Factors Associated With More Health Spending

By November 8, 2017 Commentary

Researchers keep coming up with new ways to try to understand changes in health spending over time.  The latest is a study covering 1996 to 2013 published in the Journal of the American Medical Association.   (JAMA Article)   Five primary factors were examined:  population size, population age structure, disease incidence, service utilization and service price or intensity.  After adjusting for inflation, average annualized growth in spending over the time period was 4%.  The data came from the US Disease Expenditure project the Global Burden of Disease study.  155 major health conditions were used as a basis of analysis, along with certain care categories–ambulatory, inpatient, drugs, nursing facility, ER and dental.  By category, ER and drugs had the highest annualized growth rates, at 6.4% and 5.6%, respectively.  Diabetes was the condition with the highest dollar spending growth, and also had high annualized growth, at 6.1%, most of which related to medication costs.  The next fastest growing condition by dollars spent was low back and neck pain, which had an even higher annual increase, at 6.5%, much of which was due to ambulatory and inpatient care.  Hypertension, hyperlipidemia and depression also had significant dollar growth in spending.

The increase in US population was associated with a 23.1% increase in spending, population aging with an 11.6% rise, while change in disease prevalence actually was associated with a 2.4% decline and service utilization with a 2.5% decline.  So we are controlling the impact of disease incidence and utilization pretty well.  What aren’t we controlling–you guessed it, unit prices and intensity.  That was associated with a 50% increase in spending over the study period, outweighing all other factors by a large margin.  The effect of these different factors obviously varied by disease condition, for example, heart disease prevalence declines led to a 21% reduction in spending.   Spending on ambulatory care had the largest dollar growth over the study period, and this growth was caused by more visits, and increased prices and intensity.  Inpatient care had the second-highest dollar increase, but here, utilization actually contributed to a substantial decline in spending, while price and intensity growth more than made up for that decline.  Increases in price were particularly responsible for rises in ER and dental care.  The overall picture is that while population growth and aging contribute to more spending, the biggest factor is price and intensity.  So reducing those price is a key to controlling spending.

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