Health care spending slowdown may be over

NEW YORK — The slowdown in the growth of health care spending leveled off earlier this year after two years of declines, a new study found, with the cost of treating a privately insured American rising 7.5 percent in the first half of 2004 — virtually the same as the 7.6 increase in 2003.

Paul B. Ginsburg, co-author of the study, worries that the flat spot could be a pause before the rate of spending increases will once again start to grow as programs designed to contain costs are failing to have a significant impact. Even if the rate of increase doesn’t jump dramatically, he said, it is still at a dangerous level which outpaces inflation and could eventually lead to more employers dropping health coverage.

“We have leveled off at a place that is problematic,” said Ginsburg, president of the Center for Studying Health System Change, which conducted the study with the Employee Benefit Research Institute. “There is just not much optimism that we know how to control costs.”

Health care spending growth slowed in both 2002 and 2003 after reaching 10 percent in 2001. Ginsburg said the surge in 2001 was partially a reflection of the end of strident managed care policies which kept costs in check. Programs and policies that shift a greater burden of the health care costs to employees helped moderate spending growth in 2002 and 2003. But Ginsburg said cost shifting can only accomplish so much because employees will drop coverage if they can’t bear the expense.

Unlike other studies, this one measures what is paid to providers such as hospitals and doctors instead of health care premiums paid by employers to purchase coverage. Some studies measuring premiums have showed a continued decline in the growth rate.

For instance, a study released last month by Mercer Human Resource Consulting found that this year the average premium rose 7.5 percent, down from last year’s 10.1 percent increase. Employers expect premiums to rise 7 percent next year — if they make some changes in the plans they offer. If not, they anticipate a 10 percent increase.

Ginsburg and others noted it will be very difficult to keep premium increases down if spending continues to rise. Spending accounts for the greatest portion of the premium, which also includes payments for administrative services and a profit margin. Additionally, experts say too much of the slowdown in premiums are a result of demanding employees pay more for services through higher charges to see the doctor or purchase drugs.

“The problem is employers are addressing premium costs but we still need to address the underlying costs of health care delivery,” said Barry Barnett, a health care consultant at PricewaterhouseCoopers LLP.