Officials from the Centers for Medicare and Medicaid Services (CMS) reported that health care spending growth in the United States slowed for the third consecutive year in 2005, increasing 6.9% compared with 7.2% growth in 2004 and 8.1% in 2003.
The 6.9% growth in 2005 marks the slowest rate of growth in health spending since 1999, when growth was 6.2%. Health care spending reached almost $2 trillion in 2005, or $6,697 per person, up from $6,322 per person in 2004.
Growth in retail prescription drug sales decelerated for the sixth consecutive year, increasing just 5.8% in 2005, following 8.6% growth in 2004. This slowdown was primarily due to a dramatic decrease in Medicaid prescription drug spending, along with increased use of generic drugs.
Spending for hospital care accounted for the largest share of overall health care in 2005, reaching $611.6 billion, with growth stable at 7.9% in both 2004 and 2005.
Spending for physician and clinical services reached $421.2 billion in 2005, an increase of 7% during 2004. Payments by public sources for physician services, including Medicare and Medicaid, grew more slowly in 2005.
Most significantly, Medicaid cost-containment efforts, such as reduced or frozen payments to physicians, contributed to the slowdown. Medicare growth for physician services was 9.5% in 2005 (slightly slower than the 10.4% growth in 2004) and reflects continued increases in the volume and intensity of services.
Expenditures for freestanding home health care agencies, although a small share of total health spending (only 2.4%), grew the fastest among all services in 2005, increasing 11.1% to $47.5 billion. This is the third straight year of double-digit growth.
Growth in freestanding nursing home expenditures increased 6% in 2005, following growth of 4.1% in 2004, to $121.9 billion.
Medicare spending increased 9.3% to $342 billion in 2005, following growth of 10.3% in 2004. Although growth remained strong, the deceleration was driven by slower growth in spending for hospital care, physician and clinical services, and nursing home and home health care.
Medicare spending for prescription drugs increased 19.7% in 2005, and although it outpaced overall Medicare growth, it represented only a 1.2% share of total Medicare spending and does not include expenditures associated with the full Part D prescription drug benefit, which did not begin until Jan. 1, 2006.
Medicaid spending growth continued the deceleration that began in 2002, increasing 7.2% to $311 billion in 2005, compared with 7.5% in 2004.
For the $1,085 billion spent by private payers in 2005, private health insurance contributed $694.4 billion (64%), out-of-pocket payments contributed $249.4 billion (23%), and other private funds made up the remaining $141.2 billion (13%).
Growth in private health insurance premiums slowed from 7.9% in 2004 to 6.6% in 2005. This was the third straight year of slowing premium growth from a peak of 10.5% in 2002. Employer-sponsored private health insurance accounted for 94% of total premiums in 2005, with the employer share growing slightly to 74.4% and the employee share dropping slightly to 25.6%. However, employees are paying more through mechanisms such as higher coinsurance, more deductibles, and changes in coverage criteria.
