Health care markets.

• Author: Seninger, Steve
• Position: Medical care spending in Montana

Health Care Costs

Increased spending on health care is determined by increased prices of health care, by growing population which leads to greater use of health care resources, and by more intense use of health care resources by current consumers. In 1996, national health care costs were over $1 trillion, accounting for 15 percent of U.S. gross domestic product.

The share of personal consumption devoted to medical care rose from 12 to 17 percent between 1980 and the mid-1990s - families absorbed 30 percent of this increase through direct out-of-pocket spending. Higher budgetary outlays by government [TABULAR DATA FOR TABLE I OMITTED] accounted for 40 percent and increased labor costs for businesses accounted for the remaining 30 percent. The large increase in health care costs during the last decade has been hidden in [TABULAR DATA FOR TABLE 2 OMITTED] increased taxes, lower wages, and higher prices for other goods.

Data from the Consumer Expenditure Survey (Census Bureau) show health care accounted for 5 percent of total household expenditures. Households used more than one-third (36 percent) of their health care spending for insurance; about one-fifth (21 percent) on hospitals and physicians; 11 percent went to prescription drugs; and payments to dentists, opticians, and other supportive health care providers accounted for the remaining 32 percent.

Health care spending in Montana was more than $2 billion in 1995, with about 38 percent of this total represented by federal government outlays. Higher health care spending was fueled by increased prices for hospital care (Table 1) and for physician and medical specialist services. Hospital rates in Montana increased by almost 45 percent from 1990 to 1995, a rate slightly below the national Hospital Consumer Price Index increase of 47 percent over the same period.

At the national level, doctors' fees and medical specialist/ technicians' prices increased by almost 41 percent, representing an annual average increase of 6.7 percent in medical services prices. Price inflation for prescription and non-prescription drugs, and for medical supplies, was 29 percent nationally, a rate somewhat lower than the other health care indexes. The national and Montana hospital price increases, along with the medical commodities and services indexes, were considerably above the overall increase in consumer prices for all items measured by the CPI which went up by 20.2 percent from 1990 to 1995.

Slightly lower...