9:20am
Bob Carey – Connector Director of Planning
Summary:
1. Lax system controls drive up US spending compared to other countries
2. Price and mix of services, not volume, are primary reasons for higher spending in US – in MA, price, mix and volume are higher than national average.
3. Local market conditions push up spending on health care in MA
4. 2008 rates are already set, 2009 rates are partially in place
5. Absent inflation in the affordability scheduled, individual mandate erodes and higher inflation trend erodes it faster
While we were always higher in health spending than most other nations, it’s really accelerated since 1980. We spend per capita more than twice as much on hospitals (134% of OECD average) and outpatient (115%) than other countries do. 88% drugs. 36% long term care. 472% on administration of insurance. -20% on DME.
Average number of hospitals days is 50% lower than OECD average, though average cost per day is 4.3 times higher.
Outpatient – 70% of excess US health care spending is attributable to hospitals and outpatient care. Tremendous explosion in high tech imaging. Physicians in US make twice as much as docs in other OECD countries.
Drugs – not volume, it’s cost and mix that drive spending. For top nine therapeutic classes, US patients consume 20% fewer drugs, but drug costs are 50-70% higher.
Administration/Insurance – six times higher than OECD average, $412 per capita. 64% related to product design, underwriting and marketing, activities that typically do not exist in other countries.
Health Status – we’re slightly less healthy, but that doesn’t make much difference in spending. Only $25B out of $2T in spending according to McKinsey.
MA: $6683 spent on personal health services (not including research, etc) in MA per capita in 2004 versus $5283 in US in 2004. If MA on par with US average, our spending would drop by $9B. We’ve been about 25% higher in health spending than rest of nation for the last 25 years. We’re also among states with highest per capita income.
Kingsdale – very strong correlation between how wealthy the state and the cost of health care in the state.
Turnbull – every dollar we spend on health care is a dollar we can’t spend on other things that may be more beneficial in improving health.
Carey – we spend $1400 more per capita – and almost $700 of that is excess money spent on hospital care. 45% of discharges are from teaching hospitals, opposed to about 20% nationally. From 2000 to 2006, 75% of net increase in discharges were from teaching hospitals. NonER outpatient utilization was 72% higher in MA. In 2002, MA had 30% more primary care physicians per capital than US overall (13.6 per 10,000 vs. 10.4 US). Outpatient surgeries were 30% higher in MA than US.
Mitchell – important question is how many of those outpatient services were medically necessary and useful to the patient.
Turnbull – one of the most elusive questions in the world is what doctors actually make.
Carey – drugs – MA spends 12% more than nation on prescription drugs. Though downturn in drug spending increases; lowest rate of increase in 2006 in 12 years at 7%.
Insurance Premiums: 15% higher in MA than rest of US – not as high as one would expect given prior data. Boston 1st among 14 metro areas. Small group increases up 10-12% 2003 versus 2007.
So what’s driving trend in MA: 1. increase in outpatient reimbursement utilization is 50% of increase. 2. Inpatient provider rates increasing while admissions are flat. 3. Higher RXcosts and great utilization responsible for 13-15%
