February 22, 2006

1 in 5 US dollars to be spent on health care: study

WASHINGTON (Reuters) - Health-care spending is outpacing
the growth of the American economy and will consume 20 percent
of U.S. gross domestic product by 2015, the U.S. Centers for
Medicare and Medicaid Services (CMS) said on Wednesday.

By comparison, health-care spending accounted for about 16
percent of U.S. GDP in 2004, the latest year for which data are
available, according to a study by CMS economists published in
the journal Health Affairs.

National health care spending will grow by an average 7.2
percent annually over the coming decade, the study said. That
would be slower than in recent years but still 2.1 percent
faster than GDP growth, it said.

Recent annual growth in American health care spending
peaked at 9.1 percent in 2002.

U.S. spending on prescription drugs was forecast to soar to
$446 billion in 2015, up from $188 billion in 2004, according
to the study, which is issued annually. However, the average
annual spending rise for prescription drugs over the coming
decade was seen at 8.2 percent, lower than the projection made
in last year's report due to the government's new Medicare Part
D prescription drug program.

The Medicare Part D prescription drug benefit began last
month as a way to help as many as 42 million elderly and
disabled Americans pay drug costs.

"The prescription drug plans were able to negotiate
discounts and rebates that came in larger than we thought, and
this has helped mitigate what drug spending would have been,"
said John Poisal, deputy director of the CMS' health statistics
group. "It doesn't mean drug spending won't continue to grow,
but it has helped to temper that growth."

The Pharmaceutical Care Management Association, a trade
group representing pharmacy benefit managers, said the report
showed "deeper-than-expected discounts" in both Medicare Part D
drugs and overall prescription drugs.

Pharmacy benefit managers administer mail-order and other
kinds of prescription drug plans for health insurance programs.

The study also forecast the following for specific areas of
health care:

* Medicare spending was forecast to spike by 25 percent in
2006 due to the new prescription drug benefit, then average 7.5
percent growth between 2008 and 2015.

* Medicaid spending was forecast to average 8.6 percent
growth annually from 2008 through 2015 when spending reaches
$670 billion. Medicaid is a joint federal-state program for
poor Americans.

* Private health insurance premiums slowed for a third
consecutive year and grew by 6.8 percent in 2005. However, an
upturn in the underwriting cycle in 2007 means that premiums
will grow by a forecast 8.3 percent in 2009.

* Out-of-pocket spending was predicted to decline by 1
percent in 2006 after remaining stable at 5.6 percent growth in
2005. Consumers are expected to spend $421 billion out of
pocket on health care by 2015, up from $248.8 billion in 2005.

The CMS report, "Health Spending Projections through 2015,"
was published on the Internet at
tsProjected.asp .