The new CMS data confirm that rising health care costs are driven by increases in underlying medical costs, not health plan administrative costs.
Washington, DC (Vocus) February 5, 2010
Karen Ignagni, President and CEO of America's Health Insurance Plans (AHIP), released the following statement today in response to new health spending projections released by CMS which found that health care’s share of the economy grew 1.1 percentage points in 2009 – the largest one-year increase in GDP share since the federal government began keeping track in 1960:
“Rising health care costs are crushing our economy and adding a burden on working families and employers across the country. The new CMS data confirm that rising health care costs are driven by increases in underlying medical costs, not health plan administrative costs. In fact, the proportion of health insurance premiums that go towards administrative costs is declining as overall health care costs continue to soar. Without a national, long-term strategy to address the rapid growth in underlying medical costs, health care spending will continue to grow far faster than the economy as a whole, crowding out other important domestic priorities, such as education, energy, and deficit reduction."
The report, published today in Health Affairs, notes that the “two primary drivers of growth…are medical prices and utilization”, which saw a projected increase in spending by 3.2 percent and 1.5 percent in 2009, respectively. Other key findings include:
- “Hospital spending growth is projected to have accelerated from 4.5 percent in 2008 to 5.9 percent in 2009, as spending reached $760.6 billion.”
- “Spending growth for physician and clinical services is expected to have accelerated to 6.3 percent in 2009, up from 5.0 percent in 2008, with expenditures having reached $527.6 billion.”
- “Prescription drug spending is expected to have grown 5.2 percent in 2009, an acceleration of 2.0 percentage points from 2008, and to have reached $246.3 billion.”
This is consistent with national data and information received from health plans showing that health care costs are expected to increase even further due to the underlying growth in the cost of health care services.
To read the full report in Health Affairs, please click here.