Higher prices for medical services caused per-person healthcare spending to increase by 4.2% in 2017.
Higher prices for medical services caused per-person healthcare spending to increase by 4.2% in 2017, according to a webinar presented by the Health Care Cost Institute (HCCI). While there was only a small change in utilization of services, average yearly healthcare spending for individuals with employer-sponsor insurance grew to an all-time high of $5641 in 2017.
“Increases in spending can arise from increases in use, increases in average prices, or a combination of both,” John Hargraves, senior researcher and co-author of the report, said in a statement. “The change in the composition of services can also affect spending. After adjusting for changes in the mix of services, we see that prices do drive per person spending growth.”
HCCI reports that annual healthcare-related spending per person was $4834 in 2013 and continued to grow annually ever since. These rising costs can be attributed to increased prices, which have grown total healthcare spending from 2016 to 2017 by over 4% for the second consecutive year. This number includes spending costs for both pharmacy and medical claims. However, while spending costs continued to rise, utilization was found to be stagnant or to have fallen.
“Americans aren't using more health care services, which means we’re essentially paying more and more for the same amount of health care,” Niall Brennan, president and CEO of HCCI, said in a statement.
Beginning in 2011, HCCI has monitored, examined, and documented annual expenditures, utilization, and costs for individuals up to 65 years old with employer-sponsored health coverage. More than 4 billion claims from 40 million individuals were recorded. These claims were from 4 of the biggest health insurance providers in the United States, which included Aetna, Humana, Kaiser Permanente, and UnitedHealthcare, and make up nearly 26% of the population with employer-sponsored insurance.
The findings have been published yearly in HCCI’s Health Care Cost and Utilization Report, which compares varying tendencies in healthcare. Although certain trends have been found to fluctuate, one constant is that overall costs have continued to rise. While some individuals may encounter higher prices for their specific care, others may see their costs remain similar from year to year.
“Spending and spending trends are really diverse. Just because healthcare spending is going up overall does not actually mean that all types of healthcare spending are increasing,” said Brennan.
As overall healthcare costs have continued to rise, the burden of financing these expenditures has increasingly fallen on consumers. The analysis found that total out-of-pocket spending continued to rise each year, increasing a total of 12.2% between 2013 to 2017. Additionally, premiums for employer-sponsored insurance have increased by 14% for individual and 15% for family plans.
The HCCI report examined 4 groups of healthcare services and discovered that while spending growth was driven by prices, utilization was wide-ranging. Hargraves explained that professional services, such as office visits, “The largest component of spending was professional services, such as office visits, and it accounted for nearly one-third of spending.” HCCI found costs of professional services grew rapidly by 13% from 2013 to 2017.
“The one category that stands out as far as increased spending was administered drugs. Spending increased 45% while use declined 12%,” Hargraves added.
During the same span of time, inpatient spending increased by 10% although utilization fell by 5%. Inpatient care for mental health and substance abuse was particularly found to rise considerably. Substance abuse admissions rose by 18% with a corresponding 39% increase in prices. Spending also grew for outpatient visits and procedures by 5%, driven by surgeries and emergency department visits. Use of prescription drugs expanded by 3%, growing by point-of-sale prices and leading to an overall spending increase of 4.7%. The total increase in spending on prescription drugs and medical devices was 29% between 2013 and 2017.
Individuals suffering from chronic illness were also found to have encountered extreme healthcare costs.
“We also looked at spending for individuals diagnosed with 1 of 5 chronic conditions,” Jeanie Fuglesten Biniek, senior researcher and coauthor of the report, said. “Those include hypertension, asthma, diabetes, attention deficit hyperactivity disorder, and congestive heart failure. Average spending for individuals with 1 of those 5 conditions was about $8900 in 2017 compared to just $3600 for people with none of these conditions.” The report also found that individuals with 2 or more chronic conditions faced even higher costs.
Healthcare spending also varied substantially among differing age groups. In 2017, individuals 18 years old and under had average spending of $3170 compared to $10,476 for those in the 55 to 64 age group. The reported number of claims for healthcare services and prescription drugs was also significantly impacted by individuals in diverse age-groups. In total, 25.5% of the employer-sponsored insurance population did not have any claims. 40.4% of individuals between 19 and 25 had no claims compared to 15.8% in the 55 to 64 age group.
“Our final takeaway is that people are spending more because prices are rising,” Hargraves concluded. “That brings us to the broader question of what are those higher costs buying us?”