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Employer Health Care Costs

By June 4, 2014Commentary

Truven issues regular reports on employer health benefits spending, based on a claims database on 220 employer plans covering 15.5 million people.   (Truven Report)    According to its data,  from 2007 to 2012 employers had spending growth per covered person of about 4.6% annually, and Truven expected that growth to be between 3 and 4% for 2013 and 2014.  Over the same period employee out-of-pocket expenses increased around 11.4% per year.  From September 30, 2011 to September 30, 2012, per covered person costs averaged $4,751.  Medical expenses were rising at a 6.9% rate while pharmacy was growing 5.5%.  Inpatient cost growth slowed in 2012, primarily because admissions declined to 57 per 1000 members and average length of stay also decreased.  Average cost per admission, however, rose by 4.6%, largely driven by price increases.  In regard to outpatient services, both price and utilization rose; use by 5.6% and price by 2.1%.  In the outpatient category, dialysis, emergency room, surgery, diagnostic testing and radiology all showed double-digit growth rates.  Prescription drug use rose 4.3% and price increased 3.6%.  These overall figures, however, mask the effect of generics, which moderate or lower trend, and of specialty drugs, which continue to grow in both utilization and cost.  Consistent with other reports, Truven’s data shows specialty growth exceeding 20% annually.  About 18% of all drug costs were actually incurred through the medical benefit, reflecting the expanding use of specialty drugs, which often must be administered in physician offices or other sites of care.  And also consistent with other research, Truven’s studies show that dispensing the same specialty drug in a hospital outpatient setting costs about twice what it would in a physician’s office.  Fifteen common chronic medical conditions account for about 17% of medical spend in 2012.  Osteoarthritis, back pain, heart disease, breast cancer, depression and diabetes are the most expensive conditions.  In general, people in the Truven database receive good rates of preventive screenings, with diabetes eye exams and colorectal screening being notable exceptions.  According to health risk assessment data, about 35% of covered people were obese according to body mass index and another 35% were overweight.

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