Transcript Trends in Health Care Costs

U.S. Health Care Costs:
Trends and Implications
Cathy Schoen, Mark Zezza, and Stu Guterman
October 2014
2
International Spending:
The U.S. spends much more than
any other country
U.S. Spending Higher:
Health Spending in Selected OECD Countries,
1980–2012
Average spending on health
per capita ($US PPP)
$9,000
Total health expenditures as
percent of GDP
US
SWIZ
$8,000
CAN
18
US
FR
16
GER
GER
$7,000
FR
$6,000
SWE
AUS
$5,000
UK
SWIZ
14
CAN
12
JPN
SWE
10
UK
JPN
$4,000
AUS
Note: PPP = Purchasing power parity.
Source: Commonwealth Fund, from OECD Health Statistics 2014. Available at
http://www.oecd.org/els/health-systems/health-data.htm.
2012
2008
2004
2000
1996
1992
1988
1984
2012
0
2008
$0
2004
2
2000
$1,000
1996
4
1992
$2,000
1988
6
1984
$3,000
1980
8
1980
3
U.S. Prices Higher:
Total Hospital & Physician Costs for
Select Procedures in Selected Countries, 2012
US Dollars
AUS
FRA
NETH
NZ
SPA
SWIZ
UK
US
(avg)
US
(95th
%ile)
Appendectomy
$5,467
$4,463
$4,498
$5,392
$2,245
$4,782
$3,408
$13,851
$28,426
Hip
Replacement
27,810
10,927
11,187
14,390
7,731
9,574
11,889
40,364
87,987
Bypass
Surgery
43,230
22,844
14,061
26,432
17,437
17,729
14,117
73,420
150,515
Source: International Federation of Health Plans, 2012 Comparative Price Report: Variation in
Medical and Hospital Fees by Country. Available at
http://hushp.harvard.edu/sites/default/files/downloadable_files/IFHP%202012%20Comparative
%20Price%20Report.pdf.
4
5
Slowdown in Health Spending:
More than just the recession
6
Medical spending increases
have been very slow in recent years
Annual real per capita medical spending growth
Percent
8%
7%
6%
5%
4%
3%
2%
1%
0%
1970
1975
1980
1985
1990
1995
2000
Source: Calculations by David Cutler, Harvard University, based on data from the Bureau of
Economic Analysis and the Centers for Medicare and Medicaid Services (Presented to The
Commonwealth Fund Board of Directors, July 7, 2014).
2005
2010
All payers are spending less
Note: Figures for 2013 are projections.
Source: Based on data from Bureau of Economic Analysis, National Income and Product
Accounts; Centers for Medicare and Medicaid Services; Council of Economic Advisors.
(Presented by Peter Orszag, Citigroup, at Altarum Institute Symposium on Sustainable U.S.
Health Spending: The Quest for Value, July 15, 2014).
7
8
This is more than the recession:
Medicare growth historically not responsive to the economy
Percent
25
Introduction of Inpatient
Prospective Payment System
20
15
10
5
Implementation of
Balanced Budget
Act
0
1980
1984
1988
1992
1996
2000
2004
2008
-5
Annual per-beneficiary Growth
Three-year trailing average per-beneficiary growth
Note: Shaded bars indicate recessions.
Source: Based on expenditure data provided by the CMS Office of the Actuary.
(Presented by Peter Orszag, Citigroup, at Altarum Institute Symposium on Sustainable U.S.
Health Spending: The Quest for Value, July 15, 2014).
2012
Congressional Budget Office: Ten-Year Medicare
Spending Projections, Jan. 2010–Aug. 2014
Projected Medicare Spending ($ billions)
1200
1000
800
600
400
200
Projected Medicare spending in 2020:
As of January 2010: $1,038 billion
As of August 2014: $ 826 billion
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Source: Based on analysis by Chapin White, now of RAND Health, of Congressional Budget Office
projections of Medicare outlays, from Budget and Economic Outlook, various vintages. (Presented
by Melinda Buntin, Vanderbilt University, to The Commonwealth Fund Board of Directors, July 7,
2014.)
Jan-10
Jan-11
Jan-12
Feb-13
Feb-14
Aug-14
Which Supply-Side Factors Might Have
Contributed to the Slowdown?
• Providers’ incentives to deliver care
– Indirect effects of payment rate changes
– Spillover effects of managed care
– Public focus on cost containment
• Changes in care delivery “technology”:
– Care management tools/techniques
– Changes in diagnostic technologies & their use
– Changes in rate of use of therapies, or intensity of use of
therapies
– Care process innovations
– Shifts to lower-cost sites of care
Source: Presentation by Melinda Buntin, Vanderbilt University, to The Commonwealth Fund
Board of Directors, July 7, 2014.
10
Spillover Across Payers
Medicare spending for providers participating in Blue Cross
Blue Shield of Massachusetts Alternative Quality Contract
Source: J. Michael McWilliams, Bruce E. Landon, and Michael E. Chernew, “Changes in
Health Care Spending and Quality for Medicare Beneficiaries Associated with a Commercial
ACO Contract,” Journal of the American Medical Association, August 28, 2013 310(8):829-36.
