Published in NJ Spotlight.
Although record numbers of New Jerseyans now have insurance coverage, the price of healthcare remains a major difficulty for families and small businesses
Far fewer people are being admitted to New Jersey hospitals in recent years, with improvements in medical care and a growth in less-costly outpatient options. But, with the price of inpatient care escalating by nearly 40 percent over four years, spending on this category continues to climb.
That was one of several sobering takeaways from four years worth of claims data collected by the Health Care Cost Institute, an independent research organization backed by a handful of national health insurance companies, at the request of the New Jersey Health Care Quality Institute, a nonprofit policy organization seeking to improve the state’s system of care. Linda Schwimmer, the quality institute’s president and CEO, shared the findings in a blog post late last week.
The numbers — reflecting the use, price and overall spending on a variety of medical services from 2012 through 2016 — are based on data from four insurance companies. They also show that healthcare spending overall has risen faster in New Jersey than nationwide, 18 percent to 15 percent over those years. However, the review did not include data from Horizon Blue Cross Blue Shield of New Jersey, the state’s largest insurance company, which represents close to 70 percent of the market here.
The data showed that in all, by 2016, the Garden State had the fifth highest per-person spending for healthcare nationwide, outpacing all but one other state in the Northeast (New Hampshire, which ranked third). On average, healthcare costs in New Jersey reached nearly $6,200 annually per patient. In New York, ranked tenth, the annual tab was just over $5,900. In Pennsylvania, far down the list, insurance providers shelled out some $5,400 on average.
‘Premiums cannot continue to go up…’
The HCCI review showed “price increase was driving the increase in cost,” both here and nationwide, Schwimmer told health insurance insiders and other healthcare stakeholders at the New Jersey Association of Health Underwriters annual conference earlier this month. “Premiums cannot continue to go up at the same rate that they have for businesses, or for the state,” she added.Sean Hopkins, an executive with the New Jersey Hospital Association, said the changes in use reflect nationwide trends toward treating patients in less intensive settings, when appropriate. But he said the patients that do require inpatient care have more complex, and costly medical needs which drives up the price overall. New Jersey also suffers from high regional costs of labor and professional training.
“The healthcare provider community is working hard to make that shift (to outpatient care) and has been successful in slowing the growth of healthcare costs. But with that said, we know there’s more work to be done,” said Hopkins, who is senior vice president of the association’s new Center for Health Analytics, Research and Transformation.
The United States now spends nearly 18 percent of its gross domestic product on healthcare, according to Schwimmer, twice what it did in 1980. In New Jersey, a record number of residents now have insurance coverage, but cost remains a major hurdle for families and small businesses. Taxpayers will also spend $3.4 billion this year to cover the nearly 800,000 public workers in the state.
State’s largest insurance company not in the picture
HCCI’s analysis focused on data from employee-sponsored plans provided by the four companies that support its work: Aetna, Humana, Kaiser Permanente, and UnitedHealthcare. In New Jersey, these companies insure more than 1.5 million people who have coverage through their jobs at larger, self-insured companies. These types of plans are not regulated by the state, but through federal law.
But without Horizon, which covers more than 3.5 million residents, some said it was hard to get a full and accurate picture of the true costs; Horizon declined to comment publicly on the HCCI data. “It’s important to note that these findings are based on a very small sample in New Jersey,” NJHA’s Hopkins said.
Nationwide, HCCI’s data showed spending on prescription drugs rose more than 27 percent from 2012 through 2016; more than 17 percent on outpatient care; and over 8 percent on inpatient care. The use of prescription drugs grew less than 2 percent, but the prices of those medicines rose nearly 25 percent; utilization of outpatient care declined slightly, but price grew by over 17 percent; and inpatient hospital utilization fell nearly 13 percent, but the price shot up by more than a quarter during those four years.
Some dramatic price increases
In New Jersey, some of the swings were even more dramatic. While spending on prescription drugs grew at the same rate as it did across the country, the cost of outpatient care grew 19 percent — driven by an 11 percent increase in use and a 7 percent price hike. The cost of inpatient care rose 12 percent in the Garden State; despite a 19 percent decrease in hospital use, there was a whopping 38 percent rise in price for these services.“The data shows the main driver in rising employer sponsored health care spending has been the jump in prices,” Schwimmer wrote. “While some spending increases may be connected to innovations, such as new drugs and treatments, much is driven by increased costs for services.”
A closer look at inpatient services shows that, nationwide over those four years, spending rose 23 percent on mental health and substance use treatment, 23 percent on newborn care, and 17 percent on labor and delivery services. In the Garden State, spending on newborn care shot up nearly 50 percent, something hospital officials could not immediately explain; spending on mental health and addiction treatment grew 23 percent; and, for labor and delivery, it rose 17 percent. In addition, spending on surgery escalated 20 percent in New Jersey.
A price breakdown shows that charges for surgery rose 41 percent from 2012 through 2016, while the price of overall inpatient medical care grew 28 percent and bills for labor and delivery services increased by 21 percent. The price of newborn care in hospitals grew 18 percent and mental health and substance use services increased 16 percent.