Tracking health care costs: continued stability but at high rates in 2005

Health care spending per privately insured person increased 7.4 percent in 2005, marking the third year that the cost trend hovered between 7 and 8 percent following double-digit trends in 2001 and 2002. Data for the first quarter of 2006 suggest continued stability. The trend for 2005 reflected increased growth in spending for hospital and physician care, offsetting a sharp drop in spending growth for prescription drugs. Hospital utilization trends accelerated, while price trends decelerated in 2005. In contrast to stable spending trends in 2005, premium trends continued to decline in 2006, likely reflecting the lagged effects of earlier years' slowing in cost trends and perhaps signaling a turn in the insurance underwriting cycle.