A Look at National Health Spending

Dr. Gianoli also pointed out that patients with a minimal $5 co-pay or even less for an office visit have no financial incentive to handle minor medical issues on their own. That creates virtually unlimited demand for physician services, leading to higher volumes of patient visits. As for the apparent increase of intensity of services rendered, he said that electronic medical records enable medical offices to automatically upcode, thereby taking advantage of higher reimbursement rates. The reality is that intensity is probably down because we can do less in a 10 minute than a 30 minute patient visit, he added. The system is so out of whack that physicians are not rewarded for performing optimal treatment (see box, left).

Good news for the US economy as a whole, prescription drug spending continued to decelerate in 2004, increasing only 8.2% versus 10.2% in 2003-the first single-digit growth in pharmacy spending in 10 years. A number of factors including rapid growth in prescribing lower-priced generic drugs, increased use of OTC anti-ulcerants and antihistamines, a move toward more mail order dispensing (up 13.6% versus 2% growth in retail pharmacy), and more refined tiered co-pay systems accounted for the slowdown.

Since Medicare and other insurance plans fix physician reimbursement, doctors can’t charge more money. And since there’s only so much time in a day, instead of seeing ten patients they’ll see twenty to maintain income levels. – Gerard Gianoli, MD

In addition, health plans increased incentives for consumers to use both generics and OTC drugs-lower co-pays for retail and mail order pharmacy, coupons, and not covering certain brand-name drugs. Physicians should weigh the impact of these measures on patients’ pocketbooks; generic co-pays, while smaller in absolute cost than those for brand name drugs, sometimes result in higher out-of-pocket costs. In contrast to an overall decrease in health spending growth, out-of-pocket drug spending outpaced private health insurance spending growth in 2003 and 2004 (9.4% and 7.1%, respectively.)

Institutions

Payments to home health agencies rose more rapidly than any other institutional category, 11.1% in 2003 and 13.3% in 2004, to $43.2 billion. Medicare spending for home care jumped 19.3% in 2004, impelled mostly by rapid growth of hospice care delivered at home.

Spending rose for hospitals at a higher rate than the overall 7.9% for all health-care spending. Hospital spending of $570.8 billion accounted for about one-third of total costs in 2004. It rose 9.5% for private insurers and 9.9 % for Medicaid. High compensation costs, fueled by higher wages for nurses and higher professional liability costs, were the key drivers of this uptick. Hospital volume was flat considering the growing US population, with growth in admissions and outpatient visits of only 1.2%, down from 2.4% between 2001 and 2003.