But an alternative scenario outlined in an independent actuarial study of the Medicare Trustees Report presented to the Centers for Medicare & Medicaid Services this month, paints a darker picture of the program's prospects. It projects sharp cost increases and difficulties in achieving sustainable reductions in spending on hospital services.
The report was authored by CMS' independent actuary. "Presenting an alternative look at another report is something we do," explained Donald McLeod, a CMS press officer. "The purpose isn't to say one report is right and the other is wrong."
While the independent analysis agrees with the Trustee report that Medicare's HI Trust Fund will remain solvent until 2024, the independent report forecasts significant increases in the cost of physician and hospital services as early as 2012.
Physician Reimbursement Reductions The actuarial report uses a different set of assumptions for physician reimbursements and productivity adjustments. Its projections demonstrate what could happen to Medicare when Congress, as expected, overrides the 29% physician reimbursement reduction scheduled for 2012 and phases out cuts to hospitals, nursing homes, and home health agencies.
The Trustees report leaves the physician reimbursement reduction in place. Although the Trustee report termed that outcome as "unrealistically constrained," the reduction remains the basis for analysis of the Medicare Part B costs, which include physician bills and other outpatient expenses. That helped create a more financially favorable outcome for the Medicare HI Trust Fund as well as Medicare Part B.
Productivity Adjustments Unlike the Trustees report, the actuarial report assumes that productivity adjustments for increasing provider efficiency would not be sustainable over the long run because the same level of improvement couldn't be maintained. That means that reductions in spending on hospital services touted in the Trustees report would be more difficult to achieve.
With the changes, according to the actuarial report, physician reimbursements for 2012 would increase from $220.3 billion to $248.2 billion. That means that instead of dropping 3.7% from 2011 to 2012 as per the Trustee report, reimbursements would actually post an 8.5% increase.
Under current law hospitals would post an actuarial deficit of 0.5% over 25 years based on the Trustee report. Based on projections in the actuarial report, that deficit would be 0.62%. And without the cuts, hospital costs would become a larger part of the Gross Domestic Product: an estimated 2.03% in 2030 under current law compared to 2.14% according to actuarial projections. No dollar figures are included for hospitals.
The actuarial report concludes that "the projections shown in the 2011 Medicare Trustees Report for current law should not be interpreted as our best expectation of actual Medicare operations in the future, but rather as illustrations of the very favorable impact of permanently slower growth in healthcare costs, if slower growth can be achieved."
The Office of the National Coordinator for Health Information Technology has released its first set of exams designed to help healthcare providers and other employers assess the health IT competencies of their existing staff and potential employees.
The health information technology professionals examinations will measure skill levels in the competencies identified as essential for key health IT professional workforce roles, including clinician/practitioner consulting, implementation management and support, practice workflow and information management redesign, technical/software support, and training.
In addition to assessing health IT competencies, ONC expects that the exams will help employers identify the need for additional staff training and more accurately evaluate their HI technology staffing needs.
"Hospitals, health professionals, vendors, and even ONC grantees will benefit from knowing they are employing professionals with a proven skill set," said Farzad Mostashari, the national coordinator for health information technology, in a statement.
Vouchers to take the exam free of charge are available for students trained through the community college consortia program and individuals with relevant experience, training, or education in healthcare or information technology.
The community college program includes 82 community colleges across the country that have received grants to develop or improve non-degree health IT training programs that students can complete in six months or less. The programs are designed for professionals with an IT or healthcare background. The community colleges in the program expect to train more than 10,500 new health IT specialists by 2012.
The HIT professionals exam program is one of four ONC workforce development initiatives funded by American Recovery and Reinvestment Act of 2009 and intended to address the need for an additional 50,000 health IT professionals nationwide.
The other workforce initiatives are a curriculum development program, a university-based training program, and a community college consortia. Most of the professionals completing the workforce programs are mid-career healthcare or IT professionals who have received specialized health IT training and are now ready for employment in roles crucial to achieving nationwide meaningful use of certified EHRs.
