- The Washington Times - Monday, June 20, 2005

Health care costs rose another 8 percent last year, signaling a near end of a two-year slowdown of spiraling health care costs, according to a study released today.

The increase once again was higher than the rate of inflation, surpassing it by 2.6 percentage points, according to the study by the Center for Studying Health System Change, a Washington health-policy research group that promotes health care reform.

The rise in health care costs was virtually unchanged from 2003, said the study, which was published in the online version of Health Affairs, a health-policy journal. The study based most of its findings on data from the Bureau of Labor Statistics, Milliman Inc. and Towers Perrin.

“I think little change does not sound like much of a story, but it’s actually not a good development,” said Bradley Strunk, health researcher for the center and co-author of the study.

After peaking in 2001 at 11.3 percent, health care costs slowed in their growth, increasing by 10.7 in 2002 and then 8.4 percent in 2003.

The health care cost increase stalled last year, rising 8.2 percent, instead of dramatically slipping as it had in the past, because the factors that had slowed health care spending had evaporated, Mr. Strunk said.

Less use of prescription drugs, doctor’s visits, and hospital services in 2003 offset the rising expenses that have come with more medical technology in the health care industry, he said.

But in 2004, physician spending hit a plateau instead of dropping, increasing by 6.4 percent, the same rate as in 2003.

Hospital costs for outpatient and inpatient services also rose near the same rate in 2004 as they did in 2003 instead of declining, the study said.

Prescription-drug spending slowed in its rise, to 7.2 percent, in 2004, compared with an 8.9 percent jump in 2003. But the 2004 decline in advancing prescription-drug costs was not as dramatic as in 2003, when health care increases fell from a surge of 13.1 percent in 2002.

The study forecasted health care spending would continue to increase close to last year’s rate for the next few years.

Companies and health care providers have responded to increasing health care costs by offering more consumer-driven health plans, incentives for doctors who are more efficient, and disease-management programs for employees with chronic illnesses.

“But the jury is still out on these tools. The big take-away for the moment is that there is no magic silver bullet to control health care costs,” Mr. Strunk said.

Pat Schoeni, executive director for the National Coalition on Health Care, said her biggest concern about the latest data was the fact that health care spending continued to surpass the inflation rate, which hit 5.6 percent last year.

“It’s not the fact that health care costs are going up, but the rate they are going up, that is alarming,” said Ms. Schoeni. Her group promotes universal health care coverage.

“If we had an 8 percent inflation rate, this 8 percent increase would not be so bad,” she said.

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