Healthcare spending increased in 2001

March 1, 2003

Pharmaceutical Representative

Healthcare spending in the United States rose to $1.4 trillion in 2001 according to a report by CMS.

Healthcare spending in the United States rose to $1.4 trillion in 2001, an 8.7% increase from 2000, according to a report by the Centers for Medicare & Medicaid Services.

The 8.7% growth rate for 2001, following an increase of 7.4% in 2000 and 6.1% in 1999, marked the fifth consecutive year in which health spending grew at an accelerating rate. Health spending increased more than three times faster than the 2.6% nominal rate of growth in the economy in 2001. Healthcare spending averaged $5,035 per person in 2001, compared with $4,672 in 2000.

Hospital spending

An 8.3% rise in hospital spending accounted for 30% of the health spending increase in 2001. This was the first time since 1992 that hospitals' contribution to the annual rate of increase had been this significant.

Although hospital spending contributed the most, in absolute terms, to the overall health spending increase in 2001, prescription drug spending grew at the fastest rate of any spending category. However, that rate was slower than in previous years. In 1999, prescription drug spending grew by 19.7%, versus 16.4% in 2000 and 15.7% in 2001.

Medicare and Medicaid

Public spending, accounting for 45% of national health expenditures, increased 9.4% in 2001. This was the second consecutive year that public spending growth exceeded private spending growth. Much of the growth can be attributed to Medicare payment increases granted providers by the Balanced Budget Refinement Act of 1999 and the Medicare, Medicaid and SCHIP Benefits Improvement and Protection Act of 2000, as well as increased Medicaid spending.

Medicare spending growth accelerated 2.8 percentage points in 2001, to 7.8%. Medicare payments to hospitals, home health agencies and nursing homes were particularly affected by changes in public policy, and Medicare spending for these providers increased by 3.6% in 2000 and 8.6% in 2001, following a decline of 1.9% in 1999. Legislation added $7.5 billion to total Medicare spending in 2001, with $2.6 billion alone benefiting inpatient hospital spending.

Spending for Medicaid increased 10.8% in 2001, totaling $224.3 billion. This was the fastest growth rate since 1993. An 8.5% rise in Medicaid enrollment contributed to increased spending, with some enrollment growth related to the national recession, and some from separate program expansions for the uninsured.

Private health insurance premium growth accelerated in 2001 for the fourth consecutive year, with benefits growing more slowly than premiums in the last three years. Premiums rose 10.5% in 2001 to reach $496.1 billion, while benefits grew 10.1%. PR

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