Slower spending: Growth in national health care expenditures slows for third year

Physicians feel the impact of employer coverage cutbacks, Medicaid reimbursement reductions and a drop in Medicare pay for doctor-administered drugs.

By Doug Trapp, AMNews staff. Feb. 5, 2007.

The growth in national health expenditures decelerated for the third straight year in 2005, thanks largely to a clampdown on spending on brand-name prescription drugs.

Overall U.S. health spending increased by 6.9% in 2005, down from 7.2% in 2004, according to "National Health Spending in 2005: The Slowdown Continues," a report by the Centers for Medicare & Medicaid Services published in the January/February Health Affairs.

Spending on physicians and clinical services -- a measurement of revenue to doctors and clinics -- also saw its third consecutive year of slower growth. It increased 7% in 2005, down 0.4 percentage points from 2004. Doctors and clinic revenues accounted for slightly more than a fifth of the $1.99 trillion in U.S. health expenditures in 2005.

Private spending, Medicaid and Medicare all had a hand in the trend. Private insurance spending on doctors climbed by 6.9% in 2005, compared with 7.3% in 2004, according to Cathy Cowan, a CMS economist and one of the report's coauthors.

This could have been driven by a combination of fewer employees with health benefits, as well as insurance plans and employers offering less-generous coverage with higher co-payments and deductibles, Cowan said.

Medicare also contributed to the overall decline in physician spending growth, the report said. Doctors and clinics saw a 9.5% increase in Medicare spending in 2005 -- a drop from 10.4% in 2004. One factor was the Medicare Modernization Act. While boosting payments to doctors by 1.5% in 2005, it also restricted spending on physician-administered drugs. That was a big enough reduction to keep Medicare spending on doctors in check, according to the CMS Office of the Actuary.