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New Health Care Spending Breakdown

By October 2, 2012Commentary

The Health Care Cost Institute is a research group formed by major private insurers with access to data on around 40 million people covered by employer-sponsored health insurance.  It has begun releasing reports that give a picture of cost and utilization trends in that market, a nice counterpoint to most analyses which rely on Medicare spending patterns.  It has released a report which finalizes spending and utilization numbers for 2011; and again, remember this is only for employer-sponsored insurance, but that is the largest single source of coverage for Americans.  (HCCI Report)   The headline number is that per capita expenditures rose 4.6% from 2010 to 2011, to $4349, compared to 3.8% growth from 2009 to 2011.  Growth and spending was highest in the Northeast region and lowest in the West.  Total employment-based health care coverage spending was estimated at $709 billion in 2011, up from $681 billion in 2010.  The increase in spending affected covered persons and payers relatively equally, with covered persons paying about 16.2% of total expenses in both 2010 and 2011.  The average out-of-pocket was $735 per covered person.

Spending on inpatient services rose by 4.8%; admissions declined by half a percent but prices rose 5.3%.  Spending on outpatient facility charges rose 6.8% in 2011.  While there was a modest increase in outpatient facility utilization, prices rose around 5%, accounting for almost all of the spending increase.  Outpatient or professional utilization rose about 1.2% and prices by 3.3%.   On the drug front overall spending rose a very modest 1%, with the number of prescriptions filled declining slightly.  However, while brand utilization dropped almost 13%, brand prices rose almost 18%.  Generics showed the opposite trend, with utilization increasing 3.4% and prices dropping 7.2%.  The report offers yet more support for the thesis that increases in per capita spending in the United States are driven almost exclusively by unit price increases and not by excessive or inappropriate utilization.  The continued consolidation among and across provider types, and the development of powerful groups like accountable care organizations should cause great concern for the likelihood of continued, perhaps even more rapid, price increases as providers continue to exercise market power.

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