Health Care Costs To Keep Rising

Feb 21, 2007 7:45 pm US/Central

Economists Say Health Care Will Account For $1 Of Every $5 Spent In U.S. By 2016

(CBS News)WASHINGTON Health care is expected to account for $1 of every $5 spent in the United States in another decade.

That means a rise in out-of-pocket expenses, such as the co-pays for medicine, from about $850 this year to about $1,400 in 2016, a 5.3 percent annual increase.

The cost of health insurance is projected to rise even more quickly during that same time — 6.4 percent annually.

Over the coming decade, spending on health care will continue to outpace the overall economy. By the year 2016, it will total close to $4 trillion, economists at the Centers for Medicare and Medicaid Services said in a report being released Wednesday.

Today, the number is closer to $1 out of every $6, or $2 trillion.

"It's our expectation that by the year 2016, the end of our projection period, that health care costs, which currently consume about 16 percent of the total economy's expenditures, or GDP, by 2016 will consume about 20 percent of GDP," John Poisal, deputy director of the government's National Health Statistics Group, which did the study, told CBS Radio News.

Officials are worried by the news, reports CBS News national correspondent Byron Pitts.

"This report is cause for concern," says Herb Kuhn of the Centers for Medicare and Medicaid Services. "Health care costs are going up much faster than general inflation."

Consumers are spending more on the latest treatments, despite their rising costs. For example, federal officials cite a significant increase in the use of imaging to detect blockages or other diseases.

Income will also play a significant role in the greater health spending. Historically, when income rises 1 percent, health expenditures go up about 1.5 percent, officials said.

"What that indicates is a desire to purchase good health," Poisal said.

Health and Human Services Secretary Mike Leavitt has spent recent weeks traveling throughout the country, urging consumers and caregivers to give greater consideration to the price of various health procedures.

"People who have health insurance often don't care about price. People who don't have health care insurance can't find out the price even if they ask," he said in Detroit. "Medical pricing is a mystery to everybody."

The administration is pushing government agencies, insurers and health care providers to make information available that would help consumers become good shoppers. For example, Medicare lists the percentage of pneumonia patients at various hospitals who received a timely antibiotic, which is an indicator of the quality of care.

"We hope this information will help inform the discussions that go on at several different levels," Poisal said, "including those in Congress and other policy makers, other researchers and certainly the public needs to be informed of these things so that collectively we can make decisions about how to best proceed."

The economists said their study doesn't determine how much the rising costs will affect the average family in the U.S. There are too many factors involved, particularly when the federal government accounts for about half of overall health spending through programs such as Medicare, Medicaid and the Department of Veterans Affairs.

The economists also predict that government programs will gradually replace employers when it comes to providing health insurance for millions of Americans.

"We are moving incrementally away from traditional sources of insurance, such as employer-based coverage, to a system comprising more federal and state government-provided health care," said the economists, whose report will be published in the journal Health Affairs.

(© 2007 CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report. )