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Health Spending in Minnesota

By January 2, 2020January 5th, 2020Commentary

When I first came to Minnesota it had some of the lowest health insurance premiums in the country, now it has some of the highest.  Provider consolidation is the reason.  A report issued by a non-profit group, with the assistance of the major health plans in the state, details health care utilization and costs in the state in 2018 for commercially insured persons and provides insights that are relevant to the entire country.   (Minn. Rpt.)    The average per commercially-insured person cost of delivering health care in 2018 was $596, up 25% in the five years since 2013.  Every major category of spending except inpatient hospitalization saw large increases.  For 2018, the total cost of care rose 5.9% from 2017, with inpatient spending up only 2.7%, while outpatient hospital rose 7.4%, pharmacy 6.7% and physician and other professional services by 6%.  Looking at average cost by medical group showed wide variation, from around $425 on the low end to over $800 on the high side.  The amount of variation has remained stable over several years, suggesting that efforts to get high-cost providers to be more efficient are not working.

If you look at the medical groups’ performance based on unit prices and on utilization of services by their patients, there is also no clear trend, with some groups being in each quadrant.  Some are high-priced but not high utilization and some have higher utilization but lower prices.  Almost like they were trying to be sure they hit a certain income target.  But overall it is clear that price contributes much more to total variation, that is; the higher total cost groups are in that category more because they have high prices than higher utilization.  And there is significant geographic variation within the state, interestingly, the metro area has the lowest total cost of care, but outstate areas, where single health systems tend to dominate all care, have the highest.  The region where the Mayo Clinic operates has the highest cost of health care in the state.  In terms of utilization of particular services, emergency room use shows the greatest range across medical groups, while primary care visits and prescription drug use have the smallest range.  Outpatient surgery rates, specialty care visits and inpatient admissions also display relatively large variability.

Now let’s take a look at prices for some common services–these are actual paid amounts, not listed prices.  A new patient initial office visit ranges from $65 to $202, with a median of $169, which means most prices are weighted to the high side.  By comparison, Medicare pays $76 and Medicaid $59 for the same service.  How about an eye exam.  The range is $84 to $382, with a median of $210.  Medicare pays $153 and Medicaid $109.  A chest x-ray: low is $29, the high is $361, the median is $66.  Medicare pays $32, Medicaid $23.  All these numbers making you crazy, how about a pyschiatrist evaluation.  The range for that is $106 to $469, with a median of $229.  Medicare pays $138; Medicaid $122.  The average of commercial prices to Medicare ones has risen from 174% in 2014 to 192% in 2018.  Now you can understand why costs are such an issue for commercially insured persons.  And stop and think about the implications for supposed Medicare for All.  You can see how much of a hit doctors and other providers will take if everything is paid at Medicare rates.  And you can see why Medicaid has an access issue, at some point providers are just going to say its not worth it when I can get paid three times as much by private insurance.

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