The health IT professionals exams, which are administered at 230 testing centers across the country, opened for individuals on May 20.
Widespread objections to proposed federal rules on accountable care organizations prompted the Centers for Medicare & Medicaid Services this week to announce enticements designed to sway providers to apply for the new payment model.
On Thursday CMS fleshed out one of the programs that it hopes will generate interest: Three-day learning sessions focused on ACOs.
The accelerated development learning sessions are designed to provide senior executives with in-depth information about the core competencies of an ACO, including improving care delivery to increase quality and reduce costs; effectively using health information technology and data resources; and building capacity to assume and manage financial risk.
Four sessions are planned around the country. The first is in Minneapolis on June 20-22. Dates for the other three sessions have not yet been released.
The target audiences for the sessions are physician group practices, independent practice associations, physician-hospital organizations, and integrated delivery systems. Two to four participants from an organization may attend. CMS recommends that each team include at least one member with financial/management responsibility and one with clinical responsibility. Other suggested participants include chief information officers and executives with strategic planning responsibilities.
According to the HealthLeaders Media Industry Survey 2011, more than half, (52%) of physicians surveyed said they expect to be part of an ACO within the next five years. That survey, however, was completed months before the proposed rules were released in April.
The goal of the CMS sessions is to prepare participants to:
Understand their organizations readiness to become an ACO
Identify organization-specific goals to improve care delivery, improve health and reduce costs.
Develop an action plan for establishing essential ACO functions.
There is no registration fee for attending the sessions, but attendees are responsible for their own travel, parking, meals and overnight-stay expenses. Online registration is available here.
The final regulation for health insurance rate increases for the individual and small group markets will require insurers to publically disclose and justify any rate increase in excess of 10%. The proposed increases will be subject to state and federal review.
Department of Health and Human Services Secretary Kathleen Sebelius announced the regulation at a Thursday morning conference call. She noted that insurers recently posted record profits while consumers have faced healthcare costs that have often increased at a faster rate than wages.
The goal of the regulation, which is effective Sept. 1, 2011, is to bring transparency and some uniformity to the rate increase review process. While many states review proposed increases to determine if they are reasonable, other states do not have the legal authority or resources to effectively review rates.
Also, while some states have the authority to deny or reduce proposed rate increases, most do not. With the new rule, significant rate increases in all states will be reviewed by independent experts and disclosed to the public. While it's expected that most states will take on this responsibility themselves, HHS will serve as a backup for states that don't have the resources or authority to review rates.
Through the Affordable Care Act more than $44 million in grant money is available to help states strengthen their oversight ability or create a rate review process. Already 43 states and the District of Columbia have received the grants.
Under the final regulation:
Beginning Sept. 1, 2011, insurers requesting rate increases in excess of 10% for the individual and small group markets will be required to publicly disclose the proposed increases as well as the justification for them. The increases will be reviewed by either state or federal experts to determine whether they are unreasonable.
A consumer-friendly disclosure form explaining the proposed increases will be made available through HHS, state and/or insurer websites.
States with effective rate review systems will conduct the reviews. If a state lacks the resources or authority to conduct actuarial reviews, HHS will conduct them.
On Sept. 1, 2012, the 10% threshold will be replaced with a state-specific threshold, using data that reflect insurance and healthcare cost trends particular to that state. HHS and the states will work together to develop the thresholds.
The regulation does not apply to the large group or the association business. Steve Larsen, director for the center for consumer information and insurance oversight, said on the conference call that purchasers in the large group market "are more sophisticated and don't need assistance" in securing fair rate increases. He added that the inclusion of association business will be revisited after additional comments are collected by the department.
In a press statement challenging the rate review rule, America's Health Insurance Plans' president and CEO Karen Ignagni said, "Premium review must adequately factor in all of the components that determine premium rates, including geographic variation, the cost of new benefit mandates, and the impact of younger and healthier people dropping coverage. An arbitrary threshold for review will establish a de facto presumption of unreasonableness in what should be an objective, actuarially-based evaluation."
