Last week, the Milliman Index released their annual report, detailing that health care spending for the average American family of four is now more than $20,000 a year. Today, the Health Care Cost Institute released their 2010 Health Care Cost and Utilization report:
The 2010 HCCI Health Care Cost and Utilization Report is the first report of its kind to track changes in expenditures and utilization of health care services by those younger than 65 covered by employer sponsored, private health insurance (ESI). This report assesses the levels and changes in prices and utilization (including changes in the mix of services) focusing on 2009 and 2010. Additional analysis incorporating 2007 and 2008 data is available on the HCCI web site, www.healthcostinstitute.org/report. This report is also the first of what will be an ongoing series of reports from HCCI. Future reports will provide updated numbers as they become available and focus on additional aspects of health care costs and utilization.
The numbers are just as sobering. The average under-65 American covered by employer based insurance spent $4,255 on health care in 2010 (from all sources, including premiums and out-of-pocket payments). Older Americans spent much more than younger Americans, as those between 55 and 64 years spent an average of $8,327. But even those under 18 years of age – kids, who are supposed to be cheap and healthy – spent an average of more than $2,000 each in 2010. That’s staggering.
What accounts for this? Well, it turns out that care in America is extremely expensive. The average inpatient admission to the hospital cost $14,662 in 2010. If you were admitted to the hospital for a surgery, the average cost was $27,100. The average newborn delivery – if things went well – cost $7,371. Instruments like cost sharing and high deductible health plans that are designed to empower consumers lose much of their appeal when confronted with numbers like these. If you have a baby, or need to go to the hospital just once in a year, you’ve likely already spent as much as allowed out-of-pocket, meaning that any cost-sharing incentives to reduce spending are gone.
Moreover, it appears that prices, not utilization are the cause of increases in spending:
Between 2007 and 2010, overall utilization trends were stable or went down. Inpatient admissions went down more than 3% from 2009 to 2010. You can’t blame increased spending on longer admissions as the length of stay didn’t go up that year. Outpatient visits, including those to emergency room visits and outpatient surgery centers, also declined by more than 3% from 2009-2010. Even outpatient radiology services went down 2.7% from 2009-2010. The use of prescription drugs went up slightly overall (0.9%), but this was mostly in generic prescriptions (up 2.5%), not brand name drugs (down 3.9%).
Prices are going up, while utilization is going down. This can’t even be accounted for by the intensity of care:
Prices grew at faster rates than the intensity of services.
The intensity of inpatient admissions increased only 0.7% from 2009 to 2010, whereas the intensity- adjusted price increased 4.6 percent.
Intensity and intensity-adjusted price were both major contributors to the 10.1% trend in prices paid per out- patient visit, such as emergency room and outpatient surgery visits. However, unit prices grew more than intensity (5.3% and 4.6%, respectively).
With the exception of office visits, surgery, and pathology/lab services, intensity of professional procedures declined between 2009 and 2010.
Many believe that we in America are using too much health care. They argue that because many lack “skin in the game,” they consume too much care. This report shows that actual utilization is stable to decreasing in many areas. It’s the prices per unit of care that are going up, pretty much across the board. That will continue, even if we find new ways to incentivize people to avoid care. That’s a dangerous trend. If it continues, it means that we will be getting less and less health care, but paying more and more each year.
Dr. Aaron E. Carroll is an associate professor and vice chair of health policy and outcomes research in the department of pediatrics at the Indiana University School of Medicine. He blogs about health policy at The Incidental Economist and tweets at @aaronecarroll.
As part of our ongoing effort to raise awareness of health services research and increase its application in policy and practice, AcademyHealth has partnered with Austin Frakt, Ph.D., and Aaron Carroll, M.D., M.S., to contribute posts on the subjects of health care costs, delivery system transformation, and public and population health – areas AcademyHealth has identified as a priority in the current policy environment. As regular contributors, they’ll be discussing current events with an eye toward how new and existing research informs the issues.