Government to Pick Up Larger Share of Health Care Tab, Study Says

February 25, 2005 ( - Health care spending is out of control and there seems to be no end in sight, a new government report indicated.

The Centers for Medicare & Medicaid predicted that government agencies and programs will carry an increasing share of health care costs as employers cheapen their benefit offerings, according to a press release from the agencies. With population growth outstripping enrollment growth in private health insurance over the next 10 years, the Centers believe that the government will pick up a larger share of costs through its major programs such as Medicare and Medicaid. The government is currently the largest provider of health care but will grow even further in importance over the coming years, the study said.

The agencies decided on this finding because of the shrinking private health care spending and the corresponding rise in government spending, combined with the fact that overall health care costs are not shrinking.

Private health care spending is expected to slow to 7.4% in 2004, according to the report. The cause: slower growth in the use of medical care and the introduction of Medicare Part D. Although these will not have a huge effect on the overall cost of health care, they will have an effect on who pays, according to the report. In 2014, the study predicted, public funding of health care will be above 49%; it is currently at 46%.

Total health care spending is projected to be 18.7% of GDP in 2014, up from 15.3% in 2003.

Further strain on the nation’s health care system will be put in place by premium costs continuing to exceed personal income, according to the report. While premiums per enrollee will slow in growth to 7.7% in 2004 – down from 9.9% the previous year – premium growth will still exceed income growth by 1.4% over the next 10 years, according to the study.

One bright spot highlighted by the report was the decrease in prescription drug spending, which slowed from 14.9% growth in 2001-2002 to 10.7% growth in 2003. This is due to the now over-the-counter status of many drugs, the study says. However, the growth in costs is expected to rise in 2004 to 11.9%, the study found.

Overall, however, the outlook is not a positive one. “Health care spending in this country is simply out of control,” said Robert Hartwig, the chief economist at the Insurance Information Institute, in the press release.