Last weeks release of U.S. healthcare spending data may hurt hospitals arguments that theyre suffering from a lack of funding. The data show hospitals spending climbed by a healthy 7.9% in 2005, compared with growth of 7% in spending on physician and clinical services, 6% growth in nursing home care, and 11.1% growth in home healthcare.
At the same time, hospitals share of overall spending rose to $611.6 billion last year, and all indications are that it will continue
The numbers were part of an annual report released last week by CMS actuaries that shows that for the third consecutive year spending on healthcare slowed in 2005, but nevertheless still increased 6.9% to $1.99 trillion in 2005, or roughly $6,697 per person. In comparison, spending grew 7.2% in 2004 to $1.86 trillion, or roughly $6,322 per person, according to the CMS.
But the numbers could put hospitals in the cross hairs of federal lawmakers who no doubt will search for potential offsets to their big-ticket healthcare prioritiesprimarily budgetary fixes to physician payment and other cuts to Medicare and Medicaid spending. Public payers accounted for 57% of the overall hospital spending pie, an increase of 8.1%.
Carmela Coyle, senior vice president for policy with the American Hospital Association, said theres more at play than simply what the numbers show. Most people agree that if spending is going up just for the sake of going up, then its a bad thing, Coyle said. But if you are providing needed care for more people, then increased spending is not necessarily a bad thing. Its a good thing. There are more people in need of hospital care, and we are meeting that need.
Coyle said that its only natural that hospital spending accounts for the largest share, because, historically, its much more expensive to be admitted to the hospital than to pay for a visit to a primary-care physician, for instance.
Hospital spending growth is primarily attributed to the fact that we are doing more things for more people, she said. The demand for hospital services has increased.
Lee Sacks, executive vice president and chief medical officer at Advocate Health Care in Oak Brook, Ill., said he agrees. Whats more, Sacks said that as the population continues to ageand the leading edge of the baby boom generation approaches the age when they need more hospital serviceshealthcare spending will likely continue to climb.
We all pay attention to it because we all know it contributes to shaping public policy, he said. And I think everybody breathes a sigh of relief that inflationary trends
But health-policy analysts said that even stable growth is a concern. Even in single-digit figures, it translates to a figure of spending growth that outpaces inflation for the U.S. worker, said Stephen Schoenbaum, executive vice president for programs at the Commonwealth Fund and the executive director of its Commission on a High Performance Health System.
And that translates to a decrease in the real ability of the American public to buy things other than healthcare, according
Schoenbaum said theres uncertainty about what the data will show for 2006 and years beyond, but that the long money points to slight increases moving forward. We dont have a concentrated plan to manage spending growth in healthcare in this country, Schoenbaum said.
Already, Schoenbaum said that 2006 data show that spending is significantly over
$2 trillion. And though the percentage of growth isnt in the double digits it once was, Schoenbaum warned that any increase has a direct and real impact on Americans.
Commonwealth Fund research shows that Americans have a higher proportion of total healthcare spending going to administrative costs, so trying to manage those administrative costs becomes a major issue, he said. Personally, I would argue that one of the ways to try to do that is through having this platform of everyone having coverage.
In many respects it is a hopeful and positive sign that healthcare spending growth eased again in 2005, said Leighton Ku, senior fellow in health policy at the Center on Budget and Policy Priorities. As CMS notes, however, healthcare costslike other economic trendsoperate in cycles. And while the cycle is low now, it will escalate again in the future.
The real question is not merely whether we can curb costs, but whether we can get better value for what we are buying, Ku said. We shouldnt just look at how much we are spending but on what we are getting with our healthcare dollars.