November 09, 2017
3 min read

Service price biggest driver of health care spending

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Annual health care spending increased from $1.2 trillion to $2.1 trillion between 1996 and 2013, fueled by a 50% rise in the price of health care services to $583 billion, according to findings recently published in JAMA.

“Although higher spending on health is not inherently bad, policy discussions in the United States often center around ‘bending the health care cost curve,’” Joseph L. Dieleman, PhD, of the Institute for Health Metrics and Evaluation, and colleagues wrote. “Previous research has provided insight into areas of spending growth, but little is known about what specifically is contributing to this growth, especially for specific conditions or types of care.”

Researchers culled data from 36 sex and age groups and 155 health conditions from the 2015 Global Burden of Disease study and the 2013 Institute for Health Metrics and Evaluation’s U.S. Expenditure for their analysis. They examined spending on five factors — total U.S. population; the fraction of the population living in each sex and age group; intensity and service price; disease incidence and prevalence; and service utilization — across ED, inpatient, ambulatory, retail pharmaceutical, nursing facility and dental care. A decomposition analysis was used to estimate the link between changes in the studied factors and fluctuations in health care spending, and to estimate the variability across types of care and health conditions.

Researchers found that across the health care types studied, inflation-adjusted spending increased from $1.2 trillion in 1996 to $2.1 trillion in 2013. Changes in intensity and service price — specifically, spending per visit for ambulatory, ED, and dental care; spending per bed-day for inpatient and nursing facilities; and spending per prescription filled for retail pharmacies were associated with a 50% (uncertainty interval [UI], 45–55) or $583.5 ($525.2 billion to $641.4 billion) increase.

In addition, the increase in total U.S. population was linked with a 23.1% (UI, 23.1–23.1) or $269.5 billion ($269 billion to $270 billion) spending increase and aging of the U.S. population was associated with an 11.6% (UI, 11.4–11.8) or $135.7 billion ($133.3 billion to $137.7 billion) spending increase. Dieleman and colleagues also wrote that changes in disease incidence and prevalence were associated with 2.4% (UI, 0.9–3.8) or $28.2 billion ($10.5 billion to $44.4 billion) lower spending. Service utilization changes were not linked to statistically significant changes in spending. Researchers also found that the influence of these five factors varied by type or care and health condition.


“These findings have a diverse set of policy implications,” Dieleman and colleagues wrote. “For example, the finding that service price and intensity are major contributing factors to spending growth may suggest that policy efforts focused on reducing these factors could hold promise for reducing health care spending. Condition-specific analyses may point to particular health conditions to which attention could be turned, such as the rising price of pharmaceuticals for diabetes. In addition, the estimates developed here could also be used for forecasting the potential effect of policies that alter particular factors associated with cost growth, although such analyses were beyond the scope of this project and could be considered only exploratory.”

In a related editorial, Patrick H. Conway, MD, MSc, of Blue Cross Blue Shield of North Carolina, wrote that Dieleman and colleagues’ findings reiterate a previously held notion that the U.S. “is on an unsustainable growth path in terms of health care costs and must get costs under control.”

He offered several possible solutions, including multipayer payment models and clinicians, hospitals and payers teaming up to control price increases.

Conway, a former acting administrator of CMS, also wrote there have been significant changes in the delivery systems since 2013, the last year Dieleman and colleagues gathered data.

“In addition, the analysis was based on national data, but many of these trends may vary in state and local markets. The associations are also in the context of many other changes. For example, overall service utilization did not play a large role in increased spending, but these data were based on a period when many of the interventions (eg, accountable care organizations and new payment models) primarily have focused on decreasing utilization. So the question remains what the trends might have been without some of these interventions.”

He added that even with these limitations, Dieleman and colleagues’ findings are a “significant contribution” to the existing research on health care spending. – by Janel Miller

Disclosures: The authors report no relevant financial disclosures.