Study: Slowing Health Cost Hikes a Silver Lining

But the study by the Center for Studying Health System Change in Washington, DC, found that costs are still ballooning at more than three times the rate of inflation. And premiums charged by health insurers climbed 15%, the biggest spike in at least a decade, the study found.

Hospital Spending Prompted by Rate Hikes

For the second year in a row, rises in hospital costs accounted for much of the inflation, accounting for 51% of the overall cost increase. In 2002, spending on inpatient hospital care grew by 6.8% and the costs of outpatient hospital care rose by 14.6%. Most of that rise is due to cost increases, not a surge in volume of patients, the report said. “Hospitals continue to use the formidable negotiating leverage they regained over health plans in the late 1990s to demand large payment rate increases,” according to the study’s authors.

But the researchers said that inpatient hospital spending grew by 0.3% less in 2002 than it did in 2001 while outpatient care costs went up 1.7% less in 2002 versus 2001. The 2002 numbers were the first cost decelerations for the hospital categories.

Meanwhile, prescription drug spending’s 13.2% increase in 2002 compared to a 13.8% advance in 2001 represented the third straight deceleration, according to the study. The slower growth is attributable in part to patent expirations that have allowed cheaper generic drugs on the market (See Drug Spending Lower in Q1 Than Previous Year ).

Spending on physician care jumped 6.5% in 2002, slightly less than the 2001 increase – the slowest growing health spending category.

The data is derived from samples from the Milliman USA health cost index, considered a bellwether of private health costs. A copy of the study is at http://www.healthaffairs.org/WebExclusives/Strunk_Web_Excl_061103.htm .