Health Care Costs Rise 7.5% in First Half of 2004

December 2, 2004 ( - Medical costs rose faster than worker income in the first half of 2004, according to a survey by the Center for Studying Health Systems Change and the Employee Benefit Research Institute.

Reuters reported that private-sector spending on health care rose 7.5% in the first half of 2004, equaling the growth rate seen last year in the same time frame. This significantly outpaces the growth seen in the economy as a whole.

History shows that when medical costs – those made up of prescription drug, hospital and doctor costs – grow much faster than the economy, more people are left uninsured, according to Reuters. Although 44 million Americans are already without insurance, the number is still set to grow.

This 7.5% figure, surprisingly, is still lower than the 2002 total, when 10% cost increases were noted. However, as recently as 1998, the cost increase was only 4.6%. The number seems to have leveled off at a fairly high rate, according to the study.

For consumers on private insurance, the situation is just as bad, Reuters reports. Since underlying health costs determine the premiums paid for insurance, large increases are most likely to continue.

Breaking down the 7.5% total, hospital prices rose by 7.7% in the first half of the year. Reuters reports that this is most likely due to a nursing shortage that is forcing hospitals to pay more to keep nurses on. Although prescription drug prices are often blamed for the overall increase in the cost of health care, the survey actually states that the drug cost increase tempered the overall number. The total increase for drugs was 8.8%, which was down from the 9.6% rise seen in the second half of last year. Patent expirations account for much of this decrease, Reuters is reports.

The data for the survey was collected from the Milliman Health Cost Index, which is designed to reflect claims experienced by private insurers in a typical insurance policy.