Health spending growth hits record low, HCFA says

Interim payment should slow growth even more

The Health Care Financing Administration has recently reported that health care spending increased by 4.4% in 1996, which turns out to be the lowest rate in 37 years. The report says public-sector health care spending growth also has slowed. Medicare outlays increased in 1996 by 8.1%, down from 10.6% in 1995. Changes being implemented through the Balanced Budget Act of 1997 should slow Medicare growth even further. The HCFA actuaries who wrote the report project that Medicare spending growth per enrollee should drop from the 1996 rate of 6.5% to 2.5% in 1998.

Total national health care spending topped the $1 trillion mark for the first time ever. National health expenditures in 1996 reached $1.04 trillion, up from $991.4 billion in 1995.

The study also shows taxpayers picking up more of the nation’s health care tab. The portion of health care paid for by government rose from 40% in 1989 to 47% in 1996. Between 1989 and 1996, public sector health spending increased an average of 9.7% per year, vs. 5.8% in the private sector. The disparity is due to increased Medicare enrollment, more Medicaid coverage, and slow growth in private-sector insurance premiums.

Employer-sponsored insurance premium growth reached a low of 3.6% in 1996. During the 1990s, employers have continued to shift a greater share of health insurance cost to employees, especially for coverage of dependents, including children. This shift took an additional $3.6 billion out of working Americans’ pockets in 1996, according to the study.

Medicare and Medicaid together financed $351 billion in health care services in 1996 — more than one-third of the nation’s total health care bill, and nearly three-fourths of public health care spending. Medicaid spending by the federal and state governments totaled $147.7 billion, providing coverage to 36.1 million low-income Americans. Medicare, the largest public health care payer, funded $203.1 billion in benefits for its 38.1 million aged and disabled enrollees.