American Health Care: Why So Costly? Karen Davis President, The Commonwealth Fund June 11, 2003 Hearing on Health Care Access and Affordability: Cost Containment.

American Health Care: Why So Costly?

Karen DavisPresident, The Commonwealth Fund

June 11, 2003Hearing on Health Care Access and Affordability: Cost

Containment StrategiesSenate Appropriations Committee

Labor, Health, and Human Services, Education and Related Agencies Subcommittee

0

3

6

9

12

15

18

1985 1990 1995 2000 2005 2010

Growth in Per Enrollee Private Health Insurance Premiums and Benefits, 1985

- 2012

1

Source: Heffler et al., “Health Spending Projections for 2002-2012,” Health Affairs (Web Exclusive February 7, 2003)

Percent

Projected

Premiums per enrollee

Benefits per enrollee

National Health Expenditures Average Annual Percentage Growth, Selected

Calendar Years 1960-2012

10.6%

12.9%11.0%

8.5%

5.4%7.4%

8.7%7.2% 6.9%

0%

5%

10%

15%

1960-

1970

1970-

1980

1980-

1990

1990-

1993

1993-

1999

1999-

2000

2000-

2001

2003-

2008

2008-

2012

2

Source: Levit et al., “Trends in U.S. Health Care Spending, 2001,” Health Affairs (January/February 2003): 154–164 and Heffler et al., “Health Spending Projections for 2002–2012,” Health Affairs (February 7, 2003).

Projected

Real National Health Expenditures Average Annual Percentage Growth, Selected Calendar Years 1960-2001

7.7%

5.5%6.4%

5.5%3.6%

5.2%6.2%

4.6% 4.1%

0%

5%

10%

15%

1960-

1970

1970-

1980

1980-

1990

1990-

1993

1993-

1999

1999-

2000

2000-

2001

2003-

2008

2008-

2012

3

Source: Levit et al., “Trends in U.S. Health Care Spending, 2001,” Health Affairs (January/February 2003): 154–164 and Heffler et al., “Health Spending Projections for 2002–2012,” Health Affairs (February 7, 2003).

Projected

National Health Expenditures Percentage Growth by Service, 2000 - 2001

8.7% 8.3% 8.6%

5.2%

15.7%

11.2%

0%

10%

20%

Total Hospital Care Physic ian and

c linical services

Nursing home

and home health

care

Presc ription

drugs

Program

administration

and net cost of

private health

insurance

4

Source: Levit et al., “Trends in U.S. Health Care Spending, 2001,” Health Affairs (January/February 2003): 154–164

Shares of Overall Health Care Spending Growth, 1999-2001

31% 32% 37% 37%

5% 7%

14% 14%

34% 27%

21% 22%

30% 34% 28% 27%

0%

50%

100%

1999 2000 2001 2002

Physic ian services

Prescription drugs

Hospital inpatient

Hospital outpatient

5

Source: Bradley Strunk and Paul Ginsburg, “ Tracking Health Care Costs: Trends Stabilize but Remain High in 2002.” Health Affairs (Web Exclusive, June 11, 2003.)

0

2

4

6

8

1989 1991 1993 1995 1997 1999 2001

Source: Levit et al., “Trends in U.S. Health Care Spending, 2001,” Health Affairs (January/February 2003): 154–164

Annual Percentage Change in Medical Price Index and Quantity of Service Use Per

Capita, 1989-2001Percent

6

Medical price index

Quantity of service use per person

Decomposition of Hospital Spending Trends, Annual Percentage Change,

1994-2002

7

*Calculated as the residual of the hospital spending and hospital price trends** Data through June 2002, compared with corresponding months in 2001Source: Bradley Strunk, Paul Ginsburg and Jon Gabel, “ Tracking Health Care Costs: Growth Accelerates Again in 2001.” Health Affairs (Web Exclusive, September 25, 2002.)

Spending on hospital services

Hospital prices Quantity*

1994 1.8% 4.0% -2.2%

1995 .8 3.7 -2.8

1996 .5 1.8 -1.2

1997 1.3 1.7 -0.4

1998 3.4 1.9 1.5

1999 5.8 2.5 3.2

2000 7.1 3.3 3.6

2001 12.0 3.6 8.0

2002** 11.2 4.1 6.8

Physicians’ Net Income from Practice of Medicine, 1999, and Percent Change, 1995-

1999

8

Average reported net

income

Percent change in income, adjusted for inflation

1999 1995-97 1997-99 1995-99

All patient care physicians

$187,000 -3.8%* -1.2%* -5.0%*

Primary care physicians

$138,000 -5.4* -1.1 -6.4

Specialists $219,000 -3.5*# -0.6 -4.0*#

*Rate of change is statistically significant at p<.05.#Rate of change for specialists in significantly different from change for primary care physicians at p<.05.Source: Marice C. Reed and Paul B. Ginsburg, Behind the Times: Physician Income, 1995-99. Center for Studying Health System Change, Data Bulletin No. 24, March 2003.