She agreed that states "are best suited to review premiums because they have the experience, infrastructure, and local market knowledge needed to ensure that consumers are protected and health plans are solvent. The federal government is not in a position to make these assessments."
The Affordable Care Act extends the promise of greater access to healthcare, but it also raises many financial questions, such as who will pay, and how.
The ACA expands Medicaid eligibility to 133% of federal poverty level or $29,726 for a family of four. It also requires states to set up by January 2014 health insurance exchanges where individuals and small businesses can compare and purchase private health insurance plans.
One question states are struggling with as they explore HIEs is whether the program can manage the health needs of a low-income population, especially residents with incomes between 133% and 200% of the FPL or between $29,726 and $44,700 annually for a family of four.
That’s a population that is generally considered to have special coverage needs and is particularly vulnerable to economic shifts that can often leave its members unable to pay for health insurance. There is concern that an HIE, with its broader membership mix, will not be attuned to these special considerations.
The ACA offers a second option, the basic health program, to serve the low-income population. The BHP is not as well-known as the HIE but just like that program, the federal government will provide states with a lump sum payment of 95% of what the feds would have spent on tax credits and subsidies for out-of-pocket healthcare costs for this group.
Meg Murray of the Association of Community Health Plans is worried that the BHP is losing ground to insurance exchanges and that states will embrace exchanges without considering a BHP. "We're concerned that states aren't considering both options as they develop plans for serving low-income people." She adds that although states may see this as an either/or proposition "the BHP can be a bridge between the Medicaid population and an insurance exchange."
And she suggests that states allow established Medicaid providers to handle this population. “They will have in place the infrastructure to provide for this population.” It’s system that expands well past health insurance to include translators, transportation, special needs care coordination, and housing and food assistance.
The BHP isn't a silver bullet. It isn't going to resolve provider reimbursement issues so prevalent in the care of the low-income population, for instance, but creating a BHP does hold the promise of helping to reduce state healthcare costs while stabilizing benefits and coverage, and reducing the number of uninsured. That's good news for hospitals, physicians and others who struggle to provide care for a population that often falls in and out of the insurance market.
States still have plenty of time to consider creating a basic health program. Like the HIE, the BHP will be required to cover what the ACA terms “essential benefits.” The Department of Health and Human Services is expected to finalize the list of benefits later this year.
Here's a look at some of the specific reasons states ought to consider adding a basic health program to their list of options for low-income populations:
A BHP could specifically address the medical needs of the low-income population. The low income population often has special coverage needs. A BHP could be set up to make sure the right providers, services, and benefits, such as transportation and mental health benefits are available.
A health insurance exchange would be disruptive to a vulnerable population. The beneficiary mix will probably be more diverse for exchanges so there could be a broad membership with different needs and ailments. The low-income population has needs that extend beyond insurance and can be difficult to meet. Shifting the low-income population from Medicaid straight into an exchange would be a major move that could involve a different plan, different providers and increased healthcare costs. Even with an income of 200% of FPL the population could struggle to meet the new costs; making the shift to an exchange with an income of 133% of FPL would be even difficult.
A BHP could reduce churning. According to a Health Affairs article, How Changes In Eligibility May Move Millions Back And Forth Between Medicaid And Insurance Exchanges, more than 50% of all adults with family incomes below 200% of the FPL will experience a shift in eligibility from Medicaid to an insurance exchange, or the reverse; within one year. That's called churning. It creates administrative headaches for states, coverage lapses for families, and increases the likelihood that hospitals and physicians will not be reimbursed for their services.
A BHP could stabilize coverage. A BHP could be set up so enrollees can remain with the same health plan if their income increases above 133% of FPL and they move from Medicaid to the BHP. That would make it easier for this population to remain with familiar providers and maintain their familiar coverage. It would also help reduce the administrative costs incurred by providers for processing insurance changes.
