Increasing Prices Drive NJ Spending HCCI Graph

Increasing Prices Drive NJ Spending HCCI Graph

Not long ago, I was reading Niall Brennan’s testimony to a U.S. Senate committee. You may recall that Niall was our keynote speaker at last year’s Winter Conference, and we called him a “truth teller” for his powerful insight and data on rising health care costs. Niall, President and CEO of the Health Care Cost Institute (HCCI), calls rising health care spending unsustainable for families, businesses, governments — and our economy. Niall’s testimony and data focused on an anomaly — a decrease in health care utilization, yet still an overall increase in health care spending. While some spending increases may be connected to innovations, such as new drugs and treatments, much is driven by increased costs for services.

I asked HCCI to explore what’s happening in New Jersey. First, some background. The HCCI data covers employee-sponsored insurance from four leading insurers: United Health Group, Aetna, Humana, and Kaiser Permanente. In New Jersey, the data covers 35 percent of people covered by their employers. HCCI adjusts the data so the population examined reflects the larger population of all people in New Jersey insured by their employers.

Here’s what stood out to me in HCCI’s exclusive analysis of New Jersey health costs from 2012-2016:

  • Health care spending in New Jersey rose faster than the national average. While health care spending jumped 15 percent nationally, the New Jersey jump was 18 percent. That’s a substantial difference. Our state has the fifth highest per capita spending.
  • In New Jersey, inpatient utilization decreased to a greater extent (19 percent) than the national average (12.9 percent), which is good news — except that inpatient spending went up 12 percent overall because inpatient prices went up to 38 percent.
  • HCCI dug into several specific areas of inpatient care and found spending per person for surgery in New Jersey jumped 20 percent; labor and delivery was up 17 percent; and newborn care soared 49 percent.
  • Outpatient spending in New Jersey outpaced the rise nationally because there was an increase in both usage and prices. National outpatient spending rose 17 percent while outpatient spending in New Jersey jumped 19 percent. In New Jersey, lab and pathology increased 31 percent (compared with 14 percent nationally); emergency care rose 32 percent; radiology 18 percent; and outpatient surgery 7 percent.
  • Drug prescription spending per person increased similarly in New Jersey as it did nationally. But that’s not good news when we’re talking about a 27 percent increase from 2012-2016. In New Jersey, the highest jumps were in drugs for skin conditions, at 93 percent; hormone drugs, at 67 percent; and cancer drugs, at 64 percent. Certainly there are examples of new and costly life-saving and life-changing drugs, but there also are many examples of price hikes in drugs that have existed on the market for many years.

We’re thankful to HCCI for preparing this data, and I urge all of our members to explore the HCCI charts and share your own insight with us. For me, a key takeaway is that reducing avoidable utilization alone will not solve the problem of escalating spending. The data shows the main driver in rising employer sponsored health care spending has been the jump in prices. We now spend 17.9 percent of our gross domestic product on health care — twice what we spent in 1980. The National Health Expenditure Projections predict the percentage will be 19.7 by 2026.

At the Quality Institute, we’re working to improve quality, safety, and affordability. To effectively address rising costs, we need to know the reasons behind the increases. Seeing the data and trends enables policymakers and purchasers to ask the right questions and plan more effectively.

We all need to be at the table, willing to make compromises and changes for the benefit of a system we all rely on.

I urge the state and health plans to follow the lead of other states and pull the data together in an all payer claims database (APCD) — and then use that data to catalyze better-informed decisions to reduce health care spending. Recent news stories have captured bold moves using data for purchasing and planning decisions from Ohio to Montana to Massachusetts. Now it’s New Jersey’s turn.

View and download the HCCI charts here.