NCPA - National Center for Policy Analysis

Will Rising Health Costs Force Consumers Into Cheaper Insurance Plans?

March 12, 2001

A government report speculates that people will respond to escalating health-care costs by opting for cheaper and more restrictive insurance plans -- a choice many have so far shunned. The run-up in costs is largely due to increased spending for prescription drugs, the Health Care Financing Administration says.

  • Americans spent $1.2 trillion on health care in 1999 -- 5.6 percent more than the previous year.
  • The spending, which includes both the public and private sector -- and everything from doctors' visits to hospital construction -- rose an estimated 8.3 percent in 2000 and is projected to increase 8.6 percent this year.
  • Such increases represent a significant jump from the 1990s, when annual increases hovered around 6 percent -- but aren't expected to reach the double-digit annual growth rates of the 1980s.
  • In 1999, spending on prescription drugs jumped 17 percent -- to $100 billion.

During the next four years, drug costs are expected to rise around 15 percent annually.

Source: Jill Carroll, "Health Spending Speeds Up on Costs of Prescribed Drugs," Wall Street Journal, March 12, 2001; ; Stephen Heffler et al., "Trends: Health Spending Growth Up In 1999; Faster Growth Expected In The Future," Health Affairs, March/April 2001.

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