A BHP could reduce the number of uninsured. A state will receive a lump sum payment to cover healthcare for the low-income populations. If the lump sum is more money than the state needs, the excess funds can be used to reduce some of the out-of-pocket costs, like copayments, for this group. Making care affordable for this population will make it more likely that health insurance will be maintained.
There are 75 operational RHIOs (regional health information organizations) across the U.S. but only 13 of them meet the most basic criteria for meaningful use of health information technology, according to a 2009 study by a group of Harvard University researchers.
With grant support from the federal government, RHIOs provide hospitals and physicians with a single connection to swap clinical data with other participating providers such as labs and public health departments.
To be considered meaningful, providers must have electronic health records and meet these basic criteria for meaningful use:
Transmit prescriptions
Exchange key clinical information among care providers
Report clinical quality measures
The study shows that despite the promise of more than $30 billion in incentives to stimulate the adoption and meaningful use of electronic health records, the U.S. remains in "an early stage of readiness in terms of the robust exchange of health information," says Julia Adler-Milstein, Ph.D., the lead author for A Survey of Health Information Exchange Organizations in the United States: Implications for Meaningful Use, which was published online Monday in the Annals of Internal Medicine.
None of the 75 RHIOs met the criteria for the comprehensive information exchange needed to substantially improve healthcare quality and efficiency.
This is the third time the researchers have looked at this topic with similar results.
"The goal is to quickly build a technical infrastructure but states, RHIOs and any other organizations they partner with really have their work cut out for them," says Adler-Milstein.
According to the report, funding for RHIOs may be part of the problem. Substantial start-up money comes from the public sector, but eventually RHIOs are expected to find stakeholders willing to pay for the value they create and to become self-sustaining. This encourages RHIOs to "focus on a narrow set of transactions with clear value to providers (such as exchange of test results) as opposed to a broader data exchange that might offer more substantial benefits," the report says.
Among the 75 operational RHIOs, 25 were financially viable (able to cover operating expenses with revenues from the hospitals and physician groups that participate in the RHIO). About 40% of the operational RHIOs that said they weren't financially viable reported that they expected to become financially viable in the future. Of the 13 RHIOs that could support meaningful use, six were financially viable.
Despite the drawbacks, Adler-Milstein says that with the right tools in place states may find that a RHIO still offers a good starting point for building out their HIE because RHIOs already have the infrastructure in place to share information. The challenge, she says, is to create a sustainable business model for RHIOs where there hasn't been one before. That means states must put in place policies and incentives that encourage RHIOs to expand their services and the range of HIE that they support.
Adler-Milstein says "we need to strengthen the use cases for HIE. We've been pushing the technology first when we really should emphasize the comprehensive patient information that is available at the point of care. That's what will really drive the success of RHIOs."
None of the 75 RHIOs met the criteria for the comprehensive information exchange needed to substantially improve healthcare quality and efficiency.
This is the third time the researchers have looked at this topic with similar results.
"The goal is to quickly build a technical infrastructure but states, RHIOs and any other organizations they partner with really have their work cut out for them," says Adler-Milstein.
According to the report, funding for RHIOs may be part of the problem. Substantial start-up money comes from the public sector, but eventually RHIOs are expected to find stakeholders willing to pay for the value they create and to become self-sustaining. This encourages RHIOs to "focus on a narrow set of transactions with clear value to providers (such as exchange of test results) as opposed to a broader data exchange that might offer more substantial benefits," the report says.
Among the 75 operational RHIOs, 25 were financially viable (able to cover operating expenses with revenues from the hospitals and physician groups that participate in the RHIO). About 40% of the operational RHIOs that said they weren't financially viable reported that they expected to become financially viable in the future. Of the 13 RHIOs that could support meaningful use, six were financially viable.
Despite the drawbacks, Adler-Milstein says that with the right tools in place states may find that a RHIO still offers a good starting point for building out their HIE because RHIOs already have the infrastructure in place to share information. The challenge, she says, is to create a sustainable business model for RHIOs where there hasn't been one before. That means states must put in place policies and incentives that encourage RHIOs to expand their services and the range of HIE that they support.
