Tuesday, May 22, 2012

Examining Healthcare Costs

Last year the non-profit Health Care Cost Institute (HCCI) was formed and started with some Medicare data as well as billions of claims from Aetna, Humana and UnitedHealthcare. HCCI doesn't expect to publicly separate out claims by insurer, and it will not name individual hospitals or other providers, in part to avoid antitrust concerns and to ensure patients can't be identified. The claims data includes price, volume and intensity of care being delivered to people with private coverage from one of the four insurers. Future reports will include data from Kaiser Permanente. Medicare data will also eventually be used to compare cost information with private health plans.

According to the new report from HCCI the main driver behind increasing healthcare costs for the privately insured in 2010 was rising prices of care. The report, “Health Care Cost and Utilization Report: 2010,” is the first of an ongoing series of reports from HCCI. Using de-identified, HIPAA-compliant data sets from three billion health insurance claims the researchers studied what influences the use and cost of healthcare services. Findings from the report reflect the national healthcare spending of more than 33 million privately insured people with employer-sponsored group health insurance.

The report examines trends in inpatient and outpatient care, professional services, and prescription drugs by the privately insured. HCCI looked at per capita spending, prices paid per service, out-of-pocket spending, utilization, and the mix or intensity of services used. Higher spending was mostly due to price increases, rather than change in the use of healthcare services, the report found. HCCI data show that this 3.3 percent increase follows spending increases in 2008 (6 percent) and 2009 (5.8 percent).
Based on three billion health insurance claims provided by three of the nation’s largest health plans, the data represent the health care spending of 33 million Americans across the country.

Other key findings of the report:
  • Prescription Drugs. Prescription drug prices grew 3 percent to $82, on average in 2010, from $80 per prescription in 2009. But the price increase was driven by brand name drugs whose prices increased 13 percent in 2010. Generic drug prices decreased by 6.3 percent in the same period.
  • 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 healthcare services declined in 2010, dropping by more than 5 percent for medical inpatient admissions, emergency room visits, primary care provider office visits and radiology procedures.
Martin Gaynor, Chair of Governing Board of the Health Care Cost Institute and E.J. Barone Professor of Economics and Health Policy at the Carnegie Mellon University, talks about the report.

The research will add to a debate over whether the recent slowdown in medical spending is the temporary result of a bad economy or a more lasting shift due to higher deductibles and other changes, Gaynor said. While insurer costs climbed 2.6 percent in 2010, employees’ share rose by 7.1 percent. In the period studied, insurance company and individual policyholder spending rose at almost twice the rate of growth for the Consumer Price Index. This is a rich data source that will continue to provide a treasure trove of analysis.


  1. Right on the mark Brian!
    Glad to see that Payers are sharing claims data! No surprise that Prices are growing faster than Volume. Healthcare is a price insensitive good because it is your health, pricing is not transparent & payers do not decide on care delivered or consumed. These issues need to be addressed if we want to achieve the Triple Aim- Better Health & Better Care at a Lower Cost.

  2. Of course, you are absolutely right Paulo. Increasing cost transparency is a good step towards reigning in costs...

  3. Health care costs are likely to increase unchecked. Unlike in other countries, no laws meaningfully curb the continual climb of wellness health care and drug expenses in the United States. For example, many Americans keep import drugs from Canada because Canada prices are significantly lower.