Medical Costs Rise 7.8 Percent in 2010 for Family of Four: Milliman

June 7, 2010June 7, 2010 J Roberts

Healthcare Financial News

Medical costs are on the rise again in 2010. Read the article and then go to the report from Milliman that details the rise in costs for the third straight year in a row.

The medical costs paid by and on behalf of a typical U.S. family of four reached $18,074 in 2010, up 7.8 percent over the 2009 amount of $16,771, according to the 2010 Milliman Medical Index. For the third consecutive year, the annual rate of increase has been less than 8 percent, but the dollar increase is the highest in the past 10 years. Inpatient and outpatient facility services combined represent 48 percent of the total annual medical costs, up from 47 percent last year, according to the index. Physician services represent 33 percent, prescription drugs represent 15 percent, and miscellaneous services represent 4 percent.

Over the past five years, pharmacy care and facility costs, especially outpatient facility costs, increased at a higher average annual rate than physician services, the report states. The largest dollar increase in 2010 was for inpatient facility care, which rose by $498 annually. The increase includes change in both utilization and average unit cost. Average unit cost reflects the negotiated charge for each service and the service mix, according to Milliman.

Most of the hospital and physician cost increases noted in the 2010 index have been driven by average unit cost, not utilization, which frames the future cost-control effort, according to the report. Hospital and physician services contributed $820 and $301, respectively, to the increase in total annual medical costs between 2009 and 2010, while pharmacy services contributed $151.

As in 2009, medical costs in three cities (Miami, New York, and Chicago) continue to surpass the national average by at least 10 percent. Costs in all three cities now exceed $20,000 for a typical family of four, with Miami at $22,089. Phoenix and Seattle continue to have costs much lower than the national average.

Increase in health tests, procedures is raising costs in frugal Utah

May 24, 2010 J Roberts

The rising cost of healthcare is everywhere. Even in small town communities, where spending tends to be small or limited, people can’t avoid the increase in healthcare costs. What’s driving the increase? It appears to be over utilization. Essentially, this means that the number of test and procedures is on the rise. This is due to the addition of new surgical and other specialty suites and increased technology at hospitals. These services are all paid for on a fee-for-service type arrangement – meaning the more test one does, the more the doctor or the facility performing the test or service will receive in payment.

By Jordan Rau

Kaiser Health News

PROVO, UTAH — If there is any place that should have medical spending under control, this is it. Residents of Provo, many of them Mormons who don’t smoke or drink, are among the healthiest in the country. The city’s biggest hospital is run by Intermountain Healthcare, which President Obama has lauded for providing high-quality care while restraining costs.

Until recently, Provo seemed to be a model for the nation. But spending on Medicare patients here has accelerated rapidly, as it has in many other areas of the country that are known for cost-efficient care.

The culprit: a swift increase in the number of procedures and tests being performed — a trend that has coincided with the additions of new surgical and cancer treatment suites and diagnostic machines at hospitals and clinics throughout the growing region.

“It’s very discouraging to see costs increasing rapidly in those low-cost areas we believe to have good care,” said Paul B. Ginsburg, president of the Center for Studying Health System Change, a Washington-based research group. “They appear to be succumbing to the same forces that have led to high costs elsewhere.”

This transformation calls into question initiatives — including some in the new health-care law — to encourage more profligate regions to learn from their frugal counterparts.

Medicare spending trends often parallel those in the country’s overall health system, experts say. In 2007, average Medicare spending per person in the greater Provo hospital market was $8,064. That was below the national average of $8,682, but far higher than it had been a few years earlier.

Between 2000 and 2007, Medicare spending in the Provo region rose on average 8.6 percent a year, nearly double the average national rate of 4.7 percent, according to the Dartmouth Atlas of Health Care, which analyzes geographic variations in medical spending. Provo’s growth occurred as Medicare beneficiaries underwent surgeries more frequently and spent more of their dying days in intensive care units.

Provo’s spending increases aren’t an aberration. Annual average spending grew 7 percent or more in other traditionally low-cost areas, including Oxford, Miss.; Wausau, Wis.; and Durham, N.C. Even in Rochester, Minn., home of the highly regarded Mayo Clinic, and Salt Lake City, where Intermountain is headquartered, Medicare costs grew faster than the national average, according to Dartmouth.

The increases are particularly worrisome in places where many providers have made changes to try to reduce costs. These include adopting electronic medical records, focusing on prevention and increasing cooperation between doctors and hospitals.

But Provo’s regional hospital market, which stretches south of Salt Lake City and includes nearly 27,000 Medicare beneficiaries in a population of more than half a million, also has embraced some of the less admired traits of expensive health-care markets.

Many doctors have set up their own large clinics where they share in the profits from diagnostic tests and other services. Physicians in the Provo region performed 17.3 percent more procedures on Medicare patients in 2008 than they did in 2000, outpacing the median national increase of 13.7 percent, according to a Government Accountability Office study.

“The first surgical center in Utah County was built by a physician from the hospital,” said Rulon Barlow, a former county health commissioner who runs the student health center at Brigham Young University in Provo. “So what did the hospital do? It built a surgery center. It wasn’t too much longer that another outfit came in across the street.”

