Making Sense of the Latest Health Numbers: Answers … and Questions

January 6, 2009

The latest health spending numbers are out, covering the year 2007.  What do they mean?  Put it this way:  The Times’ lede is that health costs grew at their slowest rate in nine years.  But the bottom line is that these costs rose 6.1%, compared to a 4.1% increase in the Consumer Price Index (December 2007 – December 2006).   While CPI is not a perfect analog for the entire economy (it specifically addresses consumer spending), that’s quite a story:  Growing one-and-a-half times more than overall costs is the good news.

The overall rate of increase would have been much larger had it not been for a slowdown in pharmacy costs, which “only” rose by 4.9% (still ahead of the CPI).  Why pharmacy?  Report author Micah Hartman cited three reasons:  increased use of generics, greater safety concerns, and an overall slowdown in drug price increases.  (I wonder  if benefit reductions – specifically, increased copays – also contributed to the slowdown.)

Physician reimbursements rose 5.9%. That’s down from 6.4% the year before, mostly because of Medicare reductions in imaging reimbursements.  Still, I wonder what other segment of the workforce got an average 6% raise that year.  (Granted, not all of that amount went directly to doctor compensation, but the topic of where that money went warrants further study.)

Hospital costs rose 7.3%, up from 6.9% in 2006. Heckuva job, precert and managed care.  Unanswered questions:  What was the mix of needed vs. unnecessary care reflected in these numbers?

Consumer spending increased 5.3%. Consumers didn’t pay for all of the increase in costs.  In fact, their share grew more slowly than costs did overall.  Still, cost-shifting is causing increased pain for insured Americans of all kinds.

And we haven’t even seen 2008’s numbers yet.  That was the year inflation came to town …

3 Responses to “Making Sense of the Latest Health Numbers: Answers … and Questions”

  1. Annie Says:

    Re: pharm costs – no one has yet mentioned donut holes and the millions of people who are not filling and refilling prescriptions, nor the millions who are dividing their pills and tablets and taking less than the prescribed dose.

    The other enormous gap in reportage is how much was spent on ambulatory and preventive care services and how these services impacted hospital admission rates (the theory being that the more comprehensive and effective primary/preventive/low tech care is, the lower the hospital admission rates will be for preventable illnesses and chronic illness exacerbations).

  2. reskow Says:

    Good points, Annie. The ‘donut hole’ is an issue that warrants further study. In my mind it comes under the general issue of “benefits design” and out-of-pocket costs.

    Re your second point, I certainly agree there’s a causal relationship. Since hospital costs went up, one inference we might make is that we’re not spending enough on ambulatory and preventive care. I certainly believe that’s the case.

  3. Chuck Levenstein Says:

    Are there any reasonable indicators of disease and/or injury prevention efforts? Not only health promotion, but health protection?


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