Health Spending Trends Prior to Health Reform

The next report profiled in this week’s focus on health spending in America comes from the Urban Institute and examines trends in health spending among the non-elderly during the period leading up to the enactment of the federal health reform law.   (Urban Institute Report)   The report utilizes the Medical Expenditure Panel Survey for the years 2001 to 2009.  This is a different data source than the National Health Expenditure Accounts typically used, and the authors make a number of adjustments to account for known biases and other issues in this data source.  They were interested in the overall trend of service and cost growth, by category, and what factors might account for those trends.  According to this analysis,  per capita health expenditures rose from $2873 in 2001 to $4037 in 2009 (remember this is the non-elderly, which is why it looks so different from the numbers reported in yesterday’s post).  Per capita expenses rose at 44% for physician and outpatient care, 37% for hospital inpatient and 54% for prescription drugs.  Spending growth, however, slowed in the second half of the period compared to the first, particularly in the prescription drug category.

In terms of the factors leading to spending growth, the authors find that cost per unit of service is responsible for almost all of that overall per capita increase.  The share of the population using a service category and the number of units used either fell or stayed relatively constant.  For example in the prescription drug category, the percent of the group with at least one prescription dropped slightly from 61% to 58% but the average number of fills increased from about 11 to 13. Cost per prescription rose.  Socioeconomic and demographic factors had a very modest effect, about 4%, on spending growth.  This includes the impact of changes in health insurance status.  On the other hand, chronic conditions did have a fairly substantial impact on the increase, almost 25%, and higher in some categories.  The prevalence of such conditions increased over the study period, as did the intensity of spending to treat chronic conditions.  The overall rate of growth was 3.5% higher on an annual basis than general inflation, and again, most of this is due to unit price increases.  If we are going to get spending growth under control, unit prices will have to be controlled.