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Components of Health Spending Trends

By June 17, 2014Commentary

While health spending growth slowed over the last few years, it remains a concern and a subject of intense analysis.  Two studies published in Health Affairs attempt to look at factors related to the growth.  (HA Article)  (HA Article)  The first looks at the effect of age and gender.   Based on 2010 data, it finds that females, who are a little over half the population, account for 56% of spending or $7860 per capita, which is 25% than the comparable figure for males.  The oldest cohort of the population, 65 and older, spent $18,424 on average on health care, about three times more than the average for working adults and five times more than for children.  In terms of growth, spending on the elderly rose at the slowest rate, likely due to fiat reimbursement in Medicare, and spending on children the fastest.  Low spending growth for the elderly was largely due to reduced spending on nursing home facilities, partly offset by home health care spending increases.  While females had higher average spending, male health care costs have been rising faster, with one significant factor being an increased use of prescription drugs.

The second study attempted to ascertain the respective roles of disease incidence and treatment costs in health spending growth.  National survey data from the period from 1980 to 2006 was used for analysis of trends.  Broadly stated, the issue is whether more people are getting sick or at least being diagnosed as being sick or whether it is costing more on average to treat those who are sick.  Overall in this period, average real per capita spending rose 4.3%.  This study concludes that about 70% of the rise in health spending is due to the costs of treatment and only 30% to rising disease incidence.  The cost of treatment has risen due to more expensive drugs, diseases and procedures and because of ongoing increases in unit prices for health care services and products.  Somewhat surprisingly office visits for routine care were a significant contributor to treatments costs and while hospital use fell, hospital prices rose at a rate fast enough to far outweigh the decline in use.

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