Medical Price Increases Fuel Rise in Health Care Spending, Report Finds

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Health care spending by privately insured U.S. residents increased between 2009 and 2010 primarily because prices of services increased, according to a study by the Health Care Cost Institute, Politico reports.

The study found costs increased by 3.3% in 2010, despite U.S. residents using fewer services in many categories (Feder, Politico, 5/21).

Study Details

The findings are based on claims data from Aetna, Humana and UnitedHealthcare, which cover about 20% of U.S. residents with employer-sponsored health plans (Bristol, CQ HealthBeat, 5/21).

The study found prices rose at least five times faster than overall inflation for emergency department visits, outpatient surgery and facility-based mental health and substance use care. Prices declined only for nursing home care, which saw a 3.2% decrease in cost per admission (Appleby, Kaiser Health News, 5/21). The study found large increases in prices for inpatient and outpatient hospital care -- by 5.1% and 10.1%, respectively -- while inpatient admissions declined by 3.3% and outpatient visits decreased by 3.1%.

The study also found that:

  • Health care expenditures increased fastest among those ages 18 and younger, by about 4.5%, while spending for U.S. residents ages 45 to 54 and 55 to 64 increased by 2.2% and 3.1%, respectively;
  • The Northeast had the highest spending growth, at 4.3%, while the West had the lowest, at 2.7%;
  • Health care spending increased by 2.6% for insurers over the study period, compared with 7.1% for enrollees;
  • Costs for professional procedures, including doctor visits, lab tests and imaging, increased by 2.6%, while the average overall price increase for outpatient procedures was about 1.7% (CQ HealthBeat, 5/21); and
  • Prescription drug costs increased by an average of 3%, as the average cost of generics fell but the price of brand-name medications increased significantly.

Study Challenges Tenet of Health Reform Law

According to Politico, the study's findings challenge a basic tenet of the federal health reform law, which assumes health spending will decline if physicians provide less unnecessary care.

HCCI Chair Martin Gaynor said, "[W]e may need to think about where we're directing our policies" to control health care costs. Gaynor added that reform initiatives, including the shift toward accountable care organizations, might fail if providers still are charging high prices for services (Politico, 5/21).

Paul HIllery
From what I saw in the report, it discussed "allowed costs", which do not exclude "unnecessary care". Also, while it discusses those "allowed cost" patient share, there is no clear data on patient spending on "unallowed costs". So "study's findings challenge a basic tenet of the federal health reform law, which assumes health spending will decline if physicians provide less unnecessary care." Perhaps data from Agency for Healthcare Research and Quality's the United States Health Information Knowledgebase (USHIK) can be used to firm up HCCI's analysis?

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