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Health spending rises at blistering pace

Health spending rises at blistering pace

By Julie Appleby, USA TODAY

Within a decade $1 out of every $5 spent in the U.S. economy will go for health care, with annual spending consistently growing faster than the overall economy, the federal government said Tuesday.

Increased spending on hospital care, home health services, drugs and public health programs will help push total health care spending from its current 16.2% of the economy to 20% in 2015, the Centers for Medicare and Medicaid Services projects.

Economists differ on whether that is money well spent. But dollars spent on health care are not being spent in other sectors of the economy.

"In the near term, it's a plus ... a steady source of jobs and income," says Mark Zandi, chief economist at Moody's "In the longer term, it's an increasing amount of economic resources going to a part of the economy that may not enhance underlying productivity."

By comparison, all of manufacturing equals about 20% of the economy now, Zandi says.

Rising health care spending can also push more people into the ranks of the uninsured, says economist Paul Ginsburg of the Center for Studying Health System Change.

"The more expensive our system becomes the bigger the gap between the health care haves and have-nots," Ginsburg says.

And there are few cost-control measures likely to change that trend. Even health savings accounts, which President Bush has made the centerpiece of his health reform proposals in the budget, are not likely to make much of a dent. "The net impact (of the accounts and disease-management programs) on cost containment is likely to be far smaller than that seen from the massive shift toward managed care during the mid-1990s," the report says.

Findings in the annual report, published today on the website of the journal Health Affairs, include:

• The nation will spend $4 trillion on health care — or about $12,320 per person annually — by 2015.

• Hurricanes Rita and Katrina sharply increased government spending on public health. Federal public health program spending rose 24.3% to $11.3 billion in 2005, compared with 5.7% in 2004, with disaster relief the primary cause.

• The federal government's share of prescription drug spending will rise sharply, from 2% last year to 27% this year as the new Medicare drug program takes over payments from state Medicaid programs and from seniors who formerly bought their own.

• Private insurance premiums rose 6.8% in 2005, well below the most recent peak in 2002, when premiums shot up 11.5%. That slowdown is expected to end by 2007, when premiums will rise faster.