NCPA - National Center for Policy Analysis

Higher Prices by Hospitals, Other Providers, Drove 2011 Spending Increases

September 26, 2012

Spending on medical care for Americans with job-based insurance rose 4.6 percent last year, driven mainly by higher prices charged by hospitals and other medical providers, according to a new report by the Health Care Cost Institute, a nonpartisan research group funded by insurers, says Kaiser Health News.

The growth came despite a sluggish economy, which some economists thought would translate into more modest spending growth. Still, last year's per enrollee increase ranks below the 5.8 percent increase in 2009.

It isn't clear from the data whether last year's uptick represents a return toward the higher averages of the past -- or whether it was an anomaly within a general slowdown, says David Newman, executive director of the institute. The institute noted the 2010 slowdown in its first report, which documented a 3.8 percent spending increase for privately insured Americans that year.

  • The current report found that employers in the Northeast spent the most on health care last year, at $4,659 per enrollee, while those in the West had the lowest tab at $4,358.
  • The data are based on 6 billion actual claims paid by insurers covering about 40 million people, representing one of the broadest looks at spending by employers for medical services.
  • The data do not include spending for people covered by Medicare, Medicaid or for those who buy their own coverage.

The data can help those who negotiate for health coverage "to ask what justifies price increases that are two and three times inflation," says Newman.

  • While the Consumer Price Index rose 3.2 percent between 2010 and 2011, for example, the average price for inpatient hospital care rose 5.3 percent.
  • That increase occurred as admissions declined half a percentage point.

Source: Julie Appleby, "Higher Prices by Hospitals, Other Providers, Drove 2011 Spending Increases, Study Finds," Kaiser Health News, September 25, 2012. "2011 Health Care Cost and Utilization Report," Health Care Cost Institute, September 25, 2012.


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