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Higher Prices Drive Cost Increases in Employer-Sponsored Insurance Plans

"Despite some increases in utilization,HCCI found spending growth was driven primary by increases in prices paid."

That's the bottom line of a report just released by the Health Care Cost Institute (HCCI) which found that per capita healthcare spending for employer-sponsored health insurance plans rose by 4.6%, breaking the trend of decreasing "increases" seen over the past three years. (NOTE: this report focuses on spending as measured through claims, not on premiums)

Major findings include:

  • Spending levels grew fastest for outpatient facility services at a rate of 6.8%. Outpatient utilization increased 2.1% and prices for visits grew at 5.0% and prices for services grew at 4.6%. Outpatient facility claims are for services NOT provided in a physician office or inpatient.
  • Inpatient admissions declined by 0.5% but prices rose 5.3%. Prices also outpaced increases in intensity of services.
  • Professional procedures represented the highest level of per capita spending. Utilization of these procedures increased 1.2% and prices paid rose by 3.3%.
  • Beneficiaries paid about 16% percent of the total per capita expenditure out-of-pocket, and saw a 4.6% increase in their per capita spending over 2010..
  • Health plans and employers saw their per capita spending rise by 4.5%.

So, bottom line, although there were some increases in utilization and some increases in the intensity of care provided, the driving factor for overall increases in spending was PRICE. 

Price is traditionally negotiated and, therefore, employers and their health plans need to understand how price is impacting total spending and evaluate ways to have a positive impact on price without allowing the delivery system to make up any short-fall in price with a related increase in utilization. This will require employers and plans to move away from the traditional fee-for-service model toward global budgeting or other models that create a shared risk with providers.

Read the full report.

Learn more about global payments and how they remove the economic incentives for providers to deliver MORE services and/or MORE EXPENSIVE services.

Posted by Cristie Travis at 1:47 PM

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