Study: The Issue Really is Prices

05.21.2012 - Value Based Purchasing

Higher prices charged by hospitals, outpatient centers and other providers drove up health care spending at double the rate of inflation during the economic downturn– even as patients consumed less medical care overall, according to a new study.

Prices rose at least five times faster than overall inflation for emergency room visits, outpatient surgery and facility-based mental health and substance abuse care from 2009 to 2010, says the report by the Health Care Cost Institute, a nonpartisan research group funded by insurers.  Prices declined in only one category: nursing home care, which saw a 3.2 percent drop in the cost per admission.

One of the areas with the fastest growing spending, meanwhile, was children's medical care.

"The story really does seem to be prices," said Martin Gaynor, chair of the institute's governing board and a health care economist at Carnegie Mellon University.

Representing one of the broadest looks at actual claim payments made by insurers, the study's findings raise questions that go to the heart of the nation's $2.6 trillion annual bill for health care: Why are prices for medical services rising far faster than inflation? Is a rapid increase in spending on children an anomaly, or a long-term trend with major implications for future costs?

"If you don't know what the cause is, you don't know what the right policy lever is (for a solution)," Gaynor says

He says the Institute, founded last year to make insurance industry payment data available to the public, will address some of those questions in subsequent research.

The findings are based on about 3 billion claims paid by Aetna, Humana and UnitedHealthcare on behalf of 33 million people with job-based insurance nationwide.  The data represent about 20 percent of the people with insurance nationally, but do not include spending for people who are on Medicare, Medicaid or those who buy their own policies.

The report shows that people with job-based insurance "are paying more and getting less," says Chapin White, a senior researcher at the Center for Studying Health System Change, a nonpartisan think tank in Washington. He did not work on the report.

Hospitals and other medical providers "just seem to be able to raise prices faster than general inflation," he says.

Full story and informative graphis available at the link below