Scribd Logo
Upload

Welcome to Scribd!

  • 50 views

    UNH Health Care Costs

    Uploaded by

    Lawrence Karuoya Muchira
    There are multiple factors driving rising health care costs in the US according to studies from government agencies and academic experts. No single cause is responsible but rather a complex mix of factors throughout the system. Experts cite rising prices charged by hospitals, physicians, and pharmaceutical companies as the main drivers, accounting for over 95% of cost increases. While utilization is also increasing, the majority of higher spending is due to price inflation, not more use of health services. Chronic conditions and obesity are contributing to greater treatment volumes and costs.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd

    UNH Health Care Costs

    Uploaded by

    Lawrence Karuoya Muchira
    50 views15 pages
    There are multiple factors driving rising health care costs in the US according to studies from government agencies and academic experts. No single cause is responsible but rather a complex mix of factors throughout the system. Experts cite rising prices charged by hospitals, physicians, and pharmaceutical companies as the main drivers, accounting for over 95% of cost increases. While utilization is also increasing, the majority of higher spending is due to price inflation, not more use of health services. Chronic conditions and obesity are contributing to greater treatment volumes and costs.

    Copyright

    © Attribution Non-Commercial (BY-NC)

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    There are multiple factors driving rising health care costs in the US according to studies from government agencies and academic experts. No single cause is responsible but rather a complex mix of factors throughout the system. Experts cite rising prices charged by hospitals, physicians, and pharmaceutical companies as the main drivers, accounting for over 95% of cost increases. While utilization is also increasing, the majority of higher spending is due to price inflation, not more use of health services. Chronic conditions and obesity are contributing to greater treatment volumes and costs.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    50 views15 pages

    UNH Health Care Costs

    Uploaded by

    Lawrence Karuoya Muchira
    There are multiple factors driving rising health care costs in the US according to studies from government agencies and academic experts. No single cause is responsible but rather a complex mix of factors throughout the system. Experts cite rising prices charged by hospitals, physicians, and pharmaceutical companies as the main drivers, accounting for over 95% of cost increases. While utilization is also increasing, the majority of higher spending is due to price inflation, not more use of health services. Chronic conditions and obesity are contributing to greater treatment volumes and costs.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 15

    Why Are Health Care Costs Rising?

    Leading Experts/Real-World Data Identify Multiple Factors Across the System


    March 2010

    Multiple Factors Driving The Cost Of Health Care


    There is no single cause of the escalating cost of health care in America significant cost drivers are embedded throughout the system. Studies from government and academic experts as well as data from UnitedHealth Group illustrate a complex mix of factors responsible for the continuing rise in health care costs. These analyses come from: Congressional Budget Office (CBO) Department of Health and Human Services (HHS) Centers for Medicare and Medicaid Services (CMS) Massachusetts Office of the Attorney General Academic institutions including Dartmouth College, Emory University, and the Center for Studying Health System Change (HSC)

    What The Experts Are Saying


    If you want to keep costs under control, its not about managing health care premiumsits about managing the underlying health care costs.
    - Sandy Praeger, Kansas Insurance Commissioner
    Kaiser Health News: State Regulators Criticize Obama Plan To Create Federal Authority Over Health Insurance Rates, 02/22/10

    "Insurance is not the problem. The problem is incentives. We have payment for procedures, not for results. - Warren Buffet, CEO, Berkshire Hathaway
    CNBC, 03/01/10

    And the elephant in the room that no one has focused on is providers power to get higher rates from insurers. - Paul Ginsburg, Center for Studying Health System Change
    USA Today: Impact of Bipartisan Summit To Be Felt Beyond Health Care, 02/24/10

    "Health insurers have been squarely in the crosshairs and blamed for the high cost of private insurance, while the role of growing hospital and physician market power has escaped scrutiny." - Robert Berenson, M.D., Senior Researcher, Urban Institute
    HSC News Release, Feb. 2010

    Everyone is beating up on the insurance companies, but you may be shooting at the wrong target - Uwe Reinhardt, Economist, Princeton University
    AOL News: Whos the Bad Guy in Insurance Premium Hikes?, 02/21/10

    CBO: Largest Costs In Health Care Today


    Demand Administration and net cost of private insurance Supply
    Hospital Care Physicians & Clinical Drugs Dental Home Health/ Nursing Home Etc.

    CBO Estimates for 2009

    $800B $533B $264B $177B $210B

    300M people across America

    $2.555T 100%

    $0.184T 7%

    $2.371T 93%

    Source: Congressional Budget Office: Key Issues in Analyzing Major Health Insurance Proposals, December 2008

    CMS: Hospitals And Physicians Account For Majority Of Cost Increases


    Hospitals 33% increase

    Physicians, Clinical Professional 34% increase

    Drugs 8%

    Equipment and Construction 8% Dental 7% Other, Including Nursing Homes 5% Private Administration, Net Cost of Insurance 5% increase
    Source: Average annual increases in private expenditures 2003-2008. From National Health Expenditure Accounts, Centers for Medicare and Medicaid Services, HHS.

    Dartmouth: Widespread Regional Variations In Medicare Cost Increases


    Despite this regional cost gap, Dartmouth researchers found that: Quality of care and health outcomes are better in lower spending regions. There have been no gains in survival in regions with greater spending growth.

    Source: Fisher et al, NEJM 360;9 2009

    MA Attorney General: Higher Provider Prices Are Responsible For Cost Increases
    1. Price increases, not increases in utilization, caused most of the increases in healthcare costs during the past few years in Massachusetts. Hospital and physician group prices vary significantly within the same geographic area and amongst providers offering similar levels of service. Price variations are not correlated to:
    quality of care; the sickness or complexity of the population being served; the extent to which a provider is responsible for caring for a large portion of patients on Medicare or Medicaid; or whether a provider is an academic teaching or research facility.

    2. 3.

    4. 5.

    Price variations are not adequately explained by differences in hospital costs of delivering similar services at similar facilities. Price variations are correlated to market leverage, as measured by the relative market position of the hospital or provider group compared with other hospitals or provider groups within a geographic region or within a group of academic medical centers.
    Source: Massachusetts Attorney Generals Office: Investigation of Health Care Cost Trends and Cost Drivers, Preliminary Report, January 29, 2010

    HSC: Provider Consolidation Pushing Payment Rates, Premiums Higher


    Researchers from The Center for Studying Health System Change cite a definite shift in negotiating strength toward providers, resulting in higher payment rates and premiums.
    Evidence from two decades of hospital mergers and acquisitions nationally demonstrates that consolidating hospital markets drives up prices, with disagreement only over the magnitude of the increases. Hospital and physician payment rates are nearly 30 percent and 20 percent higher, respectively, than Medicare ratesIn some cases, payment rates to hospitals and powerful physicians groups approach and exceed 200 percent of what Medicare pays. As one medical group executive said, We are making out hand over fist.

    Source: Health Affairs: Unchecked Provider Clout in California Foreshadows Challenges to Health Reform, April 2010

    Impact Of Provider Price Inflation


    FACT: 67% of the increase in National Health Expenditure is accounted for by price inflation -- CMS Office of the Actuary, January 2010
    REAL-WORLD EXAMPLES A large multi-specialty physician group in Washington, D.C., charges all competing health plans 8% more than what it charges the Blues due to a most favored nation clause. A hospital in suburban New Jersey the only hospital in its community is demanding that health plans pay an extra 15-16% to compensate them for Medicaid and Medicare payments that are rising by 4-5% less than the hospitals own costs. A hospital in the Northeast charges health plans 50% more than what it charges the plan owned by its own hospital system.

    Source: UHG internal contract negotiations. Recent examples of provider-price increases.