Adler-Milstein says "we need to strengthen the use cases for HIE. We've been pushing the technology first when we really should emphasize the comprehensive patient information that is available at the point of care. That's what will really drive the success of RHIOs."
A weak economy, lower incomes, and higher healthcare costs mean trouble for Medicare’s Hospital Insurance Trust Fund, which is now projected to remain solvent until only 2024, the 2011 Medicare Trustees report shows. That’s five years earlier than the 2010 report estimated.
But the latest report says things could be worse. Without the reforms in the Affordable Care Act, the Medicare HI Trust Fund would expire in just five years—in 2016. So, according to the report, the healthcare reform bill added eight years of solvency to the portion of the Medicare Part A program, which pays for inpatient hospital care, skilled nursing facility care, and home health and hospice care.
The Trustees report has renewed a call for Congressional action to resolve Medicare’s problems. Opinions about what steps to take are divided along political lines. In a press statement, Treasury Secretary Timothy Geithner said while the ACA “has significantly strengthened Medicare’s finances and extended the life of the Medicare trust fund” the Trustees’ report underscores “the need to act sooner rather than later to make reforms to our entitlement programs.” Administration reforms proposals have focused on quality improvements, incentive payments and capping Medicare expenditures based on the gross domestic product.
On the other side of the aisle, House Speaker John Boehner (R-OH) offered a different take on the trustee report. With a nod to Rep. Paul Ryan’s (R-WI) budget and Medicare reform proposals Boehner said in a press statement: “We’ve outlined a proposal that would mean no changes for anyone age 55 and up, while making reforms to ensure that Medicare is around when younger Americans and future generations are ready to retire. The biggest threat Medicare faces right now is the status quo. The Trustees' report makes it clear that if we do nothing, Medicare will not be able to pay promised benefits to American seniors -- and sooner than we thought.”
A study by the nonpartisan Kaiser Family Foundation found that raising the Medicare eligibility age from 65 to 67 in 2014 would generate about $7.6 billion in net savings to the federal government, but it would add $5.6 billion in out-of-pocket costs for 65- and 66-year-olds, and $4.5 billion in employer retiree healthcare costs.
HI is funded through payroll taxes paid, income taxes paid on Social Security benefits, and interest from trust fund investments. HI Trust Fund expenditures have exceeded income each year since 2008, the report says. Interest earnings and asset redemptions are required to cover the difference. HI Trust Fund assets are projected to cover annual deficits through 2023, with asset depletion beginning in 2024.
In 2010, $32.3 billion in trust fund assets were redeemed to cover the shortfall.
At least for now things look better for the Supplementary Medical Insurance Trust Fund where expenditures for Parts B and D were lower than expected this year, the report says. The SMI is financed through beneficiary premiums and general revenue income for Parts B and D are reset each year to match expected costs.
Part B costs, which include physician bills and other outpatient expenses, have increased at an average 6.9% annually over the last five years but under current law are projected to increase by only 4.7% annually for the next five years. That projection, which is characterized in the report as “unrealistically constrained,” assumes that Congress will let stand a 29% reduction in physician reimbursements scheduled for 2012.
The American Medical Society jumped on the report to encourage the immediate repeal of the “broken Medicare physician payment formula.” In a press statement J. James Rohack, a past president of the AMA, said the organization supports “a three-step-process to reform the Medicare physician payment system, including repealing the failed sustainable growth rate formula, enacting a five year period of stable Medicare physician payments, and testing of demonstration and pilot projects that would form the basis for a new physician payment system.”
A reduction in spending on prescription drugs over the next decade will help hold down Part D expenditures, the report shows.
