Milder health care spending cycle seen

This year’s national health spending projection is for growth of 6.8 percent in 2006 (yes, it’s a projection of something that has already occurred, a system that could work beautifully at the race track) and for average annual growth of 6.9 percent from 2006 through 2016. Spending on private health benefits will reflect this trend, from a peak of 9.5 percent in 2001 to a low of 4.7 percent in 2006. Net costs are expected to add one-tenth of one percentage point to this growth rate. A milder cycle is forecast for next time around, with growth rising to 7.1 percent by 2009 and then dropping to 6.1 percent by 2016, according to John Poisal, deputy director of the National Health Statistics Group and lead author of the study, which appeared in Health Affairs.

Private health insurance premiums will be affected by three factors: growth in medical spending per enrollee for all private payers; changes in the share of spending paid out of pocket by consumers; and variation in the net costs of private health insurance. Profit fluctuates during the cycle.

Excluding the effects of Medicare Part D, premiums per public and private enrollee are projected to have risen just 6.0 percent in 2006, down from 6.5 percent in 2005. Health insurance premiums are expected to follow a milder cycle over the coming decade than in previous decades.

After the storm, smooth sailing

The inception of Part D coverage in 2006 dramatically reshuffled the proportional shares of medical spending. Federal spending that year rose at a 12.7%, driven by a 22.7% Medicare increase, while consumer payments rose only at 3.6%. Medicaid spending moderated, as the dual eligible population moved into Part D. Barring major structural change to health care financing, the National Health Statistics Group expects the long term trend to be steady.

Actual and projected average annual percent growth in U.S. health expenditures, by type

Source: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group.

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