Studies blame increased consumer demand, rising wages for healthcare cost growth: provider-owned capacity expanding into profitable specialties spikes costs.(Healthcare Costs)

Publication: Medicine & Health

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COPYRIGHT 2005 Thomson Financial Inc.

Two new studies released Aug. 24 on the escalation of healthcare costs--one by the American Hospital Association and the other by the Center for Studying Health System Change--offer different views on the underlying causes. Both, however, point to supply and demand imbalances in different parts of the healthcare market as the chief culprit.

The AHA study, entitled "The Costs of Caring: Sources of Growth in Spending for Hospital Care," sees greater demand for hospital care, more complex treatments and a continued workforce as the major factors behind the growth in hospital care from 1998 to 2003. Representing over 15 percent of the Gross Domestic Product, healthcare is now the largest sector of the U.S. economy. Spending on health care has increased by 46 percent since 1998, climbing to $1.7 trillion in 2003. The Centers for Medicare & Medicaid Services projects that healthcare expenditures will increase to 18.7 percent of the GDP by 2014. Over the same time period, hospital spending will increase an average of 6.2 percent per year, CMS forecasted.

Hospital costs account for the largest share (32 percent) of the healthcare dollar. Although spending on hospital care has grown more slowly than other healthcare...

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