NCPA - National Center for Policy Analysis

Spiraling Cost Of Health Care

August 21, 2002

Insurers blame rising drug costs. Drug companies blame HMOs and hospitals. Doctors blame lawyers. And everyone, it seems, blames consumers for escalating health care costs.

  • Increases this year are averaging 13 percent and are expected to be more than that next year.
  • According to an organization backed by health insurers, spending on prescription drugs rose more than 17 percent in one year -- with drug manufacturers getting the blame.
  • According to the drug industry, however, insurers should be encouraging the use of drugs to keep people healthier -- and HMOs are in no position to complain, because they spend more money on administrative costs than on drugs, the industry charges.
  • Health insurance premiums rose an average of 11 percent last year and are expected to rise about 13 percent this year.

Many experts agree that consumers have become lazy health-care shoppers -- understanding that someone else will pay. This attitude has contributed to the cost spiral as those in the health-care business increase prices and fees to levels they think the market can bear.

Americans spent $1.3 trillion on health expenses in 2000. Medicare and Medicaid covered roughly 55 percent of those costs -- while private funds accounted for about 45 percent of payments.

To help control the cost spiral, employers are asking workers to pay a greater share of the costs. An Anderson survey of 460 companies found that more than 70 percent of them expect to make changes in their health benefits next year -- including reducing the level of benefits and increasing the amount employees pay toward premiums and deductibles.

Source: Julie Appleby, "Finger Pointers Can't Settle on Who's to Blame for Health Costs," USA Today, August 21, 2002.


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