Overview of Health Care Coverage and Cost Trends in Minnesota Presentation to the State Budget Trends Study Commission April 22, 2008 Julie Sonier Director, Health Economics Program Minnesota Department of Health

Overview of Presentation  New data on uninsurance and coverage trends  Health care spending in Minnesota: –National perspective –Private insurance market trends: Premiums and claims costs Enrollee cost sharing –Drivers of cost increases

New Data on Uninsurance and Coverage Trends

Uninsurance Rate Trends in Minnesota, 2001 to 2007 Source: Minnesota Health Access Surveys, 2001 to 2007 * Indicates statistically significant difference from previous year shown (95% confidence level).

Sources of Insurance Coverage in Minnesota, 2001 to 2007 Source: Minnesota Health Access Surveys, 2001 to 2007 * Indicates statistically significant difference from previous year shown (95% confidence level).

Access to Employer Coverage, 2001 to 2007 (Non-elderly population) Source: Minnesota Health Access Surveys, 2001 to 2007 Indicates statistically significant difference from previous year shown (95% confidence level). **Among people with a connection to an employer offering coverage. ***Among people eligible to enroll in employer coverage

Potential Access to Coverage for the Uninsured, 2001 to 2007 Source: Minnesota Health Access Surveys, 2001 to 2007 Indicates statistically significant difference from previous year shown (95% confidence level).

Summary of Insurance Coverage Trends  From 2004 to 2007, the uninsurance rate was stable in Minnesota after increasing from 2001 to 2004  The share of the population with employer based health insurance stabilized  It continues to be true that a large share of the uninsured are potentially eligible for public insurance programs  In addition, there continue to be large differences in insurance status by income, age, and race/ethnicity

Health Care Spending -National perspective and trends -Minnesota health care spending -Private market trends -Cost drivers

Health Care Spending as a Share of Gross Domestic Product *Projected. Source: Centers for Medicare and Medicaid Services. Spending estimates as of January 2007; projections as of February 2007.

Minnesota Health Care Spending by Source of Funds, 2005 Source: MDH Health Economics Program Total Spending $29.4 Billion

Minnesota Health Care Spending by Type of Service, 2005 Source: MDH Health Economics Program Total Spending $29.4 Billion

Health Care Spending Trends: Minnnesota and U.S Total Health Care Spending Minnesota U.S. $19.3 billion $1,264.4 billion $29.4 billion $1,860.9 billion Health Care Spending Growth, 2000 to 2005 (avg. annual): Minnesota U.S. 8.8% 8.0% Per Capita Health Care Spending: Minnesota U.S. $3,917 $4,476 $5,742 $6,276 Health Care Spending as a Share of the Economy: Minnesota U.S. 10.5% 12.8% 12.7% 15.0% Sources: MDH Health Economics Program, Centers for Medicare and Medicaid Services (spending for health services and supplies, a subset of total national health spending)

Private Health Insurance Market Cost Trends in Minnesota

Private Health Insurance Premium and Spending Trends, 1995 to 2006 Source: MDH Health Economics Program. Fully-insured market only.

Key Minnesota Health Care Cost and Economic Indicators, 1995 to 2006 Notes: health care cost is MN privately insured spending on health care services per person, and does not include enrollee out of pocket spending for deductibles, copayments/coinsurance, and services not covered by insurance.. Sources: Health care cost data from Minnesota Department of Health, Health Economics Program; per capita personal income from U.S. Department of Commerce, Bureau of Economic Analysis; inflation data from U.S. Bureau of Labor Statistics (consumer price index); workers’ wages from MN Department of Employment and Economic Development

Total Cost Per Person and Health Plan/Enrollee Shares, 1997 to 2006 Source: MDH Health Economics Program.