Percentage Growth in Medicare Per Capita Use of Physician Services, by Selected Type of Service,

2001-2002

2.3%

4.4%

6.5%

10.8%

14.6%

10.1% 9.9%8.9%

0%

10%

20%

Office vis its Consultations Emergency

room vis its

Echography-

heart

MRI - brain Endoscopy -

colonoscopy

K nee

replacement

Pacemaker

insertion

9

Source: Medicare Payment Advisory Commission, Report to the Congress: Medicare Payment Policy. March 2003

Growth in Ambulatory Surgery Procedures Provided to Medicare Beneficiaries,

1997, 1999, 2001

0

1500

3000

1997 1999 2001

10

Source: Medicare Payment Advisory Commission, Report to the Congress: Medicare Payment Policy. March 2003

Number of procedures

Factors Accounting for Growth in Prescrip-tion Drug Spending per Capita, 1980-2011

Note: Data for 2000-2011 are projections.”Other” includes quality and intensity of services, and age-gender effects.Source: Centers for Medicare and Medicaid Services, The CMS Chart Series. 2003

9

2.84.6 4.9 4.9

2.2

5 3.3 2.44.2

6.55.1

2.70.90.8

02468

1012141618

1980-1993 1993-1997 1997-2000 2000-2003 2003-2011

Calendar Years

Other

Drug Utilization (Number of Prescriptions)

Drug Prices (Consumer Price Index - Drugs)Average Annual Percent Change

10.79.2

16.1

13.3

10.0

11

$2.8 $12.1

$222.6

$110.9

$53.3

0

125

250

1970 1980 1993 2002* 2012*

*ProjectedSource: Levit et al., “Trends in U.S. Health Care Spending, 2001,” Health Affairs (January/February 2003): 154–164 and Heffler et al., “Health Spending Projections for 2002–2012,” Health Affairs (February 7, 2003).

Net Cost of Private Health Insurance and Government Program Administration,

(in billions) 1970–2012Billions

12

Private Insurance Administrative Costs as a Percent of Private Insurance Outlays and Public Program

Administration as a Percent of Public Outlays, 2001

11.9%

4.6%

0%

5%

10%

15%

Private insurance administration Public administration

13

Source: Calculated from Centers for Medicare and Medicaid, “National Health Expenditures, by Source of Funds and Type of Expenditure.” Available at http://www.cms.hhs.gov/statistics/nhe/historical/t3.asp

National Health Expenditures by Source of Funds, 2001

Medicare

$242 billion

Private Health

Insurance

$496 billion

Out-of-pocket

$206 billion

Medicaid

$224 billion

Other public

$180 billion

Other private

$76 billion

14

Total National Health Expenditures = $1.4 trillion

Source: Levit et al., “Trends in U.S. Health Care Spending, 2001,” Health Affairs (January/February 2003): 154–164

5%17%

16%

13%35%

14%

Percentage Change in Private Health Insurance and Medicaid Enrollment,

1985-2012

-6

-3

0

3

6

9

12

15

18

1985 1990 1995 2000 2005 2010

15

Source: Heffler et al., “Health Spending Projections for 2002-2012,” Health Affairs (Web Exclusive February 7, 2003)

Percent

Projected

Medicaid enrollment

Private insurance enrollment

0

1000

2000

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

Private healthinsurers

Medicare

Cumulative Growth in Per Enrollee Payments for Comparable Services, Medicare and Private

Insurers, 1970-2000*Growth index

*Includes hospital care, physician and clinical services, durable medical equipment, and other professional services.Source: Christina Boccuti and Marilyn Moon, “Comparing Medicare and Private Insurers: Growth Rates in Spending Over Three Decades.” Health Affairs (March/April 2003)

16

1996 1997 1998 1999 2000 2001 2002 2003

(est.)

16%

12%

8%

4%

FEHBP per participantspending

Medicare per capita spending

All employer premiums

Spending Growth: FEHBP, All Employers, and Medicare

-2%

0%

Note: Employer premium increases reflect coverage for a family of four.Source: Mark Merlis, The Federal Employees Health Benefits Program:Program Design, Recent Performance, and Implications for Medicare ReformBriefing for The Henry J. Kaiser Family Foundation, May 30, 2003.

