On the Radar – Health industry news to keep an eye on as we start 2020
Health care spending hits record highs, keeps trending higher
National health care spending hit a record $3.6 trillion in 2018, which equates to roughly $11,172 per person, according to an analysis from Centers for Medicare & Medicare Services Office of the Actuary.
Seven things you should know from the analysis, which was published Dec. 17 in Health Affairs:
- National health care spending grew 4.6 percent in 2018, slightly higher than 2017’s 4.2 percent growth.
- CMS primarily attributes this accelerated growth in spending to increases in the cost of health insurance, stemming from the reinstatement of the health insurance tax after a one-year hiatus. Spending growth was on par with 2016, when the tax was in effect, according to the report.
- Faster growth in medical prices also contributed to spending growth. Medical prices accelerated at a rate of 2.1 percent, compared to 1.3 percent in 2017. This accelerated growth outpaced slower growth in the use and intensity of health care goods and services.
- Hospital spending hit $1.2 trillion in 2018, accounting for a third of overall health care spending. Growth in hospital spending stayed relatively flat from 2017-18.
- By comparison, physician and clinical services accounted for $725.6 billion in 2018, and retail prescription drugs accounted for $335 billion.
- Despite the growth in national health spending, the economy grew faster. National health spending accounted for 17.7 percent of GDP, down from 17.9 percent in 2017.
- One million more Americans joined the ranks of uninsured for the second year in a row. There were 30.7 million uninsured people in the U.S. in 2018.
The short take: Health care is getting more expensive and there is no sign of a slowdown. Under current law, national health spending is projected to grow at an average rate of 5.5 percent per year for 2018-27 and to reach nearly $6.0 trillion by 2027.
Private insurance’s costs are skyrocketing
Newton’s Third Law of Motion states that for every action there is an equal and opposite reaction.
When it comes to health care and health insurance spending, the reactions are certainly equal, though it seems there is no opposite reaction.
With overall health expenditures hitting an all-time high for 2018, we are certainly seeing costs in the private health insurance market escalate in a similar manner, according to recently released federal data on health spending.
Here is a quick take: per capita spending for private insurance has grown by 52.6 percent over the last 10 years.
In contrast, per-capita spending for Medicare grew by 21.5 percent over the same period, and Medicaid 12.5 percent. This is why the health care industry — not just insurers, but also hospitals and drug companies — is so opposed to proposals that would expand the government’s purchasing power.
And it’s why some progressives are so determined to curb, or even eliminate, private coverage.
Private insurance generally pays higher prices for care than Medicare, which generally pays more than Medicaid.
The bottom line: The industry knows cutting government spending can only go so far. Any effort to rein in health care costs will have to confront the growth in the cost of private insurance.
Newton’s law redux
Sometimes, Newton does get it right.
When a report highlighting an increase in the pace of national health expenditures was issued, administration officials were quick to link the increases to a tax imposed by the Affordable Care Act, increased costs they said resulted in more Americans going without health coverage.
Overall national health-care spending rose to $3.65 trillion in 2018, up 4.6 percent from 2017. The tax, an annual fee on all health insurers, is among several imposed under the law to cover ACA’s estimated 10-year cost of more than $1 trillion.
Federal officials linked the tax to a rise in the net cost of private insurance, which grew 15.3 percent last year to $164 billion, its fastest rate of increase in 15 years.
Officials also said the tax played a role in a 6.7 percent increase in spending last year on per-enrollee private health insurance—the amount spent per person on health coverage, including premiums paid to managed care, self-insured health plans and others—which is the highest growth rate since 7.5 percent in 2004.
The levy, known as the “HIT tax,” is expected to generate $15.5 billion in 2020, according to the Internal Revenue Service. However, a package of laws passed and signed in late December repealed the tax for 2020.
Calling it off
La Crosse, Wis.-based Gundersen Health System and Marshfield Clinic Health System have abandoned plans to merge into a 13-hospital rural health care network.
