Health Cost Hikes Continue Slowing

June 9, 2004 ( - The pace of health-care cost increases may have slowed in 2003 for the second year in a row, but that doesn't mean employers can scratch the issue off their pressing issues dance card just yet.

A report by the Center for Studying Health System Change (CHSC), a Washington D.C. public policy research group, said drivers for the trend were the fact that health services demand dropped as workers were forced to pick up more of the tab for their care and an ebbing of a surge in service delivery from a change in managed-care policies, the Associated Press reported.

Health care spending per privately insured person increased 7.4% last year, CHSC said, down from a 9.5% jump in 2002 and 10% leap in 2001. However, experts said costs are still running ahead of inflation and should still be a grave concern as more people can’t afford health care. “The bad news is this is still a high rate of increase and the fact that it is lower than last year doesn’t mean it has gotten easier to find affordable health care,” Paul Ginsburg, CHSC president said.

The employer to employee cost shifting was most prevalent in prescription drug plans, Ginsburg said. More health insurers are instituting three-tiered drug plans, which force employees to shell out more for brand-name drugs, making cheaper generic medicines ever more popular. That’s a major reason pharmaceutical spending was up 9.1% in 2003, down significantly from 2002’s 12.3% rise, the group said.

Leading the health-care cost hikes was spending on hospital outpatient centers, up 11%. A year earlier, spending in that sector increased 12.9%. Ginsburg said spending in such centers is growing because advances in technology allow more procedures to be conducted outside the hospital.

The 6.5% increase in spending on hospitals worried Ginsburg because it resulted from higher costs, not more utilization. In fact, utilization was up only 0.9% last year. Hospital prices for both inpatient and outpatient care increased 8% in 2003, compared with a 5.2% jump in 2002. Spending on physician care increased 5.1% in 2003, compared with a 6.5% increase in 2002. This was the slowest-growing category of health spending for the third year in a row.

The Center for Studying Health System Change study was done using data from the Milliman USA Health Cost Index, the Bureau of Labor Statistics, the Towers Perrin 2004 Health Care Cost Survey and the Ninth Annual National business group on Health/Watson Wyatt Survey.

A copy of the study is at . More information about the research is at .