(12.7%)

(15%)

(4.1%)

17

Per Capita National Health Expenditures in Selected Countries, 2000

$4,631

$2,748 $2,535 $2,420$1,983 $1,763

$0

$2,500

$5,000

US GER CAN DEN OECD

Median

UK

18

Source: Anderson, et al. “It’s the Prices, Stupid: Why The United States is So Difference from Other Countries.” Health Affairs (May/June 2003): 89-105

Average Annual Growth Rate of Real Health Care Spending per Capita Between 1990 and

2000 in Selected Countries

3.9 3.7

3.2 3.1 3.12.9

2.32.1

1.8

0.0

1.0

2.0

3.0

4.0

J apan United

K ingdom

United

States

Australia OECD

Median

New

Zealand

France Germany Canadaa

a 1992–2000Source: Anderson, et al., Multinational Comparisons of Health Systems Data, 2002.The Commonwealth Fund, October 2002.

Percent

19

Distribution of Public and Private Health Care Spending in Selected Countries, 2000

81 78 77 76 75 74 72 72

44

19 22 23 24 25 26 28 28

56

0

20

40

60

80

100

United

Kingdom

New

Zealand

J apan France Germany OECD

Median

Australia Canada United

States

Private SpendingPublic SpendingPercent

Source: Anderson, et al., Multinational Comparisons of Health Systems Data, 2002.The Commonwealth Fund, October 2002.

20

$405 $399

$335 $328$290

$249 $240

$171

$707

$0

$100

$200

$300

$400

$500

$600

$700

$800

United

States

Canada Australia OECD

Median

J apan Germany New

Zealand

France United

K ingdom

Per Capita Out-of-Pocket Health Care Spending in Selected Countries, 2000

c

ba a

a 1999, b 1998, c 1996Source: Anderson, et al., Multinational Comparisons of Health Systems Data, 2002.The Commonwealth Fund, October 2002.

21

16.0

6.5 6.5 6.4 6.4 5.9 5.8 5.4

0

4

8

12

16

J apan France Germany Australia Canada OECD

Median

United

States

United

K ingdom

Per Capita Annual Number of Physician Visits, Selected Countries

aa

d

c

a

a b

b

a 1996, b 2000, c 1999, d 1998Source: Anderson, et al., Multinational Comparisons of Health Systems Data, 2002.The Commonwealth Fund, October 2002.

22

Per Capita Acute Care Hospital Days Selected Countries, 2000

1.9

1.0 1.0 1.0 0.90.7

0

1

2

GER DEN CAN OECD

Median

UK US

23

*1999Source: Anderson, et al. “It’s the Prices, Stupid: Why The United States is So Difference from Other Countries.” Health Affairs (May/June 2003): 89-105

* *

Per Capita Spending on Pharmaceuticals, 2000

$556

$473

$385 $375

$262 $253 $252$210

$313

$0

$200

$400

$600

United

States

France Canada Germany J apan OECD

Median

United

K ingdom

Australia New

Zealand

a c

bb

a 1999, b 1997, c 1998Source: Anderson, et al., Multinational Comparisons of Health Systems Data, 2002.The Commonwealth Fund, October 2002.

24

388

166

10381 66 51

0

200

400

United

States

Germany Australia Canada New Zealand England

Coronary Angioplasty Procedures per 100,000 Population in Selected Countries

a

b a a a c

a 1999, b 1997, c 2000Source: Anderson, et al., Multinational Comparisons of Health Systems Data, 2002.The Commonwealth Fund, October 2002.

25

Age-Standardized Mortality Rates for Acute Myocardial Infarction per 100,000 Population

in 1999 in Selected Countries75 75

65 63 63 61 60

2925

0

10

20

30

40

50

60

70

80

United

K ingdom

New

Zealand

Australia Canada OECD

Median

Germany United

States

France J apana

ba

a

a 1998, b 1997Source: Anderson, et al., Multinational Comparisons of Health Systems Data, 2002.The Commonwealth Fund, October 2002.

26

Percent of Sicker Adults Reporting Medical Errors Causing Serious Problems, 2002

18

1514

13

9

0

10

20

US CAN NZ AUS UK

Source: Commonwealth Fund 2002 International Health Policy Survey of Sick Adults

Percent

27

Percent of Sicker Adults Reporting Being Sent for Duplicate Tests by Different Health

Professionals, 2002

2220

17

13 13

0

12

24

US CAN NZ AUS UK

Source: Commonwealth Fund 2002 International Health Policy Survey of Sick Adults

Percent

28

Acknowledgments• Barbara Cooper, Senior Program Officer, co-

author• Steve Schoenbaum, Senior Vice President • Cathy Schoen, Vice President for Health Policy,

Research, and Evaluation• Chris Hollander, Senior Editor • Katie Tenney, research and production

assistance

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