Health costs up 7.5%

Costs rose faster than worker income Health insurance may be out of reach for more Americans as medical costs rose faster than worker income in the first half of the year, according to a closely watched survey released Thursday. Private-sector spending on health care climbed 7.5 percent in the first half of 2004, which matched the 2003 growth rate but still significantly outpaced growth in the overall economy, according to a study by the Center for Studying Health System Change and the Employee Benefit Research Institute.

Historically High The 7.5 percent growth rate is historically high. Health care spending rose at just 4.6 percent as recently as For consumers on private insurance, the situation is equally dire. Underlying health care costs determine insurance premium increases, which have risen at double-digit rates in recent years.

Possible Culprits Hospital prices, which rose 7.7 percent in the first half of the year, are a key culprit in the cost explosion, the study said. A nursing shortage is fueling that trend as hospitals need to spend more to keep or lure nurses. Although prescription drugs get much of the blame for soaring health care costs, a slowdown in the growth of prescription drug prices actually tempered the overall growth effect. Spending on prescription drugs grew 8.8 percent in the first half of the year, down from 9.6 percent in the second half of last year. Patent expirations of major drugs that allowed cheaper generics to flood the market helped ease those costs.