The latest health spending numbers are out, covering the year 2007. What do they mean? Put it this way: The Times’ lede is that health costs grew at their slowest rate in nine years. But the bottom line is that these costs rose 6.1%, compared to a 4.1% increase in the Consumer Price Index (December 2007 – December 2006). While CPI is not a perfect analog for the entire economy (it specifically addresses consumer spending), that’s quite a story: Growing one-and-a-half times more than overall costs is the good news.
The overall rate of increase would have been much larger had it not been for a slowdown in pharmacy costs, which “only” rose by 4.9% (still ahead of the CPI). Why pharmacy? Report author Micah Hartman cited three reasons: increased use of generics, greater safety concerns, and an overall slowdown in drug price increases. (I wonder if benefit reductions – specifically, increased copays – also contributed to the slowdown.)
Physician reimbursements rose 5.9%. That’s down from 6.4% the year before, mostly because of Medicare reductions in imaging reimbursements. Still, I wonder what other segment of the workforce got an average 6% raise that year. (Granted, not all of that amount went directly to doctor compensation, but the topic of where that money went warrants further study.)
Hospital costs rose 7.3%, up from 6.9% in 2006. Heckuva job, precert and managed care. Unanswered questions: What was the mix of needed vs. unnecessary care reflected in these numbers?
Consumer spending increased 5.3%. Consumers didn’t pay for all of the increase in costs. In fact, their share grew more slowly than costs did overall. Still, cost-shifting is causing increased pain for insured Americans of all kinds.
And we haven’t even seen 2008’s numbers yet. That was the year inflation came to town …