In 2010, 47.5 million people were covered by Medicare, including 39.6 million aged 65 and older, and 7.9 million disabled. About 25% of the beneficiaries were enrolled in Part C private health plans that contract with Medicare to provide Part A and Part B health services. Total benefits paid in 2010 were $516 billion. Income was $486 billion, expenditures were $523 billion, and assets held in special issue U.S. Treasury securities were $344 billion.
The Trustees report says the difference between Medicare’s total outlays and its dedicated financing sources is estimated to reach 45% of outlays in fiscal year 2011. That means federal general revenues will be a substantial share of total financing for Medicare. This has occurred each of the past six years and requires Congressional action to remedy.
The U.S. Department of Health and Human Services announced on Wednesday a program to better coordinate care for nine million dual-eligibles, or beneficiaries enrolled in both Medicare and Medicaid.
Currently, low-income seniors and people with disabilities must navigate two separate programs: Medicare for coverage of basic acute health care services and drugs, and Medicaid for coverage of supplemental benefits such as long-term care supports and services. Medicaid also provides help with Medicare premiums and cost-sharing for those who need additional assistance.
Medicare and Medicaid spend $300 billion each year to care for dual-eligibles. About 60% of dual-eligibles have multiple chronic conditions and 43% have at least one mental or cognitive impairment.
The Alignment Initiative will be led by the federal Coordinated Health Care Office (Medicare-Medicaid Coordination Office), which was created by the Affordable Care Act to help make the two programs work together more effectively to improve patient care and lower costs.
The ACA directs the Medicare-Medicaid Coordination Office to identify "existing rules that may be outmoded, ineffective, insufficient, or excessively burdensome, and to modify, streamline, expand, or repeal them." As a first step the office is addressing conflicting requirements between Medicaid and Medicare that could create barriers to high quality, seamless, and cost-effective care for dual eligibles. For example, Medicaid and Medicare have different coverage standards for accessing durable medical equipment.
The office is seeking input in six areas: care coordination, fee-for-service benefits, prescription drugs, cost sharing, enrollment and appeals.
Among the concerns:
How can the Medicare and Medicaid programs better ensure dual eligible individuals are provided full access to the program benefits?
What steps can CMS take to simplify the processes for dual eligible individuals to access the items and services guaranteed under the Medicare and Medicaid programs?
Are there additional opportunities for CMS to eliminate regulatory conflicts between the rules under the Medicare and Medicaid programs?
How can CMS best work to improve care continuity and ensure safe and effective care transitions for dual eligible beneficiaries?
How can CMS work to eliminate cost-shifting between the Medicare and Medicaid programs?
The request for comments is here. Comments will be collected until July 11, 2011.
A bill which would impose a limit on the medical liability costs paid by healthcare providers, passed through the U.S. House Energy and Commerce Committee late Wednesday night.
In a 30-20 vote in favor of H.R. 5, mostly along party lines, the committee placed a $250,000 cap on non-economic damages. Democrats presented more than 10 amendments to the bill but were denied.
A House vote has not yet been scheduled. The bill will face stiff opposition in the Senate and President Obama is known to oppose caps on damages.
Stakeholders are divided along typical lines with the American Medical Association and American Hospital Associations in support of H.R.5 while consumer advocates and the American Bar Associations opposed the bill.
In a February letter to the committee, Thomas Susman, director of the ABA, challenged the limit on compensatory damages saying “patients should not be told that, due to an arbitrary limit, they will be deprived of the compensation determined by a fair and impartial jury.“
The ABA also opposed the preemption state laws providing for joint and several liability in medical malpractice cases; imposing a sliding scale for contingency fees; and the elimination of the collateral source rule, which bars evidence that a plaintiff has received health insurance proceeds or other benefits from a third party.
The National Conference of State Legislatures expressed its opposition to what it views as a federal takeover of what has long been a state issue. In an April letter to the energy committee, William Horne, chair of the NCSL, said, "Federal medical malpractice legislation inappropriately seeks to preempt various areas of state law. All 50 states have statutes of limitations for medical malpractice suits. All 50 states have rules of civil procedure governing the admissibility of evidence and the use of expert witnesses. Many states have caps on noneconomic damages and limitations on attorney’s fees in medical malpractice cases. The adoption of a one-size-fits-all approach to medical malpractice envisioned in H.R. 5 and other related measures would undermine that diversity and disregard factors unique to each particular state."
