Health costs might double

WASHINGTON - Americans are likely to spend nearly twice as much on health care a decade from now, and the costs will shift from private insurance to Medicare as the baby boomer generation ages, federal analysts reported today.

The report by the Centers for Medicare and Medicaid Services (CMS) predicts that health care spending will increase from just under one-sixth of the nation's economy last year to just over one-fifth by 2017. The report was published in today's Web edition of the journal Health Affairs.

The nation's health care spending is expected to grow an average of 6.7 percent annually, from a total of $2.2 trillion last year to $4.3 trillion in 2017. That growth rate is expected to outpace the nation's economy by nearly 2 percent a year.

This trend means that "policymakers, insurers, and the public collectively face some difficult decisions about the way health care is delivered and paid for," said Sean Keehan, an economist with CMS and one of the report's authors.

The largest factors causing the growth in health care spending are expected to be higher prices for medical services and the increased use of medical care.

Although the aging of the baby boom generation will not have much effect on the total amount spent for health care, it will cause a significant shift in who pays the bills.

Consumers are expected to pay a slightly smaller share of total health care costs out of their own pockets, while the share paid by private and public insurance will increase. And those insured costs will shift from private, employer-based insurance coverage to public Medicare coverage.

The report said prescription drug spending per person is expected to more than double from $761 last year to $1,537 by 2016.

Likewise, the big shift will be from private to public insurance coverage.

Individuals will continue paying for about 18 percent of drug costs, but the share covered by private insurance is expected to decline from about 41 percent to 33 percent, while the share covered by the public program jumps from about 40 percent to 49 percent.

Kerry Weems, CMS' acting administrator, said the projection "reminds us that we need to accelerate our efforts to improve our health care delivery system to make sure that Medicare and Medicaid are sustainable for future generations of beneficiaries and taxpayers."

Spending on Medicare, the federal health care program for the elderly and disabled, will more than double, the report predicts, from $427 billion last year to $884 billion by 2017, when it will account for more than one-fifth of all health care spending in the United States.

On an annual basis, the growth in Medicare spending is expected to increase from about 6.5 percent last year to about 8 percent by 2017 because of the increased number of baby boomers receiving benefits.

In his budget for next year, President Bush recommended slowing the yearly growth of Medicare from about 7 percent to about 5 percent. The slowdown would occur primarily by freezing reimbursement rates for the next three years to scores of health care providers, such as hospitals, nursing homes and home health centers.

Bush also proposed requiring wealthier Medicare beneficiaries to pay higher monthly premiums when participating in Medicare's prescription drug coverage plan.

Those recommendations would reduce spending by nearly $178 billion over five years, but have little chance of passage in Congress.

Health and Human Services Secretary Michael O. Leavitt has acknowledged the unpopularity of the recommendations, but he said politicians must make some hard decisions. The longer lawmakers wait, the more difficult the decisions will be.

"Medicare, on its current course, is not sustainable," Leavitt has testified.

Spending on Medicaid, the federal-state health care program for the poor, is expected to grow even faster than Medicare, more than doubling from $338 billion last year to more than $717 billion by 2017, when it will account for one-sixth of the nation's health care spending.

Government economists say it's hardly a new trend that the health care sector will grow more quickly than the overall economy. Over the past 30 years, health spending has exceeded growth in the gross domestic product by about 2.7 percentage points each year. Over the coming decade, that difference is expected to narrow slightly.

Still, the continued gap is worrisome, Weems said. He added that consumers, particularly businesses, need more information about the quality and cost of care.

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