Health Care Cost Drivers: Spending Growth and Shares of Total Growth by Service, 2004 to 2006 Note: growth rates calculated as annual growth per enrollee over the 2-year period. “Other medical” includes skilled nursing facilities, home health care, emergency services, services of health professionals other than physicians and dentists, durable medical goods, and chemical dependency/mental health. Source: MDH Health Economics Program. Growth RateShare of Spending Growth

Summary of Private Market Premium and Cost Trends  Health insurance premiums and underlying cost growth both increased in 2006 –Reversal of recent trend –Growth continues to be faster than growth in incomes/wages  Enrollee out of pocket spending continues to rise at a faster rate than overall spending  Major drivers of cost for 2004 to 2006 continue to be physician and hospital services –These services are a large share of total spending to begin with

Health Care Cost Drivers

Drivers of Health Care Spending: Many Levels of Analysis $ Spent on Health Care Who pays (employers, consumers, govt, etc.)? What services are purchased (hospital, drugs, etc.)? What causes changes in spending for a particular category of service? Price Quantity Change in mix of services provided Factors affecting price: -Market structure -Labor costs & other inputs -Technology -Economy/general inflation -Other factors Factors affecting quantity/type of services: -Prevalence of disease -Demographics -Lifestyle/behavior -Genetics -Environment -Technology -Consumer and provider incentives - Other factors

How Is Minnesota’s Age Distribution Changing? Sources: U.S. Census Bureau and Minnesota State Demographic Center

Variation in Health Care Spending by Age Source: Agency for HeatlhCare Research and Quality, Medical Expenditure Panel Survey, data for per capita spending by age group in the Midwest. Excludes spending for long-term care institutions.

Obesity Trends* Among U.S. Adults BRFSS, 1990 No Data <10% 10%–14% (*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)

Obesity Trends* Among U.S. Adults BRFSS, 1994 No Data <10% 10%–14% 15%–19% (*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)

Obesity Trends* Among U.S. Adults BRFSS, 1998 No Data <10% 10%–14% 15%–19% ≥20 (*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)

Obesity Trends* Among U.S. Adults BRFSS, 2004 No Data <10% 10%–14% 15%–19% 20%–24% ≥25% (*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)

Trends in Overweight/Obesity in Minnesota Normal Weight Overweight Obese Source: Behavioral Risk Factor Surveillance Survey

Impact of Rising Obesity on Health Care Costs (National study)  Increasing prevalence –Between 1987 and 2001, obesity prevalence increased 10.3 percentage points, while normal weight prevalence declined 13 percentage points  Widening gap between health care spending for obese vs normal weight population –Difference grew from 15% to 37%  As a result of both these factors, obesity-related health spending accounted for an estimated 27% of inflation-adjusted per capita health spending increases –41% of the rise in heart disease spending –38% of the rise in diabetes-related spending Source: Thorpe et al., “The Impact of Obesity on Rising Medical Spending,” Health Affairs, October 2004.

Technology  Advances in technology can be reflected in: –Better diagnosis – more cases identified –Better treatment – more cases treatable –Higher (or lower) cost per treated case  Most economists agree that advances in technology have accounted for a majority of increases in health care spending over time  Recently, we have seen renewed policy concerns about a “medical arms race” –MDH report to the legislature in 2007 on medical facilities highlighted distorted signals that current payment systems send to markets

Technology  Cutler, “Your Money or Your Life”: –In general, technological advance has been “worth it” in terms of benefits that exceed costs –However, there are pervasive problems: Opportunities to prevent the need for high-tech interventions are missed Overuse, misuse, and underuse of care –“You get what you pay for”: The system we have pays well for intensive interventions and doesn’t pay well for care management and prevention David Cutler, “Your Money or Your Life,” Oxford University Press, 2004

Summary  Health care costs continue to grow faster than incomes, wages, and inflation  Erosion of private coverage, driven in part by rising cost, creates pressure on public programs  Some cost drivers, like aging, can’t be changed  Others can be changed. Potential strategies include: –Payment reform –Prevention and health promotion

Contact Information Julie Sonier, Director Health Economics Program Minnesota Department of Health Website: