Hospital Spending

Hospital inpatient costs are probably the single largest component of overall health spending.  A Statistical Brief from the Agency for Healthcare Research & Quality outlines payments by payer type and by condition.     (AHRQ Report) The data is based on hospital charges, which should be distinguished from what payers actually pay, and from the costs the hospitals incur to provide the service.  Such charges are usually higher, often much higher than the amounts payers such as Medicare, Medicaid and private health plans agree to.  One of the ironies of the American health system is that consumers spending their own money tend to pay the most for hospital care.  Total billed charges by hospitals in 2008 were 1.2 trillion dollars, spread over 39.9 million hospital stays.  This is all inpatient care.

Medicare and Medicaid received about 60% of those charges, Medicare for 14.9 million stays with $534 billion in charges and Medicaid for $159 billion.  Neither program pays anywhere near the charged amount, so their percentage of amounts actually paid to hospitals is much lower.  Private insurers were responsible for 14.1 million stays with charges of $373 billion or around 32% of the total billings.  The uninsured accounted for $48 billion of total charges, a large portion of which probably ended up being uncollectible.  The top 20 most expensive conditions led to over half of the total charges and the top five for one-fifth.  Interestingly two of the top five are pregnancy related, including actual delivery of the newborn.  Total charges for these conditions were $88 billion.

Sepsis and coronary artery disease were next on the list, each being responsible for about $48 billion in charges.  Sepsis has risen from ninth most expensive in 2004 to second most in 2008.  Osteoarthritis was fifth on the list, with $40 billion in charges, and it has risen from 8th to 5th place.  An interesting change in ranking is that congestive heart failure has actually fallen from 5th to 8th place, perhaps because it is one of the most common conditions for disease management or care coordination programs.  As might be expected, the most expensive conditions vary by payer, with private insurance and Medicaid picking up the pregnancy and delivery billings and Medicare more of the charges related to heart disease, arthritis and disease related to aging.