The Help Efficient, Accessible, Low Cost, Timely Health Care (HEALTH) Act includes these provisions:
Limits the award of punitive damages to malicious intent or instances where the provider deliberately failed to avoid injury
Limits the monetary award for punitive damages to twice the amount of economic damages or $250,000.
Requires a plaintiff to file a lawsuit within 3 years of manifestation of the injury or within one year of discovery of the injury
Sets a sliding scale for attorney contingency fees
Allows the introduction of evidence of collateral-source benefits, such as Medicare or Medicaid, to prevent double recovery
Prohibits a physicians or pharmacist from being named a party in a product liability suit for prescribing or dispensing an FDA-approved product.
H.R. 5 would not apply to civil actions brought for vaccine-related injury or death.
The price tag of malpractice liability and defensive medicine comes to $55.6 billion a year, or 2.4% of healthcare spending, a Harvard study says. While tort reform efforts to reduce malpractice lawsuit threats, such as those suggested in the Affordable Care Act, might reduce that cost, other efforts underway, such as the remodeling of the healthcare delivery system with "alterations to the fee-for-service system and the incentives it provides for overuse, probably provide greater opportunities for savings," the report states.
The Congressional Budget Office estimated that enacting H.R. 5 would increase federal revenues by $6 billion in 10 years and reduce federal spending for Medicare, Medicaid and a portion of the Federal Employees Health Benefits program by $34 billion over 10 years.
It has taken less than nine years for healthcare costs to double for the average family of four covered by a preferred provider organization, the 2011 Milliman Medical Index shows.
And there's more bad news, employers are passing more of the costs onto their employees.
The 2011 MMI healthcare cost is $19,393, a 7.3% or $1,319 increase over 2010. But here's some good news, that's the lowest annual rate of increase in more than a decade.
The report looks at five components of the MMI: inpatient facility costs, outpatient facility costs, professional services, pharmacy and other. Among the findings:
Hospital inpatient costs accounted for more than one-third of the $1,319 increase. While utilization was flat, costs per day increased by more than 8% from 2010 to 2011. Inpatient costs totaled $6,068 or 31% of a family of four's total annual healthcare bill.
Increased utilization helped grow the cost of outpatient facility care by 10% to $3,404. For the third year the increase in the cost of outpatient facility care outpaced all of the other MMI components.
The total dollars paid for physician care increased by 4.4% to $6,329. Physician services accounted for one-third of the total cost of care.
Pharmacy costs rose by 8% to $2,847. Higher average drug prices accounted for about 75% of the increase with higher usage accounting for just 25% of the increase.
The cost of miscellaneous other services such as durable medical equipment, ambulance services and home health posted a 6.9% increase to $745.
Lorraine Mayne, principal and chief actuary at Milliman, said she was surprised by the increase in healthcare costs now being borne by each year by employees. "Employee out-of-pocket cost sharing and employee payroll deduction increased by 9.2% and 9.3%," she said in a telephone interview from her Salt Lake City office. "Employees will pay $8,008 more for healthcare in 2011 than they did in 2010."
Mayne says the culprit is probably health plans with higher deductibles, higher co-insurance, and higher copayments.
In addition to looking at costs on a nationwide basis, the Milliman Medical Index also looks at the healthcare costs in 14 cities across the country, including Philadelphia, Atlanta and Memphis. Healthcare costs for a family of four ranged from $17,336 in Phoenix to $23,362 in Miami. In six of the 14 cities studied healthcare costs exceeded $20,000 annually for a typical family of four,
Mayne said the geographic cost differences can be explained in terms of utilization patterns, how providers practice in one city versus another, the differences in standard medical procedures from one city to another, and the competition. "Healthcare is a very local industry."