Costs and Prices – It’s All In The Report. Now – What Do We Do About It?

The latest health care cost trends report from DHCFP “Trends in Health Expenditures” looks at total health care spending for the private health plans (fully insured and self-insured), Medicare and MassHealth (which includes Commonwealth Care spending). The private health plan analysis is for 2007-2009 and the public analysis is for 2007-2008.

The report notes several disturbing trends including: continued growth in use of tertiary and specialty hospitals with minimal gains in certain areas by community hospitals, continued increases in price paid per unit of service for private plans, increased use of diagnostic imaging across all markets, and increased dominance of fee-for-service payments (95%-97% increase). The report finds that “health care spending continues to outpace inflation, wage growth, and other measures of economic growth in
Massachusetts.”

While the rest of the nation experienced a decrease in the health care growth rate, “health care spending growth was largely uninterrupted” in the Commonwealth. This is not surprising news to us- we have all seen the pressures on government, employers and health care consumers who struggle to pay for their health care services where health care costs take up an increasing percentage of annual budgets. What is new to us is the in-depth analysis of why costs are increasing. The analysis will enable us to target the right solutions to the different parts of the system.

Here are the top line numbers: The report estimates that Bay Staters spent $36.9 billion in total health care costs in 2008. Spending grew 10.3% in 2009 in private insurance, 4.8% in 2008 for Medicare, 2.8% in 2008 for MassHealth. Meanwhile, the GDP actually shrunk in 2009 at -1.6%.

   

Percent of Change in Total Private Insurance Hospital Inpatient Spending Due to These Factors

Year

Total Change in Overall Spending

Changes in Price for Same Service

Location of care among hospitals

Number of Admissions

Mix of Services

2007-2008

+5.7%

+113.6%

+4.4%

-36.3%%

+18.4%

2008-2009

+7.3%

+87.8%

+4.2%

-6.8%

+14.9%

Two things drive health care spending: the cost of each service and how much we use those services. For private insurance, increases in the price of services is the overwhelming cause of increased spending (accounting for virtually all growth in inpatient spending and outpatient spending and 88% of professional services in 2009). See the chart above on inpatient care, (adapted from table 9 on p. 29). For public insurance, the cause of growth is mixed, with increases in the cost of each service as well as use of the services. We recommend checking out the tables in each section that show the drivers of change in spending for each part of the market and within each growth area.

There are a few other themes that jump out:

  • First, use of imaging continues to grow everywhere. There is a little slowing in the use of the highest cost imaging technologies (CT and MRI), but not enough to slow the overall growth in this expensive area.
  • Second, behavioral health. 2009 was a pivotal year with the passage of federal mental health parity (extending coverage to the self-insured market) and the extension of the state’s mental health parity law. These two laws resulted in significant increases in volume of services provided in the private market. We will have to carefully monitor this over the next few years to determine the full impact of the changes to both people’s health and the cost of coverage.
  • Third, there is still significant and growing use of tertiary and specialty hospitals to the detriment of community hospitals. Hospitals in the Boston metro area are increasing their market share compared to the rest of the state.
  • Fourth, the report noted strong growth in the use of non-physician professionals – up 10.5% from 2007-2009 in private insurance, and up 14.1% in MassHealth. This group includes nurses, midwives, dentists, chiropractors among others.

So. Where do we go from here? For us, the ‘uninterrupted’ cost growth will only be stopped through payment and delivery system
reform. We need person-centered health care that coordinates our fragmented system so patients get the care they need and waste is removed from the system. The evidence is in. We must make a change.
-The Campaign for Better Care Team

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