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|  | DECEMBER 30, 2003
Health-Care Hikes: Slowing, Sort Of While industry experts predict smaller cost increases for 2004, they'll still be rising at double-digit rates The health-care industry has been down so long it must look like up. How else to explain the "good news" that virtually every industry expert is touting for 2004: a slowing rate of increase in health-care costs compared to the previous five years. UBS Warburg analyst William McGeever predicts that increases in medical costs reimbursed by managed-care organizations should plateau at an 11% rate in 2004 after two years of 12% to 13% growth. Hewitt Associates, a human resources consultancy, estimates that employers should see health plan rate hikes of only 12.6% in 2004, compared with 14.7% in 2003. And the nonprofit Center for Studying Health System Change says health-care spending per privately insured American rose by only 8.5% in the first half of 2003, down from a 10% hike in the last half of 2002. "UNSUSTAINABLE." The problem is, the overall rate of inflation in the U.S. so far in 2003 is barely over 2%, and the average prediction for gross domestic product growth in 2004, according to a cross-section of 60 economists surveyed by BusinessWeek, is only 4.1%. The discrepancy between health-care spending increases and overall inflation/economic growth lead the Congressional Budget Office to issue a dire warning in December that current health-care cost trends will eventually cripple the nation. "Unless taxation reaches levels that are unprecedented in the U.S., current [health-care] spending policies will probably be financially unsustainable over the next 50 years," the CBO said in its long-term budget forecast. An aging, overweight population, ever-more expensive medical products and drugs, and a growing number of uninsured patients guarantee that health-care costs will continue to rise at a faster rate than the economy as a whole. The CBO says the number of people age 65 or older is projected to grow from 12% of the population in 2000 to 19% by 2030, while the working-age population is set to fall from 59% to 56% over the same period. COST-SHIFTING. Thus, federal spending on Medicare (the health insurance system for the elderly), and Medicaid (the system for the poor), is projected to increase from 3.9% of the total U.S. economic output today to more than 21% in 2050. As for private insurance, Hewitt expects employers to increasingly restructure their benefit plans to shift more costs to employees. A Hewitt survey found that the average employee contribution for health-care benefits in 2004 will rise to $1,565, from $1,276 in 2003. For employees, or anyone else footing medical bills, this may not sound like good news.  By Catherine Arnst in New York
BW MALL
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