Health care spending slows in most sectors, but government spending increases

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On The Beat Industry News In Brief

Health spending is growing slower than it has in 48 years, but whether health care reform will continue the trend is the subject of debate here and around the country.

Health spending grew 4.4 percent in 2008, according to an annual analysis of the entire health care sector by the federal Centers for Medicare and Medicaid Services. Spending grew 6 percent in 2007.

Health care spending totaled $2.3 billion in 2008, or one-sixth of the national economy.

The news is good, but everyone agrees more cuts are needed. Many critics of the health reform bills pending in Congress say they do too little to reduce health care costs in the future.

The bills would create an independent commission to suggest cost-saving measures Congress would have to approve or reject without making tweaks. They would create various pilot programs within the Medicare program to encourage cost-saving innovations by doctors and hospitals.

Those modest measures won’t fix out-of-control health care spending, acknowledged Eric Wright, director of the Center for Health Policy at IUPUI. But he said they are necessary first steps in a process he thinks will cut costs.

“It’s like navigating the rapids,” he said. “You can’t figure out where your next turn is going to be until you get around the first turn.”

Right now, the health burden is most acute for governments. The federal government spent a whopping 36 percent of tax receipts on health care in 2008—up from 21 percent during the previous recession in 2001.

By contrast, private-household spending on health care rose to 5.9 percent of income in 2008 from 5.3 percent in 2001. Businesses spent 7.9 percent of total payroll on health benefits in 2008, up from 7.5 percent in 2001.

In 2008, federal government spending on health care spiked 10.4 percent, compared with growth rates of 1.2 percent for private businesses and 4.3 percent for private households.

State and local governments are spending, on average, 24 percent of their budgets on health care. Their spending rose 3.4 percent in 2008.


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  1. The deductible is entirely paid by the POWER account. No one ever has to contribute more than $25/month into the POWER account and it is often less. The only cost not paid out of the POWER account is the ER copay ($8-25) for non-emergent use of the ER. And under HIP 2.0, if a member calls the toll-free, 24 hour nurse line, and the nurse tells them to go to the ER, the copay is waived. It's also waived if the member is admitted to the hospital. Honestly, although it is certainly not "free" - I think Indiana has created a decent plan for the currently uninsured. Also consider that if a member obtains preventive care, she can lower her monthly contribution for the next year. Non-profits may pay up to 75% of the contribution on behalf of the member, and the member's employer may pay up to 50% of the contribution.

  2. I wonder if the governor could multi-task and talk to CMS about helping Indiana get our state based exchange going so Hoosiers don't lose subsidy if the court decision holds. One option I've seen is for states to contract with healthcare.gov. Or maybe Indiana isn't really interested in healthcare insurance coverage for Hoosiers.

  3. So, how much did either of YOU contribute? HGH Thank you Mr. Ozdemir for your investments in this city and your contribution to the arts.

  4. So heres brilliant planning for you...build a $30 M sports complex with tax dollars, yet send all the hotel tax revenue to Carmel and Fishers. Westfield will unlikely never see a payback but the hotel "centers" of Carmel and Fishers will get rich. Lousy strategy Andy Cook!

  5. AlanB, this is how it works...A corporate welfare queen makes a tiny contribution to the arts and gets tons of positive media from outlets like the IBJ. In turn, they are more easily to get their 10s of millions of dollars of corporate welfare (ironically from the same people who are against welfare for humans).