Wendell Gibby, a radiologist who owns an imaging clinic, said he has seen a dramatic change in the area. “The gastroenterologists owning their own CT scanners, the oncologists owning their own radiation machines” are examples, he said. “If you’ve got a $1 million scanner, you end up using it.”

Hospital executives and doctors insist that they guard carefully against performing unneeded procedures. Scott E. Bingham, a cardiologist at the Central Utah Clinic, said: “The only thing that I see increasing in Provo is the number of patients we see.”

And Mike Kennedy, a family doctor and the chief of staff at the Hospital Corporation of America’s Timpanogos Regional Hospital in Orem, just north of Provo, speculates that the higher costs are the result of better care. “You’re probably seeing more aggressive treatment earlier on in disease stages,” he said.

But some treatments were being performed more frequently in Provo while decreasing nationally, according to Dartmouth data covering 2000 through 2005. They included operations to clear leg arteries and replace heart valves.

The number of aortic-aneurism repairs and hospitalizations for hypertension and asthma also rose faster than the national average. Though many procedures are still performed less frequently than elsewhere, a Dartmouth study released in April singled out Provo for having the highest rate of shoulder-replacement surgery in the country.

Commercial insurers say prices in Provo and the rest of Utah still remain lower than the national average. But experts say that could change, too.

“We take some comfort that we have less of a problem in Utah than elsewhere,” said Kim Bateman, vice president for medical affairs at HealthInsight, a Salt Lake City-based nonprofit organization that Medicare has authorized to find ways to improve the quality of care in Utah and Nevada. “But really I think we’re just behind them on the same curve — that we’re going to be subject to the same kinds of cost pressures as everyone else.”

Healthcare Spending Expected to Have Outpaced GDP Growth

February 10, 2010 J Roberts

Healthcare Financial News

Healthcare spending is on track to grow faster than the nations GDP for 2009. Unfortunately, we’ve seen this trend for the past few years and 2010 will promise nothing different. One thing is for certain, to combat the increased expenditure in medical services, employers and health insures alike are passing more costs onto employees and consumers.

Growth in U.S. national health expenditures (NHE) is expected to have increased faster than the growth in the gross domestic product (GDP) in 2009, according to a report issued today by the Centers for Medicare & Medicaid Services (CMS) and published online by Health Affairs. In 2009, NHE is projected to have reached $2.5 trillion and grown 5.7 percent, up from 4.4 percent in 2008 (the latest available historical year), while GDP, with the economy still in recession, is anticipated to have declined 1.1 percent. Health spending estimates for 2009 are projected because data for all of CY09 are not yet available.

The projected acceleration in growth for 2009 was due in part to faster spending growth for the Medicaid program (9.9 percent, up from 4.7 percent in 2008), reflecting increasing growth in enrollment associated with the recession. Also contributing to the acceleration was faster growth in the use of a variety of healthcare services as many people sought treatment for the H1N1 virus and an expected increase in the take-up rate for coverage provided through COBRA in response to the government’s subsidies for COBRA premiums. As a result of NHE growth outpacing GDP growth in 2009, the health share of GDP is expected to have increased from 16.2 percent of GDP in 2008 to 17.3 percent in 2009, which would represent the largest one-year increase in history.

Spending growth in three of the major healthcare sectors is expected to have accelerated in 2009. Hospital spending growth is expected to have increased 5.9 percent in 2009, up from 4.5 percent in 2008, and reached $760.6 billion. Physician and clinical services spending growth is expected to have increased 6.3 percent in 2009, up from 5.0 percent in 2008, and reached $527.6 billion.

Health-Care Costs Rise for 2009

June 22, 2009June 23, 2009 J Roberts

Washington Post – Online

Medical costs continue to rise for American’s, even those with Health Insurance. The latest report from the health care consulting firm Milliman puts the cost at $17,000 a year for a family of four. Consistent with trends, the prediction is that more employers will shift the cost onto employees leaving them to pay more.

Families of four may want to stash away roughly $17,000 this year to pay for the cost of health-care services, according to the recently-released Milliman Medical Index. Produced by a consulting firm that advises health-care plan sponsors and participants, the MMI serves as a measure of the average annual medical spending of typical American families covered by a PPO. This year’s $17,000 price tag reflects a 7.4 percent increase from 2008. The median family income in 2008 was around $67,000, and if that amount does not change significantly, then this year’s projected spending represents about 25 percent of a family’s income.

Health economist Jane Sarasohn-Kahn crunched the 2009 projected cost in her blog, Health Populi and concluded that a rise in outpatient costs triggered this year’s projected increase. Outpatient costs have risen 10 percent this year, according to the MMI. Unit cost, rather than utilization, has gone up. As Congress continues to debate health-care reform, Sarasohn-Kahn believes companies will be unable to help cover the rise in health-care costs. She projects in her blog that “employers who sponsor health insurance will lay more health cost burden onto insured employees as their subsidy declines and the worker’s subsidy increases.”