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It Is All About the Prices

By January 24, 2018Commentary

The Health Care Cost Institute collects claims and other data from major health plans and other sources to develop analyses of health care utilization and spending by employer-sponsored health plans.  It has just released a report on 2016 spending.   (HCCI Report)   Per capita health spending increased by 4.6% in 2016, compared 4.1% in 2015.  Spending growth has stepped up in each of the last four years.  $5407 was spend per person in these commercial plans.  Of this, $1049 was inpatient hospital, $1507 was outpatient hospital, $1821 was professional and $1030 was drugs.  Note that drug spending is almost equivalent to inpatient in this population.  Outpatient spending was the biggest contributor to growth, rising at a 6.2% rate up from about 3.7% in 2015; while drug spending grew 5.1%, down from 10.4% in 2015.   And as has been the case over the last five years, almost all the spending increase is attributable to price–in 2016 there actually was a net decrease in utilization.  From 2012 to 2016, prescription drug prices rose 25% and inpatient hospital services rose 24.3% in that period, while outpatient hospital prices increased 17.7%.  During this time, inpatient hospital admissions declined 12.9%, professional service use decreased by 2.95 and medication use rose 1.8%.  Please note that the highest increases are coming from health systems which have been allowed to create near monopoly conditions in many areas and drug companies, which have a statutory monopoly on many products.

The was a wide range in category spending across the states, for example, inpatient spending ranged from $773 per person at the low end of Iowa and Missouri to $1415 at the high side in Wyoming and South Dakota.  The biggest driver of the higher inpatient hospital spending was surgical admission prices, which have increased 30% in five years, although this was partly offset by a decline of 16% in utilization over this period.  Mental health and substance abuse admissions have risen rapidly but are still a relatively minor proportion of overall inpatient costs.  Similarly, surgical prices played a major role in the rise in outpatient spending, as did emergency room use and prices.  Outpatient surgery accounts for 37% of all outpatient spending and ER represents 235.  Lab and imaging spending growth has been relatively mild.  And, as with other categories, while utilization declined for most outpatient services, prices have risen rapidly, for example, the average ER visit price rose 31% over five years.  Interestingly, young men used the ER less, while young women saw an increase in utilization.  Prices for drugs administered in a physician’s office grew 42% from 2012 to 2016, driving almost all the growth in spending in that category.  Primary care visits declined slightly while specialist visits rose a bit.  In a small piece of good news for consumers, out-of-pocket spending increased, but at a slower rate than total spending growth.  Out-of-pocket spending for drugs declined, while that for outpatient rose significantly.  At least for employer health plans, it appears that spending growth is increasing, not a good trend.

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