Tracking Health Care Costs

This paper provides an update on trends in health care costs since 1999. Although the growth rate in overall costs has been stable since 1999, the trend in costs for hospital services rose, while that for prescription drugs declined, although it remains extremely high. Increased growth in hospital costs reflects the retreat from tightly managed care and labor shortages. The discrepancy between premium trends and cost trends has increased, which reflects the health insurance underwriting cycle. If these trends continue, likely responses by employers would lead to consumers' facing higher out-of-pocket costs and an increase in the number of uninsured persons.