If hospital spending growth is slowing down, Ron Bunnell hasn't seen it yet.
To deal with the nursing shortage, Banner Health-a 19-hospital system based in Phoenix, where Bunnell is chief financial officer-has had to increase salaries an average of 8% each year for several years.
And with physicians less than excited about being on call, Banner has had to pay doctors more to make sure its emergency rooms are properly staffed.
"What it's doing to us is putting tremendous pressure on us," Bunnell said.
Along with the rising number of the uninsured, overall healthcare costs have defined the political debate this year, as Americans reach deeper into their pockets to pay their healthcare bills and those in the industry have had to find new sources of funding. And with healthcare high on the list of voter concerns, presidential candidates will have to address the issue of how to hold healthcare costs down.
"There is absolutely no question that worries about costs have propelled healthcare to the head of the list" of concerns among Americans, said Drew Altman, president and chief executive officer of the Kaiser Family Foundation, a not-for-profit think tank.
Last week, the CMS reported that after six straight years of accelerating healthcare spending growth, estimates for 2003 show that spending growth slowed last year to 7.8% from 9.3% in 2002. According to the report, the nation's healthcare bill reached $1.7 trillion in 2003, from $1.6 trillion the year before.
For hospitals, which in recent years have been singled out as the largest driver of rising healthcare costs, the CMS report brought some good news. Hospital spending growth was projected to slow to 6.5% in 2003 and again in 2004, compared with 9.5% in 2002. With technological advances enabling more procedures to be done in outpatient settings, that spending slowdown is expected to continue.
Still, for many hospital executives like Bunnell, the spending slowdown has not been apparent. "I've seen that it's slowing down in many areas, but for places like Phoenix, which are high-growth areas, patient volume is still very high" and so are healthcare costs, he said.
While the growth rate slowed down, healthcare spending still represented 15.3% of the national economy last year, up from 14.9% in 2002. And though the increase in the nation's health bill is projected to stabilize during the next decade, healthcare will continue to consume an increasingly large share of the economy. By 2013, healthcare spending is projected to reach $3.4 trillion, or 18.4% of the nation's economy.
Key to the Democratic presidential contenders' proposals to control healthcare costs are measures to rein in prescription drug costs, which in 2003 rose a projected 13.4%. The Democrats' leading candidate, Massachusetts Sen. John Kerry, for example, is calling for pharmacy benefit managers doing business with the federal government to disclose all fees and discounts they receive from drug manufacturers. He would also try to close loopholes in patent laws that prevent generic drugs from entering the market.
Both he and another Democratic presidential candidate, former Vermont Gov. Howard Dean, would allow states more latitude in trying to control their drug costs. Kerry would allow states to charge certain non-Medicaid populations the same price that Medicaid, which gets discounts on many drugs from manufacturers, charges to its beneficiaries.
Dean and Sen. John Edwards of North Carolina have proposed placing controls on direct-to-consumer advertising.
By contrast, President Bush has stayed away from putting restraints on the drug industry. According to Stuart Altman, professor of national health policy at Brandeis University and an adviser to Kerry, "I don't think there is much (cost control) in (Bush's) proposal. ... I don't think they've thought that much about healthcare."
In his State of the Union address, however, Bush did make reference to rising healthcare costs and said, "(Congress and my administration) must work together to control those costs."
His approach involves passing legislation allowing association health plans and reforming medical malpractice laws.
Association health plans would cross state lines, allowing many small businesses to join them and allowing the plans to negotiate for lower premiums for businesses and their employees, the administration said.