U.S. Health Spending Accounted For 16% Of GDP In 2004

Health care spending represented 16% of the U.S. economy in 2004, the highest share on record, according to an article by economists from the Centers for Medicare and Medicaid Services published in the January issue of Health Affairs. Growth in national health spending slowed to a rate of 7.9% in 2004, but reached a total of $1.87 trillion, or $6,280 per capita, the report said.

Researchers largely attributed the lower growth rate, down from 8.2% in 2003, to cost-saving efforts by employers and health plans, which included encouraging the use of generic drugs and mail-order services, as well as the introduction of higher co-payments. The figures showed, however, that outlays for doctors’ services and hospital care continued to increase at rates comparable to previous years.

Spending on prescription drugs rose 8.2% in 2004, compared with nearly double that rate five years ago, the article said. But because pharmaceutical expenditures made up just 11% of overall health care consumption, this reduction failed to prevent an increase in health expenditures that was well above the 2004 overall inflation rate of 2.7%.

The report also noted that, as health care became more expensive, employers appeared to be shifting a greater share of premium costs on to employees, with companies cutting their premium contributions for workers by 1.3% in 2004.