Ten-Year Report of Health Claims Shows Spending Rose in Every Area

Despite efforts over the past decade to wring more value from healthcare in an effort to contain spending, healthcare spending as measured by those with employer-sponsored health insurance rose by 44% over the past decade, according to a new analysis from the Health Care Cost Institute (HCCI).

The 10-year analysis, published online Wednesday in Health Affairs, noted that spending soared even as the past decade saw a recession, the changes brought by the Affordable Care Act, new technologies and costly drugs, and new payment methodologies and demands on providers, such as through bundled payments, the creation of accountable care organizations, and other industry shifts.

While most lay discussion about healthcare spending of late has focused on public spending on Medicare and Medicaid, the authors noted the much larger effect that private employer-sponsored health insurance has had as a share of expenditures.

Read more about employer-based health insurance.

In 2016, 54% of Americans obtained health insurance through their workplace, and they are responsible for most of the spending on healthcare. Healthcare spending by private health insurance plans totaled more than $1.12 trillion in 2016, far exceeding Medicare spending ($672 billion), the authors wrote.

In addition, federal subsidies for employer-sponsored insurance, in the form of excluded premium contributions from income and payroll taxes, were estimated to be $268 billion in 2016—comparable to federal spending on Medicaid for the low-income and working poor under the age of 65.

HCCI, an independent, nonpartisan research organization that analyzes the causes of the rise in health spending, is funded partly by 4 insurers that contribute claims data. For this study, HCCI used claims data for abut 40 million covered lives from Aetna, Humana, and UnitedHealthcare for the years 2007 to 2016 and from Kaiser Permanente for the years 2012 to 2016.

All spending measures were measured on a per capita basis and included total per capita spending (from both payers and enrollees) on all healthcare services. Spending was also separated into 4 major service categories: inpatient hospital, outpatient facility, professional services, and prescription drugs.

The report showed that the out-of-pocket (OOP) spending burden has shifted away from prescriptions and to medical services. Healthcare spending rose 44% from $3752 per person with employer-sponsored insurance in 2007 to $5394 in 2016.

During the 10 years, there was an annual average growth rate of 4.1% but with dramatic variation. The annual growth rate dipped from a high of 6.3% in 2009 to a low of 2.6% in 2014, climbing again to an average of 4.4% growth in 2015 and 2016.

“The past decade has been a transformational time in US health care market with policy changes and innovation disrupting practice models and standards of care,” Niall Brennan, MPP, president and chief executive officer of HCCI and one of the study’s coauthors, said in a statement. “However, what is remarkable is that even within these dramatic changes, the share of spending across service areas has remained fairly consistent.”

The study found:

• Brand-name prescriptions, emergency department visits, and outpatient surgery drove 48% of the per capita spending increase. The largest dollar increase in per capita spending was for brand-name prescriptions, but the share of spending for brand-name drugs rose just 1%.
• The share of spending for outpatient care, including outpatient surgery, increased while spending on inpatient medical and surgical admissions declined.
• Per capita OOP spending increased by 43%, driven by outpatient and professional services, with the largest increase seen in spending for emergency department visits. However, there was a decline in the per capita OOP spending on brand-name and generic prescription drugs.

Brennan said additional research is needed on the healthcare utilization and spending trends for people with employer-sponsored health insurance. Absent that research, “it will be difficult to develop appropriate and effective policies,” he said.

Amanda Frost, a senior researcher at HCCI and the lead author of the study, explained some of the takeaway messages from the report in an interview with The American Journal of Managed Care^®.

Cyclical patterns are evident in healthcare spending, Frost said, and lower healthcare spending in 2009 happened across all health services, suggesting the widespread effects of the recession. Other researchers have noted the effect of unemployment and other economic downtowns on healthcare spending, suggesting that this is a pattern that is likely to repeat, she said.

Second, the uptick in spending growth occurred across all categories of services.

“That we were seeing spending going up everywhere, I do think was a bit of a surprise,” she said. Utilization is declining, but spending almost uniformly went up across the board.

Third, researchers were surprised that given the increase in enrollment in high deductible health plans (HDHPs) over the past decade, particularly over the past 5 years, total spending was increasing at almost the same rate as OOP spending. Enrollment in HDHPs, which stood at about 5% in 2007, grew to 29% in 2016, and typically, HDHPs tends to hold down healthcare spending, Frost noted.

Previous research by Frost and another study coauthor, Kevin Kennedy, has found that total spending by people in HDHPs tend to be lower even as their OOP costs rose. They had expected, for this study, that OOP costs would have risen faster than total costs, she said.

Frost said HCCI views this 10-year report as “a starting point” to help identify the next step, whether that means questions policy makers should be asking or areas of additional research.

The study had several limitations. While the data sample represents more than 25% of the population with insurance through the workplace, it may not be completely representative at all subnational levels with this insurance type. It excludes spending trends for patients with public insurance. And the per capita health spending data includes healthcare services and prescription drugs, but not health insurance premiums paid by employers and employees, or information on drug rebates and coupons.

Reference

Frost A, Barrette E, Kennedy K, Brennan N. Health care spending under employer-sponsored insurance: a 10-year retrospective. [published online September 19, 2018]. Health Aff (Millwood). doi: 10.1377/hlthaff.2018.0481