UNDERSTANDING THE HEALTHCARE COST CONUNDRUM

UNDERSTANDING THE HEALTHCARE COST CONUNDRUM

The Facts Healthcare in the US 18% GDP One of every three new jobs, 2007-2017 US spends two times what other wealthy countries spend

What s Driving Spending? ~30% of healthcare spending is wasteful IOM (Institute of Medicine). 2013. Best care at lower cost: The path to continuously learning health care in America. Washington, DC: The National Academies Press.

Price and intensity have been the primary drivers of U.S. spending growth Source: Factors Associated With Increases in US Health Care Spending, 1996-2013 JAMA. 2017;318(17):1668-1678. doi:10.1001/jama.2017.15927

Health care consolidation trends highly concentrated Source: DM Cutler, F Scott Morton, Hospitals, Market Share, and Consolidation, JAMA. 2013;310(18):1964-1970.

Health care consolidation trends % of markets that are highly concentrated: 65% of specialty physician markets 57% of insurer markets 39% of primary care markets Source: Fulton, BD. Health Care Market Concentration Trends in the United States: Evidence and Policy Responses. Health Affairs. 2017;36(9):1530-1538.

Hospital Consolidation à Higher Prices Hospital consolidation leads to significantly higher prices in concentrated markets. Estimated price increases: 20-40% Author/Year Result Dafny (2009) Merging hospitals had 40% higher prices than nonmerging Haas-Wilson, Garmon (2011) Tenn (2011) Post-merger, Evanston NW hospital had 20% higher prices than controls Summit/Sutter prices increased 28% - 44% compared to controls Source: Gaynor M, Town R, The impact of hospital consolidation update, Robert Wood Johnson Foundation, The Synthesis Project, ISSN 2155-3718 (June 2012).

Patient outcomes are worse in more concentrated markets, where hospitals or physicians face less competition Hospital ownership of physician practices led to higher readmission rates and no better quality measures

Prices for inpatient hospital stays have grown faster for private insurance than for Medicare or Medicaid Average inflation-adjusted, standardized payment rates per inpatient hospital stay, by primary payer, 1997-2015 $25,000 Private insurance Medicare Medicaid $20,000 $19,975 $15,000 $10,000 $11,840 $11,186 $11,868 $9,379 $9,071 $5,000 $- 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Note: The average payment rates were computed as if each primary payer paid for all non-maternity adult stays in a given year. Payments were adjusted for inflation and standardized across payers in terms of patient s age, sex, race/ethnicity, geography, household income as a percentage of the federal poverty level, conditions, charges, length-of-stay, and whether or not a surgical procedure was performed. They were not standardized for changes over time in the bundles of treatments and services provided during inpatient stays. Source: Thomas M. Selden analysis of AHRQ s Medical Expenditure Panel Survey for the Kaiser Family Foundation. Update of earlier analysis, available here: https://www.healthaffairs.org/doi/abs/10.1377/hlthaff.2015.0706

The Cost Shifting Challenge Underpayment by Medicare & Medicaid Cost shift to other payers Community Benefit Would equalizing public & private payment rates reduce cost shift? One recent study* found hospitals receiving an unexpected 10% increase in Medicare payment rates Added new technology Increased nursing staff Increased payroll by 1/3 rd * Skinner J, Chandra A. Health Care Employment Growth and the Future of US Cost Containment. JAMA. 2018;319(18):1861 1862. doi:10.1001/jama.2018.2078

Drug spending has grown rapidly recently, but most of the health dollar is spent on hospitals and physicians Source: Kaiser Family Foundation analysis of National Health Expenditure (NHE) data from Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group

The share of household budgets devoted to health expenses has been increasing Average portion of household budget devoted to health (nonelderly families), 2002-2012 6.0% 5.0% 4.4% Total health expenses: 5.2% 4.0% 3.0% Insurance premiums: 3.1% 2.0% 1.0% Out-of-pocket costs: 2.1% 0.0% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: Kaiser Family Foundation analysis of Consumer Expenditure Survey

Spending on deductibles and coinsurance have far outpaced wages, while copayments have fallen Cumulative increases in health costs, amounts paid by insurance, amounts paid for cost sharing and workers wages, 2005-2015 200% 176% 150% 100% 50% Coinsurance Wages 67% 29% 0% -50% Copayments 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016-38% Source: Truven Health Analytics MarketScan Commercial Claims and Encounters Database, 2005-2015; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey, 2006-2016 (April to April).

Health care costs is the top health care issue voters want 2018 candidates to talk about While this year s election is still a long way off, what health care issue do you most want to hear candidates talk about during their upcoming campaigns? (open-end) Among Registered Voters: Health care costs 22% Medicare/senior concerns 8% Repealing/opposition to the Affordable Care Act 7% Improve how health care is delivered 7% Increase access/decrease number of uninsured 6% Single-payer system 5% NOTE: Only top six responses listed. SOURCE: Kaiser Family Foundation Health Tracking Poll (conducted February 15-20, 2018)