After a Two-Year Slowdown, Health Care Spending Grew 4.6 Percent Per Capita in 2011, Says HCCI Report

First look at 2011 data finds rising prices drove spending growth for those with employer-sponsored insurance

Washington, DC—U.S. health care spending grew at a faster pace than expected in 2011, according to a new report from the Health Care Cost Institute (HCCI). The Health Care Cost and Utilization Report: 2011 provides the first broad look at 2011 health care spending among those with employer-sponsored insurance (ESI). HCCI found that average dollars spent on health care services for that population climbed 4.6 percent in 2011, reaching $4,547 per person. This was well above the 3.8 percent growth rate observed in 2010 and beyond expected growth for 2011.

Consumers spent more of their own dollars on health care in 2011, with out-of-pocket spending growing to $735 per person—a $32 increase from 2010—while costs covered by insurance grew at nearly the same rate. Spending levels grew fastest for outpatient services, for those ages 18 and younger, and those in the Northeast region. Spending grew the slowest for prescriptions.

Spending Growth Slowdown Abated

Health care spending growth has been on a downward trajectory. HCCI found spending growth slowed from 5.8 percent in 2009, to 3.8 percent in 2010 for those with employer-sponsored insurance. With a sluggish economy, many experts anticipated a modest growth rate for 2011.

“While it’s hard to know whether this means spending levels are going to continue rising, it clearly is a signal that we have to pay attention to,” said HCCI Governing Board Chairman Martin Gaynor, PhD, Professor of Economics and Public Policy at Carnegie Mellon University. “We need to continue studying these data to see whether this acceleration in spending growth is the beginning of an upward trend that will return us to pre-recession levels,” he added.

HCCI’s report reflects the national health care spending of nearly a 156 million people with commercial insurance. HCCI estimates are based on the claims of 40 million privately insured people with ESI—an increase of 7 million people from a report released earlier this year. The claims held by HCCI account for the health care spending of over 25 percent of all people under 65 with ESI. Based on this data, HCCI estimates that total private health insurance spending reached $709.2 billion, an increase of 4.2 percent from 2010.

Rising Prices Drove Spending Growth in 2011

Prices rose for all major categories of health care—hospital stays, outpatient care, procedures and prescriptions—outpacing an uptick in the use of many of these services. Prices rose fastest for outpatient care.

“Prices continue be the main culprit for rising health care costs,” said HCCI Executive Director David Newman. “If we are really going to get health care spending under control, we have to better understand why those prices are rising and the implications those increases have for the U.S. health care budget.”

Prescription Spending Slowed

Overall health spending was partly offset by a slowdown in spending on prescriptions, which grew just 1 percent from 2010 to 2011, rising to $773 per capita.

Slower growth was driven by net changes in prices and use of brand name prescriptions versus generics. Although brand name prescription prices rose 17.7 percent to an average of $268 per prescription, use of brand name prescriptions fell nearly 13 percent. The price of generics fell 7.2 percent to an average of $33 per prescription, while use rose 3.4 percent.

REPORT HIGHLIGHTS:

• Regional spending gap widening: HCCI analyzed spending in the four major U.S. Census regions. The Northeast had the highest per capita spending ($4,659) while the West had the lowest ($4,358). The gap in spending between the two regions grew, widening from $232 in 2010 to $301 in 2011.
• Spending on children’s health care rising fastest: As in 2010, per capita spending on children (ages 0-18) grew much faster than spending on other age groups. In 2011, the growth rate of spending on children increased 2.1 percentage points to 7.7 percent—more than twice the rate of the spending for those aged 19-44 and 55-64.
• Cost sharing between patients and payers remains stable: Spending on health care was split between consumers and insurance companies in much the same way as previous years, with insurers paying for 83.8 percent of total expenditures and insured enrollees contributing 16.2 percent. Payers contributed $3,812 per person in 2011.
• Use of outpatient and health care services up: In 2011 compared to 2010, people with ESI used more outpatient services and had more procedures performed. Visits to the emergency room (ER) increased 3.7 percent. However, they had fewer hospitals stays and filled prescriptions.

The Health Care Cost and Utilization Report: 2011, as well as two issue briefs, will be available on the HCCI website on September 25, 2012, as of 12:01 a.m. EDT at: http://www.healthcostinstitute.org/2011report

HCCI’s analysis is based on de-identified Health Insurance Portability and Accountability Act (HIPAA) compliant data sets from nearly 6 billion health insurance claims provided by Aetna, Humana, and United Healthcare, three of the nation’s largest health plans. HCCI does not report on premiums. Future reports from HCCI will include data from Kaiser Permanente. All prices and spending reporting by HCCI are current or nominal dollars.

Later this year, HCCI will be releasing a report examining health care spending trends from 2007-2011. Several independent researchers are now working with HCCI’s data and are undertaking studies evaluating factors that influence geographic variation in health care spending and utilization of services, and examining the effects of aging on health spending.

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The Health Care Cost Institute was launched in September 2011 to promote independent, nonpartisan research and analysis on the causes of the rise in U.S. health spending. HCCI believes a better understanding of the forces driving health care cost growth will help policy makers, researchers, and the public make decisions that will lead to more accessible and affordable care. The Institute is governed by a board that includes distinguished economists, actuaries and health care experts. For more information, visit www.healthcostinstitute.org or follow us on Twitter @healthcostinst

Explore the 2011 Report »