Prices Spike, Propel Healthcare Spending During Great Recession

Despite reduced overall consumption of healthcare services at the height of the recent economic downturn, rising prices charged by hospitals, outpatient facilities, emergency departments and other providers were the chief driver of health spending in the U.S.

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According to a study published today by the Health Care Cost Institute (HCCI), a nonpartisan research group paid for by health insurance providers, “per capita spending on inpatient and outpatient facilities, professional procedures, and prescriptions drugs rose 3.3 percent in 2010 for beneficiaries under age 65 with private, employer-sponsored group insurance.”

The report, Health Care Cost and Utilization Report: 2010, revealed that “prices rose at least five times faster than overall inflation for emergency room visits, outpatient surgery and facility-based mental health and substance abuse care” between 2009 and 2010 according to Kaiser Health News.

In addition to the general per capita spending increase, HCCI’s study of approximately 3 billion patient claims paid by UnitedHealthcare, Humana, and Aetna as a part of employer-sponsored insurance plans in 2010. These data associated with these claims encompass roughly 20 percent of the insured U.S. population, excluding those covered by Medicare, Medicaid, or who purchase health insurance coverage on the individual market. An update to the report is planned for fall 2012. Future HCCI studies will incorporate data from Kaiser Permanente in addition to that from the three large insurance companies analyzed in the inaugural report.

Other key findings from the report include:

Cost Sharing. Out-of-pocket per capita spending increased 7.1 percent in 2010 to $689. Cost sharing rates between payers and beneficiaries remained relatively stable, with beneficiaries contributing 16.2 percent of average per capita spending.

Inpatient-Outpatient Facility Trends. The average facility price paid for a hospital stay was $14,662 in 2010, a 5.1 percent increase over 2009. The price for an emergency room visit climbed to $1,327 in 2010, an 11 percent hike. The average out-of-pocket price of a hospital stay rose 10.7 percent from $632 in 2009 to $700 in 2010.

Prescription Drugs. Prescription drug prices grew on 3 percent overall from an average of $80 per prescription in 2009 to $82 in 2010. However, brand name drug prices increased 13 percent from 2009 to 2010, while generic drug prices decreased by 6.3 percent.

Professional Services. The overall price of professional procedures that include doctor visits, lab tests, and diagnostic imaging, increased 2.6 percent. Payments for office visits—to both primary care and specialist providers—grew by more than 5 percent.

Utilization Trends. Overall use of health care services declined in 2010. Usage dropped by more than 5 percent for medical inpatient admissions, emergency room visits, primary care provider office visits, and radiology procedures. On average, each insured person filled more than nine prescriptions in 2010. The number of brand name prescriptions dropped by nearly 4 percent, while the number of generic prescriptions increased by 2.5 percent.

Kaiser Health News noted that the report showed the “biggest spending increases in the Northeast, up 4.3 percent and – surprisingly — among children under 18, up 4.5 percent nationally. That compares with a 3.1 percent jump in spending on 55 to 64-year-olds.  While spending grew fastest among pediatric patients, the report found medical care  for older patients costs more in total dollars – averaging $8,327 a year – than for those under 18, at $2,123.”

Annual Health Care Expenditures by Region

In the period studied, insurance company and individual policyholder spending rose at almost twice the rate of growth for the Consumer Price Index.

Of additional concern are findings that pediatric spending grew at the fastest rate of any demographic from 2009 to 2010, raising a red flag for some health professionals that as the cost of medical care outpaced inflation during the prolonged economic crisis, many families may have felt compelled to eschew routine preventative care for their children or to defer the purchase of medicines for chronic pediatric conditions.

 

Michael Klozotsky is the Chief Content Officer at insideARM.com. He has written and lectured about healthcare bad debt, revenue cycle management, and the healthcare debt buying market.

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