HCFA shares spending predictions

National spending on health care will rise 6.8% annually between 1997 and 2007, according to a recent report from the Health Care Finance Administration.

In "The Next Ten Years of Health Spending: What Does the Future Hold?" published in the September/October issue of Health Affairs, HCFA analysts projected that spending would reach $2.1 trillion in 2007.

Private health care spending will outpace public health care spending from 1998 to 2002 as a result of the Balanced Budget Act of 1997. Greater efficiency in the administration of Medicare programs will account for much of the initial decline in public spending, according to the report's authors; the Balanced Budget Act calls for tighter controls on waste, fraud and abuse, and proposes smaller payment hikes for providers.

From 2001 to 2007, average annual growth will even out, because some of the provisions are only one-time reductions.

Meanwhile, the analysts at HCFA expect faster growth in private spending because of the vigor of real per capita income. The acceleration should begin in 1998, creating an inversion of spending trends between 1993 to 1996, when the private sector's spending grew by 2.9% and the public sector's by 7.5%.

Where will the money be spent? Analysts say that will vary according to the type of service: Hospitals will continue to downsize so they will realize savings in labor compensation. As they do so, they will lag behind growth in drugs and increasing ambulatory care settings.

Spending on drugs will rise fairly rapidly through 2007, the report continues. More prescriptions are being written and there are more new, expensive drugs on the market. Utilization is up, as is prescribing intensity, including changes in size and mix of prescriptions. This growth will be greater than overall health care costs, as drug costs grow by about 6.6% and total health care costs grow by roughly 3%. PR