Medicare Compliance & Reimbursement

Reduced Rx spending wasn't the only factor playing 2004's declining health care spending growth rate

Prescription drug spending played an integral role in slowing down aggregate health care spending growth in 2004--but that's not the full story. The Centers for Medicare & Medicaid Services also attributes 2004's diminished spending growth to these key factors:

• Recent economic growth in 2004 offset the spending increase for health care in the nation's Gross Domestic Product, the report claims. Health care costs during 2004 accounted for 16 percent of the GNP--up 0.1 percentage point.

• Managed care restrictions dating back to the mid-to-late 1990s, coupled with the 1997 Balanced Budget Act, have suppressed hospital spending growth.

• Private spending growth slowed from 8.6 percent in 2003 to 7.6 percent growth in 2004.

• State-level prescription drug cost reduction efforts reduced Medicaid spending growth from 8.8 percent in 2003 to 7.9 percent in 2004. Medicaid spending accounted for 15 percent of aggregate spending in 2004.

• Out-of-pocket payments showed slower growth than private insurance premiums and aggregate health spending growth. Private health insurance premiums slowed from 11.5 percent in 2002 to 8.4 percent in 2004.