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Hospital, Health Insurance Costs Skyrocket

September 26, 2006

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American consumers -- and their health insurance providers -- pay nearly $800 billion a year in hospital bills, while health insurance premiums are rising twice as fast as wages, according to three new reports.

A study by the U.S. Department of Health and Human Service's Agency for Healthcare Research and Quality put the national hospital bill at $790 billion in 2004, the last year for which data is available.

Meanwhile, two nationwide surveys show that the health-care premiums of employers and their workers have climbed twice as fast as wages and inflation in 2006 -- to nearly double their cost in 2000 -- and look to rise at a similar clip next year.

The nation's cumulative hospital bill represents the total amount charged for 39 million hospital stays in 2004.

The federal report also found that:

• Nearly $500 billion, or 60 percent, of the national hospital bill went to the federal and state governments for Medicare and Medicaid patients.

• One-fifth of the national hospital bill was for treatment of five conditions: coronary atherosclerosis, mother's pregnancy and delivery, newborn infants, acute myocardial infarction, and congestive heart failure. Hospital stays for coronary atherosclerosis incurred the highest charges ($44 billion); mother's pregnancy and delivery had the second highest charges ($41 billion).

• Medicare, which provides insurance for the elderly, had pneumonia and osteoarthritis among its top five most expensive conditions. Medicaid, which covers certain groups of low-income patients, had treatments for pregnant mothers and their deliveries, plus care of newborn babies, as its two most expensive types of hospital stays.

• Medicaid's top five most expensive conditions also included pneumonia, schizophrenia, depression and bipolar disorders.

• Private insurers' biggest bills were for pregnancy and delivery, care of newborn infants, hardening of the heart arteries, heart attack and back problems.

• Brain trauma and stroke were among the expensive conditions billed uninsured patients.

AHRQ, a part of the U.S. Department of Health and Human Services, is charged with improving the quality, safety, efficiency and effectiveness of health care in the United States.

The data are from the agency's Healthcare Cost and Utilization Project -- the nation's largest source of statistics on hospital inpatient care for all patients regardless of type of insurance or whether they were insured.

Insurance Costs

The average family health insurance premium rose 7.7% in 2006, marking the third year employer health-care cost increases have slowed since soaring nearly 14% in 2003, according to a 2,122-employer survey by the Kaiser Family Foundation and Health Research and Educational Trust.

After several years of steady steep rises, the cost for family coverage under an employer health plan is now $11,480, well over the annual wage of a full-time minimum wage worker, more than many smaller business and their employees can afford.

As costs climb, the number of firms offering health insurance falls. The study found that while 98% of firms with more than 200 workers still provide some sort of employee health benefits, only 60% of smaller companies do.

The share of workers covered by health insurance through their own employer has fallen to 59%, down from 60% last year and 63% in 2000, according to the Kaiser survey.

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