Annals of Health Law
VALUE BASED PURCHASING
Trust Annual Employer Survey24 and the U.S. Department of Labor25
indicates that premiums for employment-based private insurance increased
114% from 1999 to 2007, while earnings increased twenty-seven percent,
leaving a gap of seven percentage points per year, on average. 26
The gap between health spending trends and income trends likely
has led to a sharp increase in the proportion of the population
concerned about their ability to afford health insurance in the
future. When health care spending grows at much faster rates than
GDP or workers’ earnings, health insurance becomes less
affordable—and more people become uninsured. Those who can
continue to afford coverage are finding that premiums and
payments for medical care not covered or paid for by insurance are
becoming increasingly large over time in relation to income. 27
What is behind these escalating health care costs? In a 2008 report, the
Congressional Budget Office identified seven key factors driving the
historical growth of health care spending: ( 1) an aging population; ( 2)
changes in third-party payment; ( 3) personal income growth; ( 4) health
sector prices; ( 5) administrative costs; ( 6) defensive medicine and supplier-induced demand; and ( 7) technology-related changes in medical practice. 28
Researchers have identified the latter as a leading factor, responsible for
anywhere from one-third to two-thirds of the growth in real per capita
health care spending. 29
B. Spending Projections
According to the most recent annual National Health Expenditure (NHE)
projection by the CMS Office of the Actuary, released in 2010, NHE
reached $2.6 trillion in 2010 and has grown 3. 9 percent, down from 4.0
percent in 2009.30 Spending growth in 2010 was slow in response to
24. KAISERFAMILYFOUND. ANDHEALTHRESEARCH ANDEDUC.TRUST,EMPLOYER
HEALTH BENEFITS: 2007 ANNUAL SURVEY, 2007 (Kaiser Family Found. eds.) (2007),
available at http://www.kff.org/insurance/7672/upload/76723.pdf.
25. U.S. DEPARTMENT OF LABOR, BUREAU OF LABOR STATISTICS, CURRENT EMPLOYMENT
STATISTICS. AVERAGE HOURLY EARNINGS, NOT SEASONALLY ADJUSTED, 1999–2007 (2007),
available at http://www.bls.gov/ces/ - tables.
26. DEMYSTIFYING, supra note 20, at 1.
27. Id.
28. CONG.BUDGETOFFICE,TECHNOLOGICALCHANGE AND THEGROWTH OFHEALTH
CARE SPENDING. 8, (Publ’n No. 2764.) (2008).
29. DEMYSTIFYING, supra note 20, at 11.
30. National Health Expenditure Projections 2010-2020 1, CTR. FOR MEDICAID AND
MEDICAID SERVS. (2010), available at https://www.cms.gov/Research-Statistics-Data-and-
Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/downloads/proj2010.pdf.
