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Private insurers blame health care prices

Health Care Cost and Utilization Report: 2010

Health Care Cost Institute
May 2012

The Health Care Cost Institute (HCCI) was created in September 2011 to provide comprehensive data on health care costs and promote independent, nonpartisan research and analysis on the causes of the rise in U.S. health spending.

HCCI’s research activities are based on de-identified data voluntarily provided by Aetna, Humana, Kaiser Permanente, and UnitedHealthcare, four of the nation’s largest insurers.

The 2010 HCCI Health Care Cost and Utilization Report is the first report of its kind to track changes in expenditures and utilization of health care services by those younger than 65 covered by employer sponsored, private health insurance (ESI).

$4,255 -
Average annual per capita health care spending for beneficiaries younger than 65 and covered by employer-sponsored group insurance in 2010.

1.6% & 3.3% -
The consumer price index (CPI-U), a measure of price inflation, and the growth rate of average per capita spending on group ESI beneficiaries younger than 65 (2009-2010). Per capita spending outpaced overall price inflation in 2010.

2.6% & 7.1% -
Growth rate of estimated per capita health care spending by insurers and beneficiaries, respectively, between 2009 and 2010.

Summary of the Executive Summary

We find continued growth in per capita and estimated aggregate health care spending in this population, although that growth is less than 4 percent. This is consistent with the Centers for Medicare & Medicaid Services’ findings regarding national health expenditures. Patients’ out-of-pocket share of prices paid went up, although the cost-sharing rate on a per capita basis (including beneficiaries who did not use services) did not change much. Prices increased across all categories of service, with outpatient services experiencing the fastest growth. Unlike other recent reports on health care spending, we find that the increased spending is mostly due to unit price increases rather than changes in the quantity or intensity of services.

http://www.healthcostinstitute.org/files/HCCI_HCCUR2010.pdf

And...

S&P Healthcare Economic Indices

March 2012 Update

7.84% - S&P Healthcare Economic Commercial Index
2.41% - S&P Healthcare Economic Medicare Index

http://www.standardandpoors.com/indices/sp-healthcare-economic-indices/en/us/?indexId=sp-healthcare-economic-indices

Comment:

By Don McCanne, MD

Until now, much of our information on health care costs has been obtained from government sources - especially Medicare and Census data. The Health Care Cost Institute is an effort on the part of the private insurance industry to share their data in an effort to improve research and analysis on the causes of the rise in U.S. health care spending.

Cooperating in this effort are Aetna, Humana, Kaiser Permanente, and UnitedHealthcare. Conspicuously absent are Cigna, and especially WellPoint.

Many reasons are given for our very high health care costs, but this study adds to the evidence that price increases are the most important factor (except, of course, for the administrative waste that is usually ignored in studies like this). The excess increase in prices is a particularly relevant observation since this study was limited to individuals under 65 with employer-sponsored, private health insurance.

This report establishes beyond any doubt that the nation's largest private insurers have been ineffective in controlling health care prices (not to mention generating more administrative waste). In spite of the contracts that the private insurers have with health care providers, health care price increases continue to greatly exceed the rate of inflation. Also, the most recent S&P Healthcare Indices confirm, once again, that our government Medicare program has been far more effective in controlling per capita health care costs than have the private commercial insurers.

All other nations control health care prices. Medicare controls health care prices. Only our private insurers have been incompetent in slowing price escalation. This is yet more evidence that private insurer intermediaries functioning relatively autonomously in the health care marketplace are ineffective in bringing us better pricing of health care products and services. This is a job for government, not the marketplace.

We are often accused of being unfairly critical of the private insurers since it is not their fault that health care prices are so high. Do we really care whether or not it is their fault? Prices are high, and they haven't helped. They are a profoundly expensive administrative industry. We should continue to waste our vast sums on their ineffective model of price containment?

Look at the growth rates of per capita health spending that they report in this study of their own industry. The spending by the insurers increased at a rate of 2.6%, a feat that they were able to accomplish partly by increasing beneficiaries costs by 7.1%! Is that the kind of assistance that we need from this industry?

It's time to throw them out of the Temple (a biblical proxy for all religious and secular moralists).