This post is part of a new series designed to highlight the most significant new reports on health care management or policy–ranging from government reports to health care business studies.
We will highlight reports that may be useful to the thoughtful and busy health care leader. Our health care programs at the Opus College of Business emphasize leadership, organizational transformation, and operational excellence. The reports we select will reflect these themes and can be helpful in strategy formulation, operations improvement and leadership activities.
This series will show you at a glance what you need to know about current developments in health care management and policy.
Modest Acceleration in U.S. Health Care Costs According to the S&P Healthcare Economic Indices
August 18, 2011
One of the key drivers of the federal budget deficit is Medicare. Most actuarial assumptions that Congress uses to predict future costs show Medicare costs rising much faster than inflation. However, this S&P report shows that Medicare cost inflation has had a remarkable decrease. If this cost inflation remains low, it seems reasonable that the federal government can resist significant reductions to provider payments or increased contributions from beneficiaries.
Data released on Aug. 18 by S&P Indices for the S&P Healthcare Economic Composite Index indicate that the average per capita cost of health care services covered by commercial insurance and Medicare programs increased by 5.61% over the 12-months ending June 2011. Since posting its lowest annual growth rate in its more than six-year history – +5.37% in April 2011 – the rate for this index accelerated in both May and June.
Over the year ending June 2011, health care costs covered by commercial insurance increased by 7.48%, as measured by the S&P Healthcare Economic Commercial Index. Medicare claim costs rose at an annual rate of 2.50%, as measured by the S&P Healthcare Economic Medicare Index. This was the lowest growth rate recorded for the Medicare Index in its history, which goes back to January 2005.
Read more about the Index.
“Examination of Health Care Cost Trends and Cost Drivers”
Report on Health Care Costs from the Massachusetts Attorney General
June 22, 2011
Massachusetts has been a leader in health care reform with its formation of the first Health Insurance Exchange in the United States. However, leaders in the state have now turned their attention to reducing health care inflation as Massachusetts costs are high compared to other regions in the United States. This report begins to examine the causes for these high costs and possible options to make improvements.
The Massachusetts Attorney General’s examination of health care costs identified several factors that we believe should be considered when analyzing cost containment strategies. They found:
- There is wide variation in the payments made by health insurers to providers that is not adequately explained by differences in quality of care.
- Globally paid providers do not have consistently lower total medical expenses.
- Total medical spending is on average higher for the care of health plan members with higher incomes.
- Tiered and limited network products have increased consumer engagement in value-based purchasing decisions.
- Preferred Provider Organization (PPO) health plans, unlike Health Maintenance Organization (HMO) health plans, create significant impediments for providers to coordinate patient care because PPO plans are not designed around primary care providers who have the information and authority necessary to coordinate the provision of health care effectively.
- Health care provider organizations designed around primary care can coordinate care effectively (1) through a variety of organizational models, (2) provided they have appropriate data and resources, and (3) while global payments may encourage care coordination, they pose significant challenges.
“Differences in the Volume of Services and in Prices Drive Big Variations in Medicaid Spending among U.S. States and Regions”
Health Affairs
July 2011-07
As leaders in the American health care system search for methods to become more efficient, it is useful to understand the root causes of health care costs. This article helps identify some of the details of health care cost inflation.
Abstract
It is well known that Medicaid spending per beneficiary varies widely across states. However, less is known about the cause of this variation, or about whether increased spending is associated with better outcomes. In this article we describe and analyze sources of interstate variation in Medicaid spending over several years. We find substantial variations both in the volume of services and in prices. Overall, per capita spending in the ten highest-spending states was $1,650 above the average national per capita spending, of which $1,186, or 72 percent, was due to the volume of services delivered. Spending in the ten lowest-spending states was $1,161 below the national average, of which $672, or 58 percent, was due to volume. In the mid-Atlantic region, increased price and volume resulted in the most expensive care among regions, whereas reduced price and volume in the South Central region resulted in the least expensive care among regions. Understanding these variations in greater detail should help improve the quality and efficiency of care—a task that will become more important as Medicaid is greatly expanded under the Affordable Care Act of 2010.
Read the full article.