Prices, Not Use, Drive Higher Healthcare Costs


By Les Masterson

Higher prices, outpatient services and mental health and substance use admissions drove average annual healthcare spending for people with employer-sponsored health insurance to a new high of more than $5,600 in 2017, the Health Care Cost Institute reported in a new study.

HCCI said per-person healthcare spending increased by 4.2% in 2017 to $5,641.

Outpatient services saw the most significant spending growth (5.1%). Mental health and substance use admissions increased by 18% between 2013 and 2017.

The report echos other recent findings of higher healthcare costs despite lower use overall.

Healthcare spending growth exceeded 4% for the second straight year, according to HCCI. That’s higher than the per-capita GDP growth.

HCCI analyzed professional services, inpatient spending, outpatient spending and prescription drugs. Average spending per patient in 2017 was: professional services ($1,898 or 33.6% of costs), inpatient ($1,097 or 19.5%), outpatient ($1,580 or 28%) and prescription drugs ($1,065 or 18.9%).

Premium rate increases are one major factor in the high-spending low-utilization trend. The Commonwealth Fund, which released a similar spending report in December, found family premiums increased in 44 states, reaching $20,000 or higher in seven states and the District of Columbia. Workers with employer-sponsored plans are watching more and more of their income go toward premium contributions.

Health insurance costs are increasing at a faster rate than wage growth, the Commonwealth Fund found. Yet insurance quality isn't improving.

A study published last week found hospital prices for inpatient care have skyrocketed substantially faster than physician prices, and similarly so for outpatient settings. Researchers suggested policymakers focus on antitrust enforcement, as market consolidation continues to reduce competition.

American Hospital Association President Tom Nickels argued that hospitals have expenses physicians don't, including administrative expenses, drugs and medical devices.

HCCI found spending on administered drugs was one of the fastest growing professional services categories, rising by 45%. Psychiatry spending grew by 25% between 2013 and 2017, while utilization of those services increased by 18%. Spending, utilization and prices for inpatient care for mental health and substance use all increased.

Inpatient spending grew by 10% between 2013 and 2017 despite a 5% drop in utilization. Instead, rising prices for medical and surgical admissions drove the spending growth.

Outpatient visits and procedures increased by more than 5%, driven by outpatient surgeries and emergency room visits. Outpatient surgeries decreased by 4%, but prices increased by 14% over the five years.

Meanwhile, ER visit utilization increased by 10% and prices by 24%. Prescription drug utilization grew by 3% between 2016 and 2017 after three years of little change.

Not surprisingly, HCCI found that younger people aren't using much healthcare. More than 40% of 19- to 25-year-olds weren't involved in any claim or prescription drug. That's compared to just 16% of people between 55 and 64.

The per-person spending increase in 2017 was slightly below the level in 2016 (4.6%). HCCI's 2012-2016 analysis blamed price increases as the main driver for the higher costs. Following two years of sub-3% increases between 2012 and 2014, healthcare costs increased by more than 4% each year between 2015 and 2017.

The report comes shortly after United Healthcare, the largest private payer, said it would no longer provide claims data to the nonprofit. HCCI will still receive claims data from Aetna, Humana and Kaiser Permanente.

"HCCI and its board are seeking new partners to enable continued analysis of the ever-growing U.S. healthcare sector. Much work remains to be done," Bob Town, chair of the HCCI board and professor at the University of Texas-Austin, said at the time.


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    • Masthead

    • Editor-in Chief:
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      Lin Takahashi
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      Cynthia Casteneda Avina
      Ronald Harvinger
      Lisa Andonis

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