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CCH® BENEFITS — 03/12/12
Health Reform's Success Tied To Sharper Focus On Spending Patterns Of Privately Insured, IMS Health Says
from Spencer’s Benefits Reports: As the health care industry, payers, and policymakers look to curb the growth of U.S. health costs, new efforts are required to understand the substantial differences in spending and utilization between the privately insured under age 65 and Medicare age 65 and older populations, according to recently released report from the IMS Institute for Health Care Informatics.
The privately insured population under age 65 likely will remain the dominant part of the payment system even as the health care landscape transforms with the implementation of the Patient Protection And Affordable Care Act (ACA). The report,
Health Care Spending Among Privately Insured Individuals Under Age 65, finds that care setting and treatment use vary considerably between the two age group segments, resulting in a different distribution of costs across outpatient, inpatient, and pharmacy services.
"As states look to define their essential health benefits packages, a deeper understanding of actual utilization patterns, especially for the small number of patients driving the lion's share of costs, is critical," said Murray Aitken, executive director, IMS Institute for Health Care Informatics. "Further, effective benefits packages will need to fully consider services used by the three high-cost member segments—those with cancer, chronic conditions, and those with auto-immune or other specialty diseases.”
An additional 44 million Americans are expected to have health insurance coverage by 2020, including 25 million through Insurance Exchanges established under the ACA.
The IMS Institute report used data from more than 10 million privately insured members under age 65 to examine the distinctions between IMS aggregated health care use and spending patterns and those commonly cited among health service researchers, including the Agency for Health care Research and Quality, and Centers for Medicare and Medicaid Services.
The report's key findings include the following:
- Distribution of health care costs differs from commonly cited research. For the privately insured under age 65 segment, outpatient and inpatient services represent 59 percent and 20 percent of total spending, respectively. This compares with Medical Expenditure Panel Survey (MEPS) findings of 39 percent and 43 percent, respectively, for outpatient and inpatient services spending within the Medicare age 65 and older population.
- Outpatient services represent the largest share of overall spending. Spending for outpatient services for the privately insured under age 65 population averages more than $2,200 per member per year ($188 per member per month). Professional and facility visits account for 74 percent of all outpatient spending, while emergency room visits and outpatient medical drug therapy represent 10 percent and 5 percent of spending, respectively.
- Inpatient spending is highest among those with chronic conditions. Average spending for each inpatient admission is $14,248, with inpatient services representing 20 percent of total annual spending. Patients with chronic conditions account for 63 percent of all hospital admissions, averaging $15,566 per admission. Oncology patients make up the highest average cost per admission, exceeding $20,000, but average only 2.8 admissions per 1,000 health plan members. This compares with 29.3 admissions per 1,000 members with chronic conditions.
- Pharmacy spending represents 21 percent of overall spending. Health plan members with chronic conditions are filling 78 percent of all prescriptions, while specialty medicines account for 17 percent of retail pharmacy spending. Overall, spending on specialty medicines dispensed by a pharmacy or administered in an outpatient setting accounts for 6 percent of all spending by health plan members. By contrast, pharmacy spending represents 33 percent of total spending for members with auto-immune or other specialty conditions. This reflects the growing availability of treatment options for members with specialty conditions, where medications can be administered outside of the hospital setting.
- Health care spending is highly concentrated. Consistent with patterns across the health care system, privately insured under age 65 health plan members who are among the top 1 percent in annual spending are vastly disproportionate users of health care resources. The top 1 percent of health plan members spend nearly $100,000 annually per member on health services, in contrast to $3,837 per member for the overall plan population. Of this top 1 percent group, 77 percent are diagnosed with at least one chronic condition, and 16 percent have at least one type of cancer. The top 20 percent of members with the greatest need for health care services are responsible for more than 80 percent of total health care spending.
“Payers and regulators need to understand at a more granular level the profile, behavior and use patterns of plan members who will have the greatest overall impact on health care costs," said Dan Malloy, vice president of IMS Payer Solutions. "Generalizations looking at the 'average patient' are woefully inadequate for designing and implementing more effective, efficient care management programs, and pricing their services optimally.”
For more information, visit http://www.theimsinstitute.org/healthspending.
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