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Nation's health spending rose 6.7% in 2006

The Baltimore Sun

WASHINGTON -- The nation's health care bill climbed above $2 trillion in 2006, averaging a record $7,026 per person, according to a government report released today.

The report is likely to intensify the presidential campaign debate over curbing costs and covering the nation's 47 million uninsured people.

Costs increased 6.7 percent over 2005, according to the report by Medicare's actuaries - only slightly higher than the 6.5 percent rate in 2005. But it was still well above the overall rate of inflation.

"Many people involved in health care will say, 'Hey, wait a minute, 6.7 percent ... things are moderating,' but for average people around the country, they don't see this as moderation," said Ron Pollack, executive director of Families USA, a liberal advocacy group that promotes coverage for all. "People just see that health care costs are rising faster than their wages."

Much of those costs are incurred by the sickest patients. For example, about 10 percent of the population accounts for more than 60 percent of health care costs.

Democratic and Republican presidential candidates agree on the need to curb costs, but there is little consensus on how.

Democrats generally favor giving government a stronger hand, for example, by negotiating drug prices under the Medicare prescription benefit.

Republicans divided

Republicans want to foster greater competition in the health-insurance market and are divided over the role of government. Yet that role is growing - and it doesn't seem to matter whether conservative Republicans or liberal Democrats are in charge.

In addition to assessing overall costs, the report provides a look at the first full year of the Medicare drug benefit - proposed by President Bush and passed by a GOP Congress - and it found that the federal share of prescription costs increased significantly, while the shares paid by states, private insurance and consumers shrank.

In 2005, Medicare paid just 2 percent of the total tab for prescriptions purchased at the retail level. That share grew to 18 percent in 2006.

"What we are seeing here is a blip on a path to the government being a larger and larger payer for health care and, in the long term, being the majority payer," said health economist Jack Rodgers of the consulting company PricewaterhouseCoopers.

Government role

Federal, state and local governments already pay 47 percent of the nation's health care costs through public programs. Under current policies, the government share would creep up to more than half by 2017.

The Democratic presidential candidates' plans to expand health care coverage would accelerate the tipping point to 2011, according to a PricewaterhouseCoopers analysis.

The report did not provide a final verdict on whether the Medicare prescription benefit is a good deal for taxpayers, a topic of intense debate among Democrats and Republicans, as well as for fiscal conservatives.

On the negative side, it found that the private insurance plans that provide the prescription benefit were not able to obtain discounts from drug manufacturers as deep as those that state governments got through their Medicaid programs.

About 6 million low-income elderly people and disabled Medicaid beneficiaries were transferred into the Medicare prescription program, which has a total of about 24 million enrollees.

Bigger discount

The private plans get discounts averaging 5 percent to 10 percent, Medicare officials said, compared with the 30 percent the state Medicaid programs got for low-income beneficiaries.

On the positive side, the report found that senior citizens who previously had to buy medications at list prices are now getting discounts. As a result of the new coverage, seniors are buying more prescription drugs, the report also found. In the long run, greater use of medications could reduce costly hospitalizations among those with chronic conditions such as heart disease and diabetes.

On the bigger problem of trying to curb overall costs, the leading Democratic candidates would launch an extensive research effort to identify the most cost-effective treatments with the aim of persuading doctors and hospitals to stop providing services of little or questionable value.

Republicans, meanwhile, want to cut down on malpractice litigation.

Ricardo Alonso-Zaldivar writes for the Los Angeles Times.

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