Download presentation
Presentation is loading. Please wait.
1
U.S. Health Care Costs: Trends and Implications Cathy Schoen, Mark Zezza, and Stu Guterman October 2014
2
2 International Spending: The U.S. spends much more than any other country U.S. with the pack in 1980, but then took off Almost $8,000 per person / 18% of GDP by 2009 Difference as a share of GDP between US and next highest countries (Norway and Switzerland at about 12% equals $750 Billion per year This is more than Social Security, more than Defense and about equal to federal, state and local spending on education. IF we go slowly enough to reach 16% of GDP in the future – still much higher than any other country – it would release about $300 Billion to the economy. Could be redirected to schools, engineering, roads/trains, toxic waste, housing, alternative energy sources. Alternative housing for frail elderly and disabled with support to manage chronic conditions to avoid nursing homes and frequent trips to emergency departments Double or more than double what is spent in many other wealthy countries
3
U.S. Spending Higher: Health Spending in Selected OECD Countries, 1980–2012
3 Average spending on health per capita ($US PPP) Total health expenditures as percent of GDP U.S. with the pack in 1980, but then took off Almost $8,000 per person / 18% of GDP by 2009 Difference as a share of GDP between US and next highest countries (Norway and Switzerland at about 12% equals $750 Billion per year This is more than Social Security, more than Defense and about equal to federal, state and local spending on education. IF we go slowly enough to reach 16% of GDP in the future – still much higher than any other country – it would release about $300 Billion to the economy. Could be redirected to schools, engineering, roads/trains, toxic waste, housing, alternative energy sources. Alternative housing for frail elderly and disabled with support to manage chronic conditions to avoid nursing homes and frequent trips to emergency departments Double or more than double what is spent in many other wealthy countries Note: PPP = Purchasing power parity. Source: Commonwealth Fund, from OECD Health Statistics Available at
4
U.S. Prices Higher: Total Hospital & Physician Costs for Select Procedures in Selected Countries, 2012 4 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
5
Slowdown in Health Spending: More than just the recession
5 Slowdown in Health Spending: More than just the recession U.S. with the pack in 1980, but then took off Almost $8,000 per person / 18% of GDP by 2009 Difference as a share of GDP between US and next highest countries (Norway and Switzerland at about 12% equals $750 Billion per year This is more than Social Security, more than Defense and about equal to federal, state and local spending on education. IF we go slowly enough to reach 16% of GDP in the future – still much higher than any other country – it would release about $300 Billion to the economy. Could be redirected to schools, engineering, roads/trains, toxic waste, housing, alternative energy sources. Alternative housing for frail elderly and disabled with support to manage chronic conditions to avoid nursing homes and frequent trips to emergency departments Double or more than double what is spent in many other wealthy countries
6
Medical spending increases have been very slow in recent years
Annual real per capita medical spending growth Percent Source: Calculations by David Cutler, Harvard University, based on data from the Bureau of Economic Analysis and the Centers for Medicare and Medicaid Services (Presented to The Commonwealth Fund Board of Directors, July 7, 2014).
7
All payers are spending less
Note: Figures for 2013 are projections. Source: Based on data from Bureau of Economic Analysis, National Income and Product Accounts; Centers for Medicare and Medicaid Services; Council of Economic Advisors. (Presented by Peter Orszag, Citigroup, at Altarum Institute Symposium on Sustainable U.S. Health Spending: The Quest for Value, July 15, 2014).
8
This is more than the recession: Medicare growth historically not responsive to the economy
Percent Note: Shaded bars indicate recessions. Source: Based on expenditure data provided by the CMS Office of the Actuary. (Presented by Peter Orszag, Citigroup, at Altarum Institute Symposium on Sustainable U.S. Health Spending: The Quest for Value, July 15, 2014).
9
Congressional Budget Office: Ten-Year Medicare Spending Projections, Jan. 2010–Aug. 2014
Projected Medicare Spending ($ billions) Projected Medicare spending in 2020: As of January 2010: $1,038 billion As of August 2014: $ billion 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.)
10
Which Supply-Side Factors Might Have Contributed to the Slowdown?
10 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.
11
Spillover Across Payers
11 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, (8):
12
30-Day, All-Condition Medicare Readmission Rates
12 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, Available at
13
Improved Provider Effectiveness
13 Improved Provider Effectiveness 2012 Healthcare-Associated Infection Rates vs Baseline Source: Centers for Disease Control, National and State Healthcare Associated Infections: Progress Report, March Available at
14
Continuing Challenges
14 Continuing Challenges
15
Provider Consolidation
15 Provider Consolidation Hospitals 528 hospitals were involved in mergers/acquisitions between 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 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.
16
What Is the Cost? Payment Variation in New Hampshire
16 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 Colonoscopy Anthem: 28 Hospitals, Cigna 31, HP 26 MRI Back Anthem: 30 hospitals Outpatient: Cigna 29; HP: 27 Mammogram Anthem: 27; Cigna: 28; HP: 27 Source: NH HealthCost, an official New Hampshire government website. Accessed October 15, 2014 at Figures correspond to payments for an insured patient.
17
17 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).
18
No Consistent Relationship between Commercial and Medicare Spending Across Referral Regions
18 Relative Commercial Insurance Spending Per Person, 2009 Higher than Average Lower than Average Rochester, NY Honolulu, HI 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.
19
Premiums for Employer-Sponsored Insurance Rising As Share of Median Income for Under-65 Population
19 2003 2012 Less than 17% % % % Note: Total premiums include employer and employee shares. Source: Commonwealth Fund analysis using Medical Expenditure Panel Survey–Insurance Component (average premiums employer-based health insurance); Current Population Survey (median income for under-65 population).
20
Sustaining Slowdown Requires Continued Action
20 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
21
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 17.2% of GDP NHE (in $ Trillions) Data Source: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group National Health Expenditures, Projected. Available at
Similar presentations
