U.S. health-care costs grow 8 percent

WASHINGTON — Rising health-care costs, already threatening many basic industries, now consume 16 percent of the nation's economic output — the highest proportion ever, the government said Monday in its latest calculation.

The nation's health-care bill continued to grow substantially faster than inflation and wages, increasing by almost 8 percent in 2004.

Spending for physicians and hospitals shot up considerably faster than in recent years, while drug costs grew at a slower rate than over the past decade.

Even as health-care costs continue to escalate, however, many Americans — especially minorities and the poor — don't get high-quality care, according to two other federal reports Monday. Health-care quality is improving slowly and some racial disparities are narrowing, the reports found, but gaps persist and Hispanics appear to be falling even farther behind.

"We can do better," said Health and Human Services Secretary Mike Leavitt at a Washington conference on racial and ethnic disparities in health. "Disparities and inequities still exist. Outcomes vary. Treatments are not received equally."

Political, medical and economic leaders and experts have long warned that health-care cost trends will gradually overwhelm the economy, and many companies now complain that employee and retiree health costs are making them less competitive. Monday's report added new reasons to worry.

The overall cost of health care — everything from hospital and doctor bills to the cost of pharmaceuticals, medical equipment, insurance, and nursing home and home-health care — doubled from 1993 to 2004, said the report from the Center for Medicare and Medicaid Services. In 2004, the nation spent almost $140 billion more for health care than the year before.

The health-care increase of 7.9 percent in 2004 was almost three times greater than the overall national inflation rate, which was 2.7 percent. The average hourly wage for workers in private companies was essentially unchanged that year, according to the U.S. Department of Labor.

The best news involved spending on prescription drugs, which increased by less than 10 percent for the first time in more than a decade.

Cynthia Smith of the Centers for Medicare and Medicaid Services, lead author of the health spending report, attributed the slower increase in drug spending to greater use of generic drugs and mail-order pharmacies, a slowdown in the introduction of costly new medications and the impact of higher drug co-pays.