Health Care Spending for U.S. May Double to $4 Trillion by 2015 Bloomberg.com ~ Feb 22, 2006 Feb. 22 (Bloomberg) -- U.S. spending for health care may double to $4 trillion by 2015, propelled by an aging population using more drugs, hospital care and technology, according to a government forecast. If medical spending rises that much, it will consume about 20 cents of every dollar in goods and services produced in the U.S, up from 16 cents last year, said authors of the outlook. The cost of health care will jump to twice its current amount even if more Americans can be encouraged to use health savings accounts, a new type of insurance being promoted by President George W. Bush to help curb spending. More than 3 million people in the U.S. have signed up for the health savings accounts, created by a law President Bush signed in 2003. In his State of the Union address last month, Bush pressed for wider use of HSAs, which allow consumers to use pretax income to pay for their medical expenses. Proponents say HSAs will slow the rise of health-care spending by encouraging consumers to shop for lower-cost medical care. The government report found that the savings from HSAs ``is likely to be far smaller than that seen from the massive shift toward managed care in the mid 1990s,'' said John Iglehart, the founding editor of Health Affairs, which is publishing the spending outlook on its Website today. By 2015 annual spending for hospital visits will almost double to $1.23 trillion, the cost of prescription drugs will double to $446 billion, and the nation's nursing home bill will climb 78 percent to $216.8 billion, according to the national outlook. `Can't Go On' The health-care spending outlook was compiled by researchers at the U.S. Centers for Medicare & Medicaid Services. The Medicare and Medicaid programs are the largest purchasers of health care in the U.S., paying for treatments for 90 million older, poor and disabled people, or about three in 10 Americans. ``Twenty percent of the nation's gross domestic product is not impossible for the economy to handle, but we know that it can't go on like this forever,'' said Mark Pauly, a professor of health-care systems at the University of Pennsylvania's Wharton Business School, in a telephone interview yesterday. ``And, we have not a clue to what could slow it down.'' HSAs are being promoted by the U.S. government and employers as one possible way to rein in costs. Under the rules governing HSAs, consumers can create tax-free savings accounts to pay for medical services in connection with participating insurance plans. Spending Less The law requires that individuals typically pay the first $1,100 of their health bills before insurance coverage takes effect. Families will pay about the first $2,200 of care. Money placed into the savings account can accrue interest. Unused funds can be invested, used later or even handed down to heirs. Al Meginnis, an addictions counselor who lives in Schaumburg, Illinois, has been using an HSA since last July. Meginnis, 55, said he is spending less on his medical bills and saving money for future costs since the non-profit group he works for switched its insurance plan to one that uses a health savings account. Meginnis's employer, Lutheran Social Services of Illinois, said its health costs last year were ``flat'' for the first time in six years. Health-insurance costs account for about 8 percent of its annual budget, Lutheran said. Meginnis said the HAS-type plan encourages him to reduce his medical expenses because unspent funds can be saved and invested in a mutual fund-like account. That's already encouraged him to be a smarter consumer, he said. In October, Meginnis asked his doctor to prescribe a generic version of a prescription painkiller that cost him $10 a month. The brand-name medicine his doctor had prescribed would have cost $50, he said. `Conscious of Costs' ``I was not as conscious of costs before,'' said Meginnis, who runs a residential treatment center. ` UnitedHealth Group Inc. of Minnetonka, Minnesota, which administers Lutheran's HSA, pays for preventive-care services for his diabetes, Meginnis said. The insurer also provided him a card, much like a credit-card account, to charge his medical expenses and track his savings and spending. Bush last month said he wants to increase the amount of money people can put into health savings accounts, thereby reducing their taxes more. The Bush administration said it expects this tax reduction to help increase the number of people using the insurance plans to 21 million by 2010. The current estimate under the existing law is that 14 million will sign up over the next four years. Managed Care The Medicare researchers in their forecast report said the health savings accounts will have a ``far smaller'' effect on health costs than did the shift to restrictive insurance plans, known as managed care, in the 1990s. Health costs rose slowly between 1993 and 2002, from 14 percent of gross domestic product to 15 percent, partly because of the increased use of health insurance programs that limited choices of doctors to an approved network, the researchers said. The U.S. government's new Medicare drug benefit, which started Jan. 1, is paying lower prices for drugs than anticipated, the researchers reported. The drug plans, administered by private health insurers, have been able to get bigger discounts from drugmakers, the Medicare researchers said. ``It doesn't mean drug spending won't continue to grow, but it has helped to temper that growth,'' said John Poisal, deputy director of the National Health Statistics Group at the Centers for Medicare & Medicaid Services and one of the report's authors. The only way to slow the rate of health-care spending would be to make ``difficult decisions'' about how much care consumers get, Wharton's Pauly said. ``People don't really want to hear that. They want to hear, `Here's a way to slow it down that won't hurt you a bit','' Pauly said. ``I don't believe there are such miracle pills.'' return to LRO HOME PAGE