Rise in health spending eases in US, not state

Growth in healthcare spending is cooling off nationwide, even as health plan members in Massachusetts are getting used to premiums that are about 10 percent higher in 2007.

The latest survey of national healthcare spending by the federal government found that the rate of growth declined to 6.9 percent in 2005, compared with 7.2 percent in 2004 and 8.6 percent in 2003.

Over the same three years, the amount of the nation's gross output that is spent on healthcare has leveled off at about 16 percent, according to the report by the Centers for Medicare and Medicaid Services, or CMS , which is published today in the journal Health Affairs. That shows that the nation's output and its spending on healthcare are growing at roughly the same rate.

"To have a slowdown for three straight years is pretty significant," said Cathy Cowan , an economist who coauthored the study. She said the "convergence" of the rates of growth of gross domestic product and healthcare spending "means that healthcare costs are not consuming more of the economy."

Still, not everyone was impressed by the statistics, which are the most recent available from the federal government.

"It's a good sign it's moving in the right direction, but it's still growing at more than double the rate of the economy," said Michael Doonan , executive director of the Massachusetts Health Policy Forum. "It's also not keeping anywhere close to wage increases, and it's building off a large base. This will translate into higher premiums for healthcare coverage."

Slowing increases in prescription drug spending were the biggest factor in the smaller increases in healthcare spending in 2005, according to the government study. Prescription drug spending grew only 5.8 percent in 2005, compared with 18.2 percent in 1999.

Health insurers have slowed the growth in drug spending by introducing tiered plans in which patients pay higher co-payments for name-brand drugs compared with generic drugs. Other efforts emphasize use of cheaper drugs before patients migrate to higher-cost drugs, and slower increases in drug spending among Medicaid patients, who are poor and disabled.

But a November report from the Massachusetts Division of Health Care Finance and Policy underscored the disparity between the slowdown in national healthcare spending increases and the rate of growth in the Bay State.

Health spending in Massachusetts between 2000 and 2004 increased at 8.5 percent, compared to average annual increases of 5.7 percent between 1990 and 2000. In Massachusetts, healthcare spending for each resident was $7,075 in 2004, compared with the $5,313 spent nationally.

Massachusetts healthcare insurance premiums have also increased more quickly than the national average, averaging more than 10 percent for the past seven years, and doubling the amount most workers pay for healthcare coverage.

"In Massachusetts, we have not shifted the healthcare costs to employees the way they have in the rest of the country," said Wendy Everett , president of the New England Healthcare Institute , a local think tank. "That is a way to control medical costs."

Jeffrey Krasner can be reached at krasner@globe.com.