With a new CMS report showing that Medicare spending rose almost 19% in 2006, healthcare providers are facing an uphill battle in trying to jockey for more money from the Medicare program, which ultimately might be looking for areas where it can rein in spending.
The report, National Health Spending in 2006: A Year of Change for Prescription Drugs, showed that healthcare spending across the U.S. increased about 6.7% to $2.1 trillion, or $7,026 per person, up from $1.97 trillion in 2005.
From the public payer side, Medicare spending increased 18.7% to $401.3 billion in 2006. In 2005, Medicaid spent $338 billion, CMS economists said. Medicaid spending, conversely, decreased 1.9% in 2006, going to $175.7 billion in 2006 from $179.1 billion in 2005. It was the first decrease in spending since its inception in 1965. The Bush administration is pushing to further restrict Medicaid spending (See story, p. 12).
Medicare spending in total increased from 17% share of health spending to 19% share in 2006, said Aaron Catlin, a CMS economist for the National Health Statistics Group. The growth in Medicare spending is largely attributed to the full implementation of the Part D drug benefit, coupled with larger enrollment into the Medicare Advantage program. The expansion of those private plans into the Medicare program caused a massive spike in Medicares overall administrative procedures as well as the net cost of its insurance.
Rep. Frank Pallone (D-N.J.), chairman of the House Energy and Commerce Subcommittee on Health, said in a written statement that the reports findings could prompt action from Capitol Hill lawmakers. Healthcare costs continue to increase, often making healthcare coverage and services unaffordable for hardworking American families, he said.
But at least one healthcare lobbyist said he thinks the Part D spike is good news for the hospital sector. With much of the attention falling on the prescription drug program and Medicare Advantage, policymakers may instead shift their focus away from hospital spendingthe largest piece of the healthcare pieto those other programs, thus averting any potential cuts. Prescription drug spending clearly sticks out like a sore thumb, but in an environment of paygo, everyone is at risk, he said.
Along those lines, Americans spent more money on hospital care in 2006 than ever before. But where the hospital actually put those dollars after it left the patients pockets has changed and could ultimately affect the services they choose to provide and how they get paid for providing them.
As a whole, the nation spent $648.2 billion on hospital care in 2006, roughly 7% more than it had in the previous year, according to the CMS. And while the recent data show a continued trend of slower spending growth, hospitals nevertheless remained the largest coffer for the healthcare buck.
Since 2002, it has been a very gradual deceleration, said Stephen Heffler, CMS actuary and director of the National Health Statistics Group, at the news conference. Were still talking about the 7% to 8% growth range. It has largely been driven by slower growth in use, especially inpatient care. Then in (2006), we did see an uptick in prices that offset that a little bit.
In 2006, hospitals accounted for 31% of all healthcare expenditures. When paired with the amount spent on physician and clinical services, $447.6 billion, the group together accounts for more than half, 52%, of the overall $2.1 trillion healthcare bank.
For the patient though, that number isnt good news. The report shows that hospital price growth, as measured by the Producer Price Index, grew 4.4% in 2006 compared with 3.8% from the previous year. Every year healthcare can do more things for more people, said Caroline Steinberg, vice president for health trends analysis at the American Hospital Association. Unfortunately, that leads to the cost of care in hospitals rising.
Hospitals and physicians recouped federal dollars at a much slower clip in 2006 as well. While overall Medicare spending increased, the amount that went to hospitals for inpatient admissions and to physicians both decreased, the CMS said.
The slower rate of growth in hospital spending, Steinberg said, could in part be attributable to a focus on treating more and more patients in the outpatient setting. There has been a big shift to outpatient care, she added, especially by Medicare.
Paul Ginsburg, president of the Center for Studying Health System Change, cautions that the slowdown may be short-lived. Using community-level data culled from its ongoing Community Tracking Study from last year, Ginsburg said that many signs point to an acceleration of costs in the future, especially from the hospital sector. A separate report released last week shows that consumers continue to face increasing healthcare costs (See story, p. 7).