Double digit US health care cost rise, but slowest for five years

Two studies concur that the increase in US health care costs in 2007 will be in the 11.0%-11.9% range. However, one of them says that the rise is the lowest since 2002, while the other notes that health insurance premiums may not increase at the same rate. The studies come at a time when annual US Medicaid spending has fallen, a unique event since the program's inception in 1965 (see page 14) and competitive pressures have kept the cost of the Medicare Part D prescription drug benefit well below initial expectation levels (see page 13).

Aon Consulting, the Chicago, Illinois-headquartered human capital consulting division of the Aon Corp, has issued its projections for the next 12 months, with the headline figure of 11% cost growth for health care as a whole. Bill Sharon, the study's director, said: "health care trends continue to move downward due to a number of factors. First, health care insurers are aggressively controlling hospital, physician and pharmacy price increases. Second, employers are introducing higher deductibles, coinsurance and co-pays, which have slowed down the utilization of health care services. Third, employers are implementing health promotion programs to improve employee lifestyles. Finally, employers and health care insurers are adding chronic management programs to more effectively manage the high cost of chronic conditions such as asthma, diabetes and coronary heart disease."

Mr Sharon pointed to consumer-driven health plans as a particular area of improvement. He said: "the CDH trend rate decrease has been particularly satisfying. After six years of CDH, there is now enough credible financial information about these plans to show they can be an effective approach to controlling health care costs."