly higher than the numbers released last week. Also, a Washington think tank, the Center for Studying Health System Change, said last September that 2000 spending had increased 7.2% and proclaimed that "hospital spending is back with a vengeance."
Healthcare spending grew faster than the overall economy for the first time since 1993, as healthcare expenditures moved from 13.1% of the gross domestic product in 1999 to 13.2% in 2000. The study's authors predicted that healthcare spending will continue to grow faster than the economy in 2001.
Prescription drugs again showed the biggest jump in spending in 2000, at 17.3% over 1999 levels. Hospital spending, which grew 5.1% in 2000 vs. 3.4% in 1999, was responsible for driving the overall spending increase. The relatively modest increase was compounded by hospitals' large portion of overall expenditures-the $412 billion spent on hospitals in 2000 was 32% of national healthcare spending.
The managed-care industry used the new CMS report to rally opposition against federal and state laws that it says keep health plans from controlling costs. But even Karen Ignagni, president of the American Association of Health Plans, acknowledged that the study doesn't offer any new data.
"I think the thing that is new about this is hearing the information from a source that has been relied on year after year for objective data," Ignagni said. "Once you hear the objective analysts from HHS making this point, I think it really hits home."
What also hits home in the CMS report is that federal healthcare policy helped fuel national spending growth. Medicare hospital spending grew 4.5% in 2000, the highest rate of growth since 1997. The authors blame Congress' efforts, specifically the Balanced Budget Refinement Act of 1999, to ease the Medicare cuts in the Balanced Budget Act of 1997.
Shining the light on lawmakers for healthcare spending increases may drive legislative action to control costs. "It is pretty clear that it will put pressure on politicians to respond," said Herb Kuhn, the Premier hospital alliance's vice president of advocacy. Kuhn said, however, he didn't think the report would drive cuts to Medicare.
The jump in hospital expenditures won't result in a public or political backlash against hospitals, predicted Cynthia Smith, an author of the study and an economist with the CMS' National Health Statistics Group.
Utilization rose in all categories of hospital care-inpatient, outpatient, emergency department and deliveries-contributing to the rise in hospital spending, the American Hospital Association said. Also, hospitals were faced with higher labor costs because of difficulties recruiting clinical workers such as nurses and pharmacists.
"When you combine the cost pressures on hospitals with the volume increases, you are going to see an increase in hospital spending," said Don May, the AHA's senior associate director for policy.
As hospital utilization increased, hospital capacity has declined by 5%, or 35,000 inpatient beds, from 1996 to 2000, according to the AHA's Hospital Statistics 2002.
Increasing demand matched with declining capacity have given hospitals greater power in negotiations with payers, said Katharine Levit, an author of the study who is director of the CMS' National Health Statistics Group.
Levit said she expects healthcare costs to continue to grow at a faster rate than the overall economy in 2001.