Tracking Health Care Costs: Spending Growth Slowdown Stalls in First Half of 2004

Publication Date: December 2004

Publisher: Center for Studying Health System Change

Author(s): Paul B. Ginsburg; Bradley C. Strunk

Research Area: Health

Type: Brief


The recent slowdown in health care spending growth stalled in the first half of 2004 as health care costs per privately insured American increased 7.5 percent--virtually the same rate of increase as in 2003. Private-sector spending on health care constitutes more than one-half of all health care spending, and both the private and public sectors are subject to similar cost pressures. Growth in spending on hospital inpatient care slowed to 5.1 percent in the first half of 2004, while the trend for outpatient spending held steady at 11.4 percent. With hospital utilization continuing to grow at a slow rate for the second year in a row, hospital price increases--7.7 percent in the first half of 2004--accounted for much of the hospital spending increase. Spending on prescription drugs increased 8.8 percent in the first half of 2004, similar to the increases in the first and second halves of 2003 and substantially below the peak increase of 19.5 percent in the second half of 1999. Health care costs likely will continue to grow faster than workers' income for the foreseeable future, leading to greater numbers of uninsured Americans and raising the stakes for policy makers to initiate effective cost-containment policies or accept the current trend of rapidly growing health care costs and gradually shrinking health coverage.