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Rising Prices Spur Healthcare Spending Pace

By John Commins  
   January 23, 2018

Spending growth from 2012 to 2016 was almost entirely due to price increases, particularly for prescription drugs, emergency department visits, and inpatient surgical procedures.

Consumers used the same amount of healthcare or less in 2016 than in 2015, but paid more for it because of rising prices, and that pace is accelerating, according to a new report from the Health Care Cost Institute.

"It is time to have a national conversation on the role of price increases in the growth of healthcare spending," said Niall Brennan, president of HCCI.

"Despite the progress made in recent years on value-based care, the reality is that working Americans are using less care but paying more for it every year. Rising prices, especially for prescription drugs, surgery, and emergency department visits, have been primary drivers of faster growth in recent years."

The report covers the period 2012 through 2016 and includes national claims data from Aetna, Humana, Kaiser Permanente, and UnitedHealthcare.

Key findings:

  • Over the five years examined in the survey, prescription drug spending had cumulative growth of 27%, despite flat or decreasing generic drug pricing and a decline in the use of brand name prescription drugs. The increase in spending was driven by double-digit price increases from 2012-2016 for brand prescription drugs.
     
  • The overall number of emergency department visits rose only slightly over the five-year period, but the average price for an emergency department visit increased 31.5%.
     
  • The average price for surgical admissions increased by nearly $10,000, or 30%, over the five-year period, despite a 16% cumulative decline in use. The price for outpatient surgery rose more than 19% over the five-year period.
     
  • Total spending per person is now growing at faster rates than prior years, with 4.6% growth in 2016 compared to. 4.1% growth in 2015, which followed 2 years of sub-3% growth from 2012 to 2014.
     
  • Utilization of most healthcare services remained unchanged or declined, both year-over-year and over the 2012-2016 period.
     
  • Consumer out-of-pocket spending per person increased, but grew more slowly than total spending. This difference in growth led to a decline in out-of-pocket spending as a share of total spending.

"While consumers, especially those with employer-sponsored insurance, may not feel the direct impact of these charges via out of pocket payments, they ultimately pay through increased premiums and decreased benefits," Brennan said.  

PhRMA has challenged the HCCI findings.

"The latest annual report from HCCI overlooks key data published on drug prices included in the years covered by the report. More recent data provides key insights into the spending and costs of prescription medicines," PhRMA said in an email to HealthLeaders Media.

  • In 2016, spending on retail medicines grew just 1.3%, as reported by CMS.
     
  • 2016 spending rates published by a number of sources cite a decline in medicine cost growth, on average of 3%-5% for the year. (Express Scripts, CMS, CVS/Caremark, Quintiles)

"In addition, HCCI does not factor for discounts drug makers provide to payers," PhRMA said. "In 2015, more than $100 billion in savings for patients were negotiated with drug manufacturers. That number is increasing year on year. These discounts rebate more than one-third of the list price back to payers and others in the supply chain."

 

 

John Commins is a senior editor at HealthLeaders.


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