American Health Care: Why So Costly? Karen Davis President, The Commonwealth Fund June 11, 2003 Hearing on Health Care Access and Affordability: Cost Containment Strategies Senate Appropriations Committee Labor, Health, and Human Services, Education and Related Agencies Subcommittee Growth in Per Enrollee Private Health Insurance Premiums and Benefits, 1985 - 2012 Percent 18 Premiums per enrollee 15 Benefits per enrollee 12 9 6 3 0 1985 1990 1995 2000 2005 2010 Projected Source: Heffler et al., “Health Spending Projections for 2002-2012,” Health Affairs (Web Exclusive February 7, 2003) 1 National Health Expenditures Average Annual Percentage Growth, Selected Calendar Years 1960-2012 15% 2 12.9% 11.0% 10.6% 8.5% 10% 7.4% 8.7% 5.4% 7.2% 6.9% 5% 0% 1960- 1970- 1980- 1990- 1993- 1999- 2000- 2003- 1970 1980 1990 1993 1999 2000 2001 2008 2012 Projected 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). 2008- Real National Health Expenditures Average Annual Percentage Growth, Selected Calendar Years 1960-2001 3 15% 10% 7.7% 5.5% 6.4% 5.5% 5% 3.6% 5.2% 6.2% 4.6% 4.1% 0% 1960- 1970- 1980- 1990- 1993- 1999- 2000- 2003- 1970 1980 1990 1993 1999 2000 2001 2008 2012 Projected 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). 2008- 4 National Health Expenditures Percentage Growth by Service, 2000 - 2001 20% 15.7% 11.2% 10% 8.7% 8.3% 8.6% 5.2% 0% Total Hospital Care Physician and Nursing home Prescription Program clinical services and home health drugs administration care and net cost of private health insurance 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 5 100% 30% 50% 34% 34% 28% 27% 21% 22% 14% 14% 27% 5% 7% 31% 32% 37% 37% 1999 2000 2001 2002 Physician services Prescription drugs Hospital inpatient Hospital outpatient 0% Source: Bradley Strunk and Paul Ginsburg, “ Tracking Health Care Costs: Trends Stabilize but Remain High in 2002.” Health Affairs (Web Exclusive, June 11, 2003.) Annual Percentage Change in Medical Price Index and Quantity of Service Use Per Capita, 1989-2001 Percent 8 6 Medical price index 4 Quantity of service use per person 2 0 1989 1991 1993 1995 1997 1999 Source: Levit et al., “Trends in U.S. Health Care Spending, 2001,” Health Affairs (January/February 2003): 154–164 2001 6 Decomposition of Hospital Spending Trends, Annual Percentage Change, 1994-2002 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 *Calculated as the residual of the hospital spending and hospital price trends ** Data through June 2002, compared with corresponding months in 2001 Source: Bradley Strunk, Paul Ginsburg and Jon Gabel, “ Tracking Health Care Costs: Growth Accelerates Again in 2001.” Health Affairs (Web Exclusive, September 25, 2002.) 7 8 Physicians’ Net Income from Practice of Medicine, 1999, and Percent Change, 1995-1999 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 20% 14.6% 10.8% 10% 10.1% 9.9% Endoscopy - Knee Pacemaker colonoscopy replacement insertion 8.9% 6.5% 4.4% 2.3% 0% Office visits Consultations Emergency Echography- room visits heart MRI - brain Source: Medicare Payment Advisory Commission, Report to the Congress: Medicare Payment Policy. March 2003 9 Growth in Ambulatory Surgery Procedures Provided to Medicare Beneficiaries, 1997, 1999, 2001 Number of procedures 3000 1500 0 1997 1999 Source: Medicare Payment Advisory Commission, Report to the Congress: Medicare Payment Policy. March 2003 2001 10 11 Factors Accounting for Growth in Prescription Drug Spending per Capita, 1980-2011 Other Average Annual Percent Change 18 16 14 12 10 8 6 4 2 0 Drug Utilization (Number of Prescriptions) Drug Prices (Consumer Price Index - Drugs) 16.1 6.5 10.7 0.8 0.9 9.2 4.2 9 2.2 2.8 1980-1993 1993-1997 13.3 5.1 10.0 2.7 5 3.3 2.4 4.6 4.9 4.9 1997-2000 2000-2003 2003-2011 Calendar Years 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 Net Cost of Private Health Insurance and Government Program Administration, (in billions) 1970–2012 Billions 250 $222.6 $110.9 125 $53.3 0 $2.8 1970 $12.1 1980 1993 2002* *Projected 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). 