    UHG: Provider Charges Driving Cost Increases


    Sharply rising hospital inpatient and outpatient costs are the main cause of rising medical costs for employers and consumers.
    Physician Inpatient Outpatient Pharmacy 4.0%-5.0% 11.5%-12.5% 8.0%-9.0% 6.0%-7.0%
    Increased fee schedules. Office visits similar to 2009. Continued unit cost pressure. Similar utilization trends as 2009. Continued unit cost pressure. Utilization trends remain in the mid-single digits. Largest driver is unit cost particularly brand-name drugs

    2009E
    8.0% +/- 50bps

    2010P
    8.0% +/- 50 bps

    Unit Cost

    5.5%

    5.5%

    Utilization

    2.5%

    2.5%

    Source: UHG Data as of December 1st, 2009

    10

    Brand-Name Drug Price Increases


    FACT: 416 brand-name drugs had extraordinary price increases -- GAO, Dec. 2009

    UHC Prices of Some Popular Drugs Have Also Jumped Dramatically


    Adderal XR Up 60%, Flomax Up Over 30%, Crestor Up Nearly 20%

    Brand-Name Drug Price Inflation Reached 11.3% for UHC in 2009


    70% 60% 50%
    Inf lation

    Price Inflation for Select Drugs

    16.0% 14.0% 12.0% 10.0%


    Inflation

    Drug Price Inflation by Year


    13.4% 11.3% 11.3% 9.9% 7.6% 8.2% 5.8% 8.1% 8.8%

    40% 30% 20% 10% 0%

    8.0% 6.0% 4.0% 2.0% 0.0%

    2007
    Brand Specialty

    2008

    2009*
    Total (including generics)

    *Specialty drug Source: UHC data. AWP per unit January 2008 compared to AWP per unit ending September 26, 2009

    *Source: Sample of UHC data based on AWP per days supply for actual utilization January 2009 September 26, 2009

    11

    HHS: Treatment Volumes Are Rising


    Over the past decade: MRI / CT / PET scans tripled Hip replacements up by a third Knee replacements up by 70% Kidney transplant rates up by 31% Liver transplant rates up by 42% Statin drug usage up nearly tenfold

    Source: US Department of Health and Human Services Health, United States 2009 published January 2010. Data for the decade to 2006/7.

    12

    Emory University: Obesity A Leading Cost Driver


    Obesity is growing faster than any previous public health issue America has faced. If current trends continue, 103 million American adults will be considered obese by 2018. The U.S. is expected to spend $344 billion on health care costs attributable to obesity in 2018 if rates continue to increase at their current levels. Obesity-related direct expenditures are expected to account for more than 21 percent of the nations direct health care spending in 2018. If obesity levels were held at their current rates, the U.S. could save an estimated $820 per adult in health care costs by 2018 a saving of almost $200 billion dollars.
    Source: The Future Costs of Obesity: National and State Estimates of the Impact of Obesity on Direct Health Care Expenses. A collaborative report from United Health Foundation, the American Public Health Association and Partnership for Prevention. Based on research by Kenneth E. Thorpe, Ph.D. of Emory University November 2009

    13

    Emory University: Chronic Conditions Driving Medicare Spending


    Much of the recent growth in spending among Medicare beneficiaries is attributable to rising spending on chronic conditions specifically diabetes and hypertension.

    Source: Thorpe et al, Health Affairs, April 2010

    14

    The Bottom Line


    There is no single factor responsible for rising health care costs. Our system is complex and the cost drivers are numerous.
    95 cents of every $1 cost increase is driven by health care providers and related services. Hospitals, physicians and prescription drugs cause 75% of the increase in spending. 67% of the increase in national health spending is accounted for by rising prices charged by providers, not increased use of health care. But treatment volumes are increasing too partly because of the rise of chronic conditions and obesity.
    www.unitedhealthgroup.com/reform
    15

    You might also like