WASHINGTON-After five years of near-stability in health-care spending, economists are sniffing a new climb.
A study by HCFA actuaries says that national health spending will rise from just over $1 trillion in 1996 to $2.1 trillion in 2007. That’s a three percentage point jump in the gross domestic product, to 16.6%.
But HCFA economist Sheila Smith says the inflation shouldn’t approach the double-digit annual rises of the 1970s and ‘80s. And in a shift from the past, the rise will be driven almost entirely by private-sector growth.
Medicare costs are being held down by 1997’s balanced-budget legislation, which expanded prospective payment to new sectors and cut HMO payments, Smith wrote in Health Affairs. Because 85% of the privately insured market is now in managed care, the one-time savings by the shift from fee-for-service may already have accrued, she says.
Spending on physician services is expected to more than double, from $202.1 billion in 1996 to $427.3 billion in 2007. Of this, Medicare physician spending will creep from an annual growth rate of 8.6% between 1994 and 1996 to 8.9% between 1997 and 1999, as patients choose managed-care plans that substitute physician services for hospitals’.
Private-sector physician spending will accelerate more quickly, rising from 1.6% per year from 1994 to 1996, to 4.7% from 1997 to 1999. This will be driven in part by consumers’ demand for access to specialists. But the increase won’t necessarily translate into higher incomes for doctors, says Smith, because of a projected oversupply.
Neither public nor private payers are likely to slash physician payment rates, says Tulane economist Ken Thorpe. “They’ve already been cut close to the bone,” he says. -Christina Kent
WASHINGTON-After five years of near-stability in health-care spending, economists are sniffing a new climb.
