Trends in medical care cost--revisited

Market forces have had a greater influence on the health care sector than anticipated. The increased use of managed care, particularly HMOs, has been largely responsible for a sharp deceleration in the rise of medical care costs. After recording double-digit growth for much of the post-Medicare/Medicaid period, national health expenditures rose just 5.1 percent and 5.5 percent in 1994 and 1995, respectively. The medical care Consumer Price Index (CPI) rose 3.5 percent in 1996-just 0.5 percent above the overall CPI. The delivery and financing of health care continues to evolve within a framework of cost constraints. As such, mergers, acquisitions and provider alliance groups will remain an integral part of the health industry landscape. However, cost savings are likely to become more difficult to achieve, especially if the "quality of care" issue becomes more pronounced. National health expenditures, which surpassed the $1 trillion mark in 1996, are projected to rise to $1.4 trillion by the year 2000--representing a 7.2 percent growth rate from 1995. In any event, demographics and technological advances suggest that the health sector will demand a rising share of economic resources. The ratio of health care expenditures to gross domestic product is forecast to rise from 13.6 percent in 1995 to 15 percent by the year 2000.