In this episode, we are joined by John Hargraves, Director of Data Strategy and Senior Researcher at HCCI, to discuss their report on trends in healthcare spending, pricing, and use for individuals with employee-sponsored insurance.
Highlights of this episode include:
- Background on HCCI’s report which studied the healthcare spending, use, and pricing for over 40 million individuals covered by employee-sponsored insurance from 2014-2018.
- What were the driving factors behind the increase in per-person spending over the five-year period?
- Why outpatient spending led the way in price increases in HCCI’s study.
- Reasons why inpatient price increases were less aggressive in previous years.
- And more…
Mike Passanante: Hi, this is Mike Passanante and welcome back to the award-winning Hospital Finance Podcast®. Recently, the Health Care Cost Institute released their 2018 Health Care Cost and Utilization Report which looked at healthcare spending, use, and prices for individuals under 65 covered by employer-sponsored insurance. To explain the findings in this report, I’m joined by John Hargraves, the director of data strategy and senior researcher at HCCI. John oversees HCCI’s data infrastructure and data visualizations. He’s also a co-author of the annual healthcare cost and utilization report and contributes to the development of HCCI’s qualified entity initiative. His research focuses on the impact of policy and regulatory changes on healthcare spending and service use. John, welcome back to the program.
John Hargraves: Hi, Mike, thanks for having me. Good to be back.
Mike: Happy to have you back. And for those that, maybe are not familiar with HCCI, can you tell us a bit about what you do there?
John: Yeah, sure. So, the Healthcare Cost Institute was founded in 2011. We are a non-profit, non-partisan research group focusing on healthcare costs and use trends. Go figure. We primarily focus on these trends in the commercially insured population, and that’s the population that’s relatively understudied when looking at the US healthcare system. Most of the research has been done using Medicare claims data, so we’re trying to fill that gap with our data on the commercially insured.
Mike: Great. So, let’s talk about the 2018 Health Care Cost and Utilization Report that you recently published. Explain what that analysis entailed and really what you were looking at.
John: Yeah, sure. So, the Health Care Cost and Utilization Report is kind of a flagship report we put out every year. It usually comes out January or February and looks at the previous five years of commercially insured spending focusing on price, use, and spending per person. We look at the employer-sponsored insured population. So that’s about 160 million people in the US get their health insurance through their employer. And as I mentioned before, historically, it’s a group we haven’t had a lot of data about. So, HCCI’s work is really trying to fill that gap. Our Health Care Cost and Utilization Report– sorry that’s a bit of a mouthful– it uses 25 billion medical and pharmacy claims from four of those largest national insurers. Our research models cost, prices, use, for the entire ESI population. So, the data is weighted to be really representative of all ESI, not just for those people we do have data on.
Mike: And lots of great information in the report, but we’ll focus on some of your topline results. First and foremost, per-person spending increased to $5,892 per person in 2018. Can you talk to us about what drove that increase?
John: Yeah, sure. So, we look at spending– often we talk about spending growth. So, how much has spending increased compared to the prior year. So going from 2017 to 2018 spending grew 4.4%. The two primary drivers of increases in spending are use. Are people using more services? Or price. Is the price of each service going up? So from 2017 to 2018 price was a bigger increase than use but compared to previous years use actually made up a substantial part of that increase in spending growth. So to put numbers to that, prices increased 2.6% from 2017 to 18. Use increased 1.8%. And when we break it down to the types of services we’ve talked about services in categories. Inpatient, inpatient admissions, outpatients, and professional services so that most of the services people are used to going to their physician. Any individual procedures so on and then last pharmaceutical spending. So those four categories are how we kind of bucket our claims and outpatient spending has the largest increase from 2017 to 2018.
Mike: And that’s maybe not surprising given the shift from inpatient to outpatient procedures among healthcare providers. What other information can you share with us about that?
John: Yeah. So specifically, looking at outpatient, as I said, had the fastest spending growth. There was a 5.5% increase in spending per person in 2017 to 2018 and most of that was increases in price and there are kind of two underlying services that make up the bulk of outpatient spending. Emergency room and surgery and when we’re talking about outpatient spending, we’re specifically talking about the outpatient facility spending. If someone has an ER visit, they may have some bills and charges from specific providers. Those would be captured on professional bucket. So we’re not talking about a total cost of care but specifically where the claims come from and so these are outpatient facility and ER and surgery are the two biggest drivers of big growth in outpatient spending and both of those actually have significant increases in price over this period.
Mike: And inpatient price increases were actually a little bit less aggressive than in previous years. Any sense as to what might account for that?
John: So in previous years prices for inpatient admissions had been consistently growing. We see a little dip in the growth rate for inpatient prices but that doesn’t mean they’re not growing so inpatient prices did grow and 2018 we’ve kind of seen there have previously been in the early period 2014/15 a decline in the use of acute inpatient admissions. That’s kind of stabilized. Where we’ve seen kind of the plateauing of price growth is really in surgical medical admissions which are two of the most common categories of inpatient admissions where we’ve seen spending really increase, some price increases. It’s actually in mental health admissions and substance use admissions. So although those don’t make up a large share of overall acute inpatient admission for this population, they’re use has increased a lot in recent years as well as the price.
Mike: And once again, out of pocket costs went up, maybe no surprise there. What kind of detail did you find when you looked at that specifically?
John: So average out of pocket spending averaged a little over $900 per person in 2018. And when we say out of pocket, these are the co-pay, co-insurance, and deductible part of payment per claim. This doesn’t include premiums or any payments that are not captured on a claim. This is really kind of when you go visit the doctor, or have a service done, and there’s that either bill that’s sent to you, later on, that’s a view of this portion. Or you pay a $20 co-pay. That’s what we’re talking about with our out of pocket measures. Over five years 2014 to 2018, out of pocket costs grows an average of about 14.5% which is an increase of $114. So that is a substantial increase. However, that was lower than the total rate of spending growth. So overall healthcare spending actually grew faster than the out of pocket spending. Another interesting thing we include in this year’s report was a little bit on high deductible plans, and the share of people enrolled in high deductible plans. That’s been increasing. In 2018, 33.5% of American’s job-based coverage were enrolled in a consumer-directed or high deductible plan. That’s 7.7 percentage points higher than we saw in 2014.
Mike: Great information and findings, John. If someone wanted to get a copy of the report where can they go?
John: So they can go visit our website, which is healthcostinstitute.org. And right on our homepage, they’ll see Health Care Costs and Utilization Reports. And you can click on that to access the most recent version and any of the previous year’s reports. We also make sure to include downloadable data sets. So the underlying data for all of the charts and all of the text in our group reports is available for download. All of our reports and the data publicly available on our website. This year’s report actually has a state-level add-on. So it’s an interactive tool people can use if they’re interested in the spending trends in their state. In comparing it to other states have a national average just especially relevant to policymakers out there. And I think we’re all interested in looking at some of that geographic variation. There’s a local map.
Mike: Interesting stuff, John. John Hargraves, thanks so much for joining us again on the hospital finance podcast.
John: Thanks for having me. I always enjoy talking to you.