UNDERSTANDING THE

HEALTHCARE COST CONUNDRUM

The Facts

� Healthcare in the US – 18% GDP

� One of every three new jobs, 2007-2017

� US spends two times what other wealthy countries spend

What’s Driving Spending?

~30% of healthcare spending is wasteful

IOM (Institute of Medicine). 2013. Best care at lower cost: The path to continuously learning health care in America. Washington, DC: The National Academies Press.

Source: Factors Associated With Increases in US Health Care Spending, 1996-2013 JAMA. 2017;318(17):1668-1678. doi:10.1001/jama.2017.15927

Price and intensity have been the primary drivers of U.S. spending growth

Healthcareconsolidationtrends

highlyconcentrated

Source:DMCutler,FScottMorton,Hospitals,MarketShare,andConsolidation,JAMA.2013;310(18):1964-1970.

Healthcareconsolidationtrends

Source:Fulton,BD.HealthCareMarketConcentrationTrendsintheUnitedStates:EvidenceandPolicyResponses.HealthAffairs.2017;36(9):1530-1538.

%ofmarketsthatarehighlyconcentrated:

65%ofspecialtyphysicianmarkets

57%ofinsurermarkets

39%ofprimarycaremarkets

HospitalConsolidationàHigherPrices

Source:GaynorM,TownR,Theimpactofhospitalconsolidation–update,RobertWoodJohnsonFoundation,TheSynthesisProject,ISSN2155-3718(June2012).

Hospitalconsolidationleadstosignificantlyhigherpricesinconcentratedmarkets.Estimatedpriceincreases:20-40%

Author/Year Result

Dafny(2009) Merginghospitalshad40%higherpricesthannon-merging

Haas-Wilson,Garmon(2011)

Post-merger,EvanstonNWhospitalhad20%higherpricesthancontrols

Tenn(2011) Summit/Sutterpricesincreased28%-44%comparedtocontrols

• Patientoutcomesareworseinmoreconcentratedmarkets,wherehospitalsorphysiciansfacelesscompetition

• Hospitalownershipofphysicianpracticesledtohigherreadmissionratesandnobetterqualitymeasures

Averageinflation-adjusted,standardizedpaymentratesperinpatienthospitalstay,byprimarypayer,1997-2015

Prices for inpatient hospital stays have grown faster for private insurance than for Medicare or Medicaid

Note:Theaveragepaymentrateswerecomputedasifeachprimarypayerpaidforallnon-maternityadultstaysinagivenyear.Paymentswereadjustedforinflationandstandardizedacrosspayersintermsofpatient’sage,sex,race/ethnicity,geography,householdincomeasapercentageofthefederalpovertylevel,conditions,charges,length-of-stay,andwhetherornotasurgicalprocedurewasperformed.Theywerenotstandardizedforchangesovertimeinthebundlesoftreatmentsandservicesprovidedduringinpatientstays.Source:ThomasM.SeldenanalysisofAHRQ’sMedicalExpenditurePanelSurveyfortheKaiserFamilyFoundation.Updateofearlieranalysis,availablehere:https://www.healthaffairs.org/doi/abs/10.1377/hlthaff.2015.0706

$11,840

$19,975

$11,186$11,868

$9,379 $9,071

$-

$5,000

$10,000

$15,000

$20,000

$25,000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Privateinsurance Medicare Medicaid

The Cost Shifting Challenge

�  Underpayment by Medicare & Medicaid ÷ Cost shift to other payers ÷ Community Benefit

�  Would equalizing public & private payment rates reduce cost shift? ÷ One recent study* found hospitals receiving an unexpected 10% increase in Medicare

payment rates… •  Added new technology •  Increased nursing staff •  Increased payroll by 1/3rd

* Skinner J, Chandra A. Health Care Employment Growth and the Future of US Cost Containment. JAMA. 2018;319(18):1861–1862. doi:10.1001/jama.2018.2078

Source: Kaiser Family Foundation analysis of National Health Expenditure (NHE) data from Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group

Drug spending has grown rapidly recently, but most of the health dollar is spent on hospitals and physicians

Source: Kaiser Family Foundation analysis of Consumer Expenditure Survey

The share of household budgets devoted to health expenses has been increasing

Averageportionofhouseholdbudgetdevotedtohealth(nonelderlyfamilies),2002-2012

2.1%

3.1%

4.4%

5.2%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Out-of-pocketcosts:

Insurancepremiums:

Totalhealthexpenses:

176%

-38%

67%

29%

-50%

0%

50%

100%

150%

200%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Spending on deductibles and coinsurance have far outpaced wages, while copayments have fallen

Source: Truven Health Analytics MarketScan Commercial Claims and Encounters Database, 2005-2015; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey, 2006-2016 (April to April).

Cumulativeincreasesinhealthcosts,amountspaidbyinsurance,amountspaidforcostsharingandworkers’wages,2005-2015

Coinsurance

Wages

Copayments

22%

8%

7%

7%

6%

5%

Healthcarecosts

Medicare/seniorconcerns

Repealing/oppositiontotheAffordableCareAct

Improvehowhealthcareisdelivered

Increaseaccess/decreasenumberofuninsured

Single-payersystem

NOTE: Only top six responses listed. SOURCE: Kaiser Family Foundation Health Tracking Poll (conducted February 15-20, 2018)

Health care costs is the top health care issue voters want 2018 candidates to talk about

Whilethisyear’selectionisstillalongwayoff,whathealthcareissuedoyoumostwanttohearcandidatestalkaboutduringtheirupcomingcampaigns?(open-end)

AmongRegisteredVoters: