Trends in medical care costs--evolving market forces

Slower growth in medical care costs has been the culmination of lower inflation and significant changes to the U.S. health care system, primarily the movement toward managed care. National health expenditures rose just 4.4 percent in 1996 - the smallest growth since the beginning of the national health expenditure data series. This is also true for the 35 percent gain recorded during 1992-96. The medical care Consumer Price Index (CPI) rose just 2.8 percent in 1997 and was only one-half of a percentage point above the overall CPI. The reduction in spending growth is most evident in hospital expenditures, which clearly reflects the expansion of HMO enrollment in both the private and public sectors. While the issue of quality of care is receiving more attention, this is unlikely to alter the basic direction of health care in the near-term. Cost is likely to remain a dominant factor in shaping the market forces that have significantly changed the delivery and financing of health care. Although trending upward, growth in medical spending is expected to remain relatively moderate as we move into the next century.