HCFA predicts increased spending on physicians
HCFA predicts increased spending on physicians
Public sector growth to outweigh private dollars
Spending for health care in the United States will double over the next decade, reaching $2.1 trillion by 2007, according to Health Care Financing Administration estimates provided in a recently released study titled The Next Ten Years of Health Care Spending: What Does the Future Hold?
While medical bills have stayed relatively stable recently, health care costs should start rising more rapidly after this year as it becomes harder for managed care to squeeze more fat out of the system. In recent years, employers have switched to managed care, "scouting around for the most inexpensive plans they could find," says HCFA chief actuary Richard Foster. "This can only go so far."
However, when it comes to physician-specific spending, the study projects two trends could converge to direct more health care dollars to physicians. HCFA, for instance, predicts:
· more Medicare spending for physician services as beneficiaries switch to managed care, resulting in a substitution of physician services for hospital care;
· growth in private-sector spending on physicians, albeit at a slower rate than in the public sector, reflecting consumers' demand for specialists and a wider choice of out-of-network options.
Eighty-five percent of working Americans are already covered by managed care, so quick savings from switching plans are almost gone, Foster says. Also, HMOs until now have worked with very low profit margins - something that will have to change if they are to stay in business, he warns.
At the same time, federal officials and lawmakers are working to restrain Medicare and Medicaid spending, tightening payments to physicians and hospitals alike.
Among the specifics the study found:
· Health care spending will rise from $1.035 trillion in 1996 to $2.133 trillion in 2007. In 1996, consumers paid $552 billion through private insurance, out-of pocket payments, or other private sources, while Medicare, Medicaid, and other government programs shouldered $483 billion of the cost. By 2007, private sources will account for nearly $1.15 trillion and government will provide $987 billion.
· Spending per person will jump from $3,759 in 1996 to $7,100 in 2007.
· Hospitals will get a smaller share of the pie, accounting for 30% of health expenditures by 2007, compared with 35% in 1996, as the trend toward more outpatient care continues.
· One of the key driving forces behind the expected jump in health care spending is the fact that the cost of prescription drugs is projected to account for 8% of all medical costs by the year 2007, compared to 6% in 1996, says HCFA's study. Costs for prescription drugs are expected to increase from $62.2 billion in 1996 to $171.1 billion in 2007.
· Real per capita prescription drug spending is projected to increase 6.6% from 1996 to 1998, 6.2% from 1998 to 2001, and 5.6% from 2001 to 2007. In comparison, total real per capita national health spending is expected to only increase 2.6%, 3.1%, and 3.4% during the same periods respectively.
This trend is expected to increase pressure to further reduce the growth in Medicare spending "directly, by lowering payment updates during 1998-2002, and indirectly, through the impact of fee-for-service savings provisions, which interact with the managed care payment mechanism to reduce payment updates to plans," the study explains. In other words, expect to see reduced payments for Medicare fee-for-service reimbursement as well as managed Medicare fees.
Subscribe Now for Access
You have reached your article limit for the month. We hope you found our articles both enjoyable and insightful. For information on new subscriptions, product trials, alternative billing arrangements or group and site discounts please call 800-688-2421. We look forward to having you as a long-term member of the Relias Media community.