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30-Day, All-Condition Medicare Readmission Rates
ACA passed
Penalties start
Source: Niall Brennan, Centers for Medicare and Medicare Services, “Findings from Recent
CMS Research on Medicare,” Presentation at AcademyHealth Annual Research Meeting
session on The Centers for Medicare and Medicaid Services Data and Information Products,
June 9, 2014. Available at http://www.academyhealth.org/files/2014/monday/brennan.pdf
12
13
Improved Provider Effectiveness
2012 Healthcare-Associated Infection Rates vs. 2008 Baseline
10%
+3%
0%
-2%
-10%
-4%
-11%
-20%
-20%
-30%
-40%
-50%
-44%
Central LineAssociated
Bloodstream
Infections
Catheter-Associated
Urinary Tract
Infections
Surgical Site
Infections, Colon
Surgery
Surgical Site
Infections,
Abdominal
Hysterectomy
Surgery
Hospital-Onset C.
Difficile Infections
Source: Centers for Disease Control, National and State Healthcare Associated Infections:
Progress Report, March 2014. Available at http://www.cdc.gov/HAI/pdfs/progress-report/haiprogress-report.pdf.
Hospital-Onset
MRSA Bloodstream
Infections
14
Continuing Challenges
Provider Consolidation
Hospitals
• 528 hospitals were involved in mergers/acquisitions between 2010
and 2012
Physician practices
• 29% of MDs now employed by hospitals or hospital-owned
practices (up from 16% in 2007)
• Increase in mean practice size outside hospitals
Dialysis clinics
• Share of top two chains is ~2/3 (up from ~1/3 in 2000); jointly
operate 3500+ clinics
Long-term care pharmacies
• Share of top two chains is now 57%; jointly operate 200+
pharmacies
Source: Presentation by Leemore Dafny, Northwestern University, to Commonwealth Fund,
June 30, 2014.
15
What Is the Cost?
Payment Variation in New Hampshire
Range of Payments to Health Care Providers
Across New Hampshire for Selected Procedures
Emergency
Room Visit–
Medium
MRI–back
(Outpatient)
Insurer A
$444–$2,071
$940–$3,245
Insurer B
$431–$1,099
$797–$3,146
Insurer C
$410–$1,290
$635–$3,586
Others
$490–$1,130
$524–$3,918
Source: NH HealthCost, an official New Hampshire government website. Accessed October
15, 2014 at http://www.nhhealthcost.org. Figures correspond to payments for an insured
patient.
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IOM Findings: Geographic Variations in Medicare
and Private Health Care Spending
• Variation Across Payers
– Spending per person in Medicare and private payers are
not correlated across local regions
• However, utilization of services is correlated
– Geographic variation in Medicare and private $ only
partially explained by health and demographic factors
• Variation Within Payers
– Medicare: Spending varies by 50% across the country
• Post-acute services costs explain disproportionate share of
geographic variation
– Private health insurance: Variation mainly (70%) a result
of differences in prices paid to providers, not use patterns
• Consistency Over Time
High-cost areas remain high
Source: Institute of Medicine. Variation in Health Care Spending: Target Decision Making, Not
Geography. (Washington D.C.: National Academies Press, July 2013).
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No Consistent Relationship between Commercial and
Medicare Spending Across Referral Regions
Relative Commercial Insurance
Spending Per Person, 2009
2
Higher
than
Average
Northeast
South
Midwest
West
1.5
1
Lower
than
Average
Rochester, NY
Honolulu, HI
.5
.5
1
1.5
Lower than Average
Higher than Average
Relative Medicare Spending Per Person, 2008
Source: Commercial – 2009 Thomson Reuters MarketScan Database, analysis by M. Chernew,
Harvard Medical School; Medicare – 2008 Medicare claims as reported by IOM.
2
18
Premiums for Employer-Sponsored Insurance Rising
As Share of Median Income for Under-65 Population
2003
Less than 17%
2012
17 - 19%
20 - 22%
23 - 27%
Note: Total premiums include employer and employee shares.
Source: Commonwealth Fund analysis using 2012 Medical Expenditure Panel Survey–
Insurance Component (average premiums employer-based health insurance); 2011-12 Current
Population Survey (median income for under-65 population).
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19
Sustaining Slowdown Requires
Continued Action
• Payment reform
– Incentives and support for delivery system innovation
– Safeguard access and encourage quality improvement
• Transparency
– On prices, costs, and quality
– For patients and providers
• Align incentives across public and private payers
• Market reforms
– Policies to address consolidation, balance market
power
– Reduce administrative costs
20
What If National Health Expenditures (NHE) Grew
at Same Rate as GDP?
21
Projected 2013–2023 $40.4 T assuming same growth rate
as GDP, compared to $42.9 T with CMS NHE projections.
19.3% of GDP
Cumulative
Difference:
$2.4 T
NHE (in $ Trillions)
$5.0
$4.5
Based on
CMS NHE
Projection
$4.0
17.2% of GDP
$3.5
Actual
$3.0
Growing at same
rate as GDP
$2.5
$2.0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Data Source: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health
Statistics Group. 2007-2023 National Health Expenditures, Projected. Available at
http://cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-andReports/NationalHealthExpendData/NationalHealthAccountsProjected.html.