Health spending outlay tops $2 trillion, but spending growth on doctors declines

The pace of national health spending remained nearly steady, but higher increases may be on the horizon.

By Doug Trapp, AMNews staff. Jan. 28, 2008.

Washington -- While the national health spending growth rate increased slightly in 2006, the percentage rise in expenditures on physician services slowed markedly, due largely to a small Medicare pay increase and its private-sector fallout, according to a new report by the Centers for Medicare & Medicaid Services.

At the same time, the start of Medicare Part D had a major impact in the prescription drug sector.

Overall national health spending reached $2.1 trillion, up 6.7% from $1.97 trillion in 2005, states the CMS report, published in the January/February Health Affairs. The 2005 growth rate was 6.5%.

This moderate increase was possible because of a broad-based slowdown in spending growth in many categories, including physicians and clinical services. These expenditures increased by 5.9% in 2006, down from 7.4% in 2005, found the report, "National Health Spending in 2006: A Year of Change for Prescription Drugs." For the first time since 1999, physician spending increased more slowly than the gross domestic product.

The small size of Medicare's physician payment update in 2006 played a role in the decelerating physician spending, said Cathy Cowan, a CMS economist and one of the report's co-authors. "[Physician and clinical] price growth slowed significantly, in part, due to the Medicare payment update, which was 0.2%, and the impact of private payers somewhat following Medicare's lead," Cowan said.

Private health plan expenditures on physicians and clinical services -- which account for two-thirds of such outlays -- increased 6.1% in 2006, compared with 8.3% in 2005. Medicare spending on physicians and clinical services, which is 21% of such expenditures, grew by 6.6% in 2006, down slightly from 6.8% in 2005.