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Health costs to continue rising

Within a decade, an aging America will be spending one of every five dollars on health care, according to government analysts who see no end to increases in the cost of going to the doctor and taking medicine.

The nation's health care bill by 2015: more than $4-trillion. Consumers will foot about half the bill, the government the rest.

Hospital costs will rise more quickly than previously anticipated, reflecting a construction boom for urban hospitals. Meanwhile, drug costs are expected to be lower, in part because of the new Medicare prescription drug program.

The projections, published in the journal Health Affairs, come as President Bush urges Americans to confront the rising cost of health care. In his State of the Union address last month, the president pushed health savings accounts and the high-deductible insurance plans that go with them. The administration predicts Americans would become more thrifty consumers if they had to pay more of the upfront costs, which occurs with health savings accounts.

"We don't expect HSAs to proliferate so dramatically that we would have an impact similar to that of the managed care era of the '90s," said John Poisal, deputy director of the Centers for Medicare and Medicaid Services' National Health Statistics Group. Then, health care flattened out at 13 percent of gross domestic product.

The report, written by analysts with the Centers for Medicare and Medicaid Services, attributes rising costs to the aging of the baby-boom population and the changing nature of health insurance.

They forecast a 7.2 percent annual increase in health care costs over the coming decade. That's in line with the 7.4 percent increase in 2005.

Still, the economy is projected to grow at a rate of 5.1 percent over the coming decade, which means health care will play an ever-growing role.

"These changes could force payers and providers to re-examine fundamental questions regarding the delivery and financing of health care services," the analysts said.

The analysts said the net effect of the new insurance plans being promoted by the administration is likely to be far smaller than that seen from the huge shift toward managed care during the mid 1990s.

Another trend within the new government projections is an ever-growing reliance on the government to foot the bill for health care. By the end of the next decade, the government will pay for about half of the nation's medical costs.

The most important factor in health care spending is income, the analysts said. As Americans make more money, they spend more to get healthy. People making $90,000 are more likely to visit a doctor and get their prescriptions filled than those who make $50,000, Poisal said.

Investment in research, equipment and people also drives the growth in health care spending, he said.

"It's consumption and investment," Poisal said. "But primarily it's about consumption."

Medicare spending will more than double, from $309-billion in 2004 to $792-billion, in 2015. Medicaid spending will grow from $293-billion to $670-billion during the same time span.