The two systems said they “mutually decided to remain independent” after several months of productive and collaborative discussions.
Scott Rathgaber, MD, CEO of Gundersen Health System and Susan Turney, MD, CEO of Marshfield Clinic, both said that moving forward with the merger would not be best for their patients or organizations.
“This was an opportunity we had to explore. Yet we have to make the right decision for our patients and for our organizations,” Rathgaber said. “We each still have a commitment to delivering the best care possible to those we serve.”
“Bringing two entities together of our size and scope is an incredibly complex process, and first and foremost in that process is making sure it was the best path forward for our patients, staff and communities,” Turney said. “While we mutually decided to remain independent, we will continue to execute our strategy of smart growth as we look for opportunities to ensure residents across rural Wisconsin have access to excellent health care close to home.”
Brakebush Brothers wins award for employee health care efforts
Brakebush Brothers, the Westfield-based chicken processing company, won a National Alliance of Healthcare Purchaser Coalitions 2019 Employer/Purchaser Excellence Award for its program to control employee health care costs.
Brakebush is a member of The Alliance, a Madison-based not-for-profit cooperative of 250 self-funded employers in Wisconsin, Illinois and Iowa, and an employer-partner of NOVO Health. The Alliance, a strategic payer-partner of NOVO Health, nominated Brakebush for the award.
In 2014, Brakebush launched a self-funded health benefits plan that includes an onsite health center with free primary and acute care service to all employees and dependents covered by the company’s health plan. In addition, a program directs patients to high-value health care resources such as NOVO Health when deemed medically appropriate. Other services include onsite physical therapy and mammograms, at-home sleep studies and mail-order pharmacy service for high-cost medicines.
Last year, Brakebush’s per-member health benefit costs were lower than in 2014, even after factoring in the cost of the onsite clinic, the company said in a statement. During the same time, employers nationwide saw an average annual cost increase that varied from 3.9 percent in 2014 to 3.6 percent in 2018, according to the Mercer U.S. National Survey of Employer-Sponsored Health Plans.
“The award shows that employers of all sizes, and any location, can make a positive impact in their fight against the rising costs of health care without government intervention, or the need to pass those costs on to its employees,” Dan Ludwig, Brakebush’s director of benefits and safety, said in a statement.
Brakebush has 2,100 employees, including 1,100 in Wisconsin and 1,000 employees in Minnesota, North Carolina and Texas.
BIGGER, not necessarily BETTER
The merger and acquisition trend sweeping through the nation’s hospital systems has not resulted in higher quality for patients, according to research.
Recent consolidations were often justified with arguments by involved executives that greater size would boost quality and yield other improvements. The New England Journal of Medicine looked for evidence of quality gains using four widely used measures of performance at nearly 250 hospitals acquired in deals between 2009 and 2013.
The analysis didn’t find it, the study’s authors told the Wall Street Journal.
“Quality didn’t improve,” Harvard University research associate Nancy Beaulieu, lead author of the study, said in an interview with WSJ.
The NEJM study is one of the first large-scale efforts to examine whether the mergers deliver the promised benefits to offset the higher prices associated with the sector’s consolidation.
The American Hospital Association disputed the new findings with a statement citing its own sponsored research conducted by Charles River Associates showing improvements.
There were 90 hospital mergers announced in 2018, down from 117 transactions the prior year, but up 80 percent from 50 announced deals in 2009, according to data from Kaufman Hall, a health-care consulting .rm.
Prior studies have found higher prices follow mergers. Prices increased 6 percent after nearby hospitals merged, according to one analysis published by the Quarterly Journal of Economics in 2018.
In the latest study, researchers looked at four measures of performance collected by the Centers for Medicare and Medicaid Services: patient satisfaction; deaths within a month of entering the hospital; return trips to the hospital within a month of leaving; and how often some heart, pneumonia and surgery patients got recommended care.