2012* 12 Private Insurance Administrative Costs as a 13 Percent of Private Insurance Outlays and Public Program Administration as a Percent of Public Outlays, 2001 15% 11.9% 10% 4.6% 5% 0% Private insurance administration Public administration 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 Total National Health Expenditures = $1.4 trillion Other private Out-of-pocket $76 billion 5% $206 billion 14% Medicare $242 billion 17% Medicaid 16% Private Health Insurance $496 billion 35% 13% $224 billion Other public $180 billion Source: Levit et al., “Trends in U.S. Health Care Spending, 2001,” Health Affairs (January/February 2003): 154–164 14 Percentage Change in Private Health Insurance and Medicaid Enrollment, 1985-2012 Percent 18 Medicaid enrollment 15 12 Private insurance enrollment 9 6 3 0 -3 1985 1990 1995 2000 2005 2010 -6 Projected Source: Heffler et al., “Health Spending Projections for 2002-2012,” Health Affairs (Web Exclusive February 7, 2003) 15 Cumulative Growth in Per Enrollee Payments for Comparable Services, Medicare and Private Insurers, 1970-2000* Growth index 2000 16 Private health insurers Medicare 1000 0 70 972 974 976 978 980 982 984 986 988 990 992 994 996 998 000 9 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 *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) Spending Growth: FEHBP, All Employers, and Medicare (15%) 16% All employer (12.7%) premiums FEHBP per participant spending 12% 8% (4.1%) 4% 0% -2% Medicare per capita spending 1996 1997 1998 1999 2000 2001 2002 2003 (est.) 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 Reform Briefing for The Henry J. Kaiser Family Foundation, May 30, 2003. 17 18 Per Capita National Health Expenditures in Selected Countries, 2000 $5,000 $4,631 $2,748 $2,535 $2,500 $2,420 $1,983 $1,763 $0 US GER CAN DEN OECD Median 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 UK Average Annual Growth Rate of Real Health Care Spending per Capita Between 1990 and 2000 in Selected Countries Percent 4.0 3.9 3.7 3.2 3.1 3.1 3.0 2.9 2.3 2.1 1.8 2.0 1.0 0.0 Japan a United United Kingdom States Australia OECD New Median Zealand France Germany a 1992–2000 Source: Anderson, et al., Multinational Comparisons of Health Systems Data, 2002. The Commonwealth Fund, October 2002. Canada 19 20 Distribution of Public and Private Health Care Spending in Selected Countries, 2000 Private Spending Public Spending Percent 100 80 19 22 23 24 25 26 28 28 56 60 40 81 78 77 76 75 74 72 72 44 20 0 United New Kingdom Zealand Japan France Germany OECD Australia Canada Median Source: Anderson, et al., Multinational Comparisons of Health Systems Data, 2002. The Commonwealth Fund, October 2002. United States 21 Per Capita Out-of-Pocket Health Care Spending in Selected Countries, 2000 $800 $707 $700 $600 $500 $405 $399 $400 $335 $328 $290 $300 $249 $240 $171 $200 $100 $0 United States a Canada a Australia b OECD Median Japan a Germany New France Zealand 1999, b 1998, c 1996 Source: Anderson, et al., Multinational Comparisons of Health Systems Data, 2002. The Commonwealth Fund, October 2002. United Kingdom c 22 Per Capita Annual Number of Physician Visits, Selected Countries 16 16.0 12 8 6.5 6.5 6.4 6.4 b Australia Canada 5.9 5.8 5.4 4 0 a Japan France a Germany a c OECD Median a United b States United a 1996, b 2000, c 1999, d 1998 Source: Anderson, et al., Multinational Comparisons of Health Systems Data, 2002. The Commonwealth Fund, October 2002. Kingdom d 23 Per Capita Acute Care Hospital Days Selected Countries, 2000 2 1.9 1.0 1 1.0 1.0 0.9 0.7 0 GER * DEN CAN OECD UK * Median *1999 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 US 24 Per Capita Spending on Pharmaceuticals, 2000 $600 $556 $473 $385 $400 $375 $313 $262 $253 $252 OECD United c Australia $210 $200 $0 United States a France Canada Germany Japan a Median Kingdom b 1999, b 1997, c 1998 Source: Anderson, et al., Multinational Comparisons of Health Systems Data, 2002. The Commonwealth Fund, October 2002. New Zealand b 400 Coronary Angioplasty Procedures per 100,000 Population in Selected Countries 25 388 166 200 103 81 66 51 0 United States Germany b Australia a Canada a New Zealand a England a 1999, b 1997, c 2000 Source: Anderson, et al., Multinational Comparisons of Health Systems Data, 2002. The Commonwealth Fund, October 2002. a c Age-Standardized Mortality Rates for Acute Myocardial Infarction per 100,000 Population in 1999 in Selected Countries 80 75 26 75 65 70 63 63 61 60 60 50 40 29 30 25 20 10 0 United Kingdom a New a Zealand Australia Canada b OECD Median Germany United a States Francea 1998, b 1997 Source: Anderson, et al., Multinational Comparisons of Health Systems Data, 2002. The Commonwealth Fund, October 2002. Japan 27 Percent of Sicker Adults Reporting Medical Errors Causing Serious Problems, 2002 Percent 20 18 15 14 13 9 10 0 US CAN NZ AUS UK Source: Commonwealth Fund 2002 International Health Policy Survey of Sick Adults 28 Percent of Sicker Adults Reporting Being Sent for Duplicate Tests by Different Health Professionals, 2002 Percent 24 22 20 17 13 13 AUS UK 12 0 US CAN NZ Source: Commonwealth Fund 2002 International Health Policy Survey of Sick Adults 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 www.cmwf.org