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Decreasing Health Spending Return to Informing the Health Care Debate »
U.S. health care spending continues to rise rapidly and accounts for an increasing proportion of the gross domestic product. Trends affecting health care spending include price inflation, the number of mix of services used, increases in the population and the aging of the population; the obesity "epidemic," and new technology are significant contributors. Most health care bills are paid by "third party payers" (such as insurance companies, employers, and government programs), and so patients have little incentive to be discerning consumers who will demand high quality services at a lower cost and use less unnecessary care. Increased consumerism is also expected to encourage cost and quality competition among health care providers, resulting in lower prices for services. Drawing on publicly available data, RAND analysts have examined trends in health care spending and have also assessed how policy options such as high deductible health plans and increased cost sharing affect both costs and health outcomes.
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Health care spending is projected to grow at about 7% a year through 2017.
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By 2017, about twenty cents of every dollar spent in the US economy will be spent on health care.
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Over the last four decades, the proportion of health care spending has been shifting from out-of-pocket expenses to federal spending and private insurance, although the share of spending on different types of services hasn't changed substantially.
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People are living longer and are in better health but younger populations have high levels of chronic disease, suggesting that the health of the future elderly may be worse than the current elderly population and their health care costs higher.
To curtail spending, Congress is considering options that would encourage patients to become better consumers by shifting a greater share of health care costs to them. Two of these approaches include encouraging the use of high deductible health plans and increased cost sharing for services such as prescription drugs.
A high deductible health plan (HDHP) is a fee-for-service insurance plan with lower premiums and higher deductibles than a traditional health plan (usually $1,100 per year or more for single coverage; $2,200 or more for families). Such plans are designed to give consumers a financial incentive to make more careful health care choices.
RAND COMPARE: Overview of High Deductible Health Plans
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HDHPs will reduce use of health care services and costs.
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But early evidence suggests that HDHPs have mixed effects on quality of care.
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In addition, consumers responding to increased cost sharing reduce the use of both effective and less-effective care across the board.
To stem increases in prescription drug spending, pharmacy benefit managers and health plans are changing prescription drug benefits to steer patients toward less-expensive drugs or to require patients to assume a share of the costs, often by across-the-board increases in patient co-payments.
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For each 10 percent increase in cost sharing, prescription drug use decreases by 2 percent to 6 percent, depending on the class of drug and the health problem of the patient.
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Increased cost sharing for some prescription drugs may actually increase the use of health services.
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In some cases, reducing drug co-payments for sicker patients could save money by increasing their compliance with drug regimes which in turn contributes to avoiding costly emergency and hospital care.
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