Today’s Managing Health Care Costs Number is 4.6%
The Health Care Cost Institute published its third annual compendium of health care costs for employer sponsored health insuranceduring Thanksgiving week, and total costs of providing medical coverage for the employer sponsored population went up by 4.6% - more than in the previous two years that HCCI has evaluated.
Price growth (as opposed to utilization growth) continued to drive the total cost of care. Inpatient utilization declined by almost 4% (but prices went up by over 6% -which more than wiped out any potential savings. Prescription utilization went down very slightly –but price per unit was up 9%, and outpatient and professional utilization went up a bit – but the price increases drove more of the total cost trend.
Primary care problem-focused office visits dropped (they have decreased at an annualized rate of 4.7% since 2012). However, primary care preventive visits (those annual exams that are not all that useful) went up by 2%. Specialist visits also increased by 2.4%– and there are more visits to specialists than to PCPs.
The HCCI data continues to show us that our main challenge is cost per unit – as opposed to decreasing utilization. High deductible health plans have been effective at lowering utilization – but there is little that health plans have been able to do consistently to lower unit prices. The most promising approaches include:
· Narrow networks (restricted to high quality providers with lower unit prices)
· Tiered networks (where patients pay more out of pocket to see the providers with higher unit prices)
· Transparency tools, which help patients know in advance the price of a provider that they intend to see. However, the “friction” involved is high – and it’s been a challenge to show that patients effectively use these tools. (Castlight published one study showing that imaging unit costs were lower for those who used its transparency tool - although this hasn’t been replicated).
· Reference pricing –where the insurer covers up to a reference price and all costs beyond that are out of pocket – is only practical for high ticket expenses.
There are a number of third parties which have programs to lower unit cost. Vitalshas gotten substantial press- it has worked with a number of states to give patients a share of savings from going to less expensive providers, largely for imaging and for drug infusions. There are a number of companies that run call centers that promise higher touch and the ability to direct patients to higher value providers, although these have not published peer reviewed results. Health plans also promise to direct their members to more cost-effective providers.
Most developed countries have national fee schedules –and providers are not allowed to charge what are regarded as excessive fees. Clearly, this is not likely to be acceptable in the US.
Lower prices are natural in industries with healthy competition (look at the progressive decreases in costs of computers or clothing.) But lower prices require disruptive innovation –and the health care industry regulations and payment methods encourage accretive innovation that raises costs, even if improvement of quality is miniscule. It’s painful for an industry to accept lower prices –and lower prices can mean substantial cutbacks given fixed costs.
The hospital industry agreed to decreased Medicare fee increases in part to gain more insured patients as part of the Affordable Care Act, and is already advocating that any repeal include restoring the higher future Medicare rate increases.
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