Ohio Health Policy Review

Milliman releases its fourth annual study of average medical spending

Milliman, one of the major actuarial firms in the United States, released its fourth annual study of average medical spending for a typical American family of four (Source: "2008 Milliman Medical Index," Milliman, May 2008).  This report both tracks national trends and health cost data for 14 major metropolitan areas.

Key findings include:

• The total medical cost in 2008 for a typical American family of four is $15,609 (compared with $14,500 in 2007).
• The average annual medical cost of the family increased by 7.6% from 2007 to 2008. While the $1,109 increase is a big expense, the rate of increase was down for the second straight year and is the lowest rate of increase in the past five years.
• There is a wide variation in costs across the country. Among the 14 metropolitan areas studied, healthcare costs varied by more than 35% from lowest to highest.
• While the overall rate of cost increase was down this year, the rate of prescription-drug cost increase was up for the first time since 2006.
• For the employee's share of spending on healthcare services, 2008 marks the second consecutive year of double-digit increase. 

According to this analysis, the employer pays for about 60 percent of total medical cost while the family pays for 40 percent of the cost.  Just over half of the employee share goes for payroll deductions to purchase health insurance.  This contribution increased by 10.1 percent in 2008.  The remaining employee share goes for cost sharing on health services.

New Dartmouth Atlas of Health Care finds great variation in health care and costs with no better outcomes

The latest edition of the Dartmouth Atlas of Health Care confirms that there is great variation in the delivery of health care to Medicare patients with chronic conditions and patients in the last two years of life.  This variation results in a wide range in health costs.  The report further finds that those receiving more services have poorer outcomes (Source: "Chronically Ill Patients Get More Care, Less Quality, Says Latest Dartmouth Atlas," The Robert Wood Johnson Foundation, April 7, 2008).

One example of variation found in the report is that Medicare spending on people in the last two years of life ranged from $59,379 in New Jersey to $32,523 in North Dakota.  Another example is that chronically ill patients in the last six months of life averaged 14.5 doctor visits in Ogden, Utah compared to 59.2 visits in Los Angeles. 

The report calculates the magnitude that all this variation creates for overall Medicare spending.  According to the report, total Medicare spending for the study population was $289 billion dollars between 2001 and 2005.  The authors estimate that this spending would have been $50.1 billion lower if everyone's spending mirrored spending in the area around the Mayo Clinic in Rochester, Minnesota.

This edition, "Tracking the Care of Patients with Severe Chronic Illness," was primarily funded by the Robert Wood Johnson Foundation.  According to Risa Lavizzo-Mourey, M.D., M.B.A., president and CEO of the Robert Wood Johnson Foundation, "This report demonstrates the need to overhaul the ways in which we care for Americans with chronic illness.  The extent of variation in Medicare spending, and the evidence that more care does not result in better outcomes, should lead us to ask if some chronically ill Americans are getting more care than they or their families actually want or need."

The report includes several appendixes that list information for hospitals in different states, including Ohio.  Also, the Dartmouth Atlas Project has added a new Web feature with the release of this report, the Hospital Care Intensity Index. This feature allows comparisons on the intensity with which hospitals treat patients at the end of life—how many days they spend in the hospital and how often they see medical specialists. 

Anthem plans to stop paying for preventable mistakes

Anthem Blue Cross and Blue Shiled announced its plans to stop paying for eleven preventable mistakes by the end of this year (Source: "Anthem won't cover wrong procedures or fixes," Dayton Daily News, April 3, 2008).  The eleven mistakes are those identified by the Centers for Medicare and Medicaid Services and the National Quality Forum.   According to Anthem's plans, it will not pay anything for three surgery errors and only the normal payment for error-free medical care for eight other medical mistakes.

Insurance companies and doctors worry about excessive use of medical scans

"Insurance companies are taking a harder look at advanced medical scans like CT scans, citing spiraling costs and safety concerns. And some doctors agree there's emerging evidence that these scans are being over-prescribed." (Source: "Insurers Try To Limit High-Tech Scans," Associated Press, March 24, 2008.) As a result, health insurance companies are "requiring more pre-authorizations before patients can receive these scans, and setting other restrictions including mandating that the imaging equipment and medical staff operating it be credentialed in advance." The article adds that doctors are also concerned that patients are receiving too much radiation for scans that are not needed or are done merely as a defense against possible future lawsuits.

Survey: 1 in 3 Americans skip medical care because can't afford it

"One in three Americans say their families skipped medical care because they couldn't afford it, according to an AFL-CIO survey." (Source: "Americans skip medical care because of cost, AFL-CIO survey says," Plain Dealers, March 26, 2008.) "A quarter of the respondents said they had serious problems paying for the care they needed, and 79 percent said health care is a top voting issue for them." The online survey was conducted earlier this year and also included Ohio-specific results. "While 29 percent nationally said they did not fill a prescription or skipped doses because of cost, 35 percent of Ohioans surveyed answered that question similarly. Five percent of all survey takers said they had considered or filed for personal bankruptcy because of medical debt; the figure was 9 percent of Ohioans." Complete survey results are available here.

Article: Health care charges in Ohio don't reflect actual costs or what insurance providers pay

"For years, Ohio has forced hospitals to report what they charge for heart surgery, knee replacements and other procedures, to help you price-shop when you have the need. But it's of little benefit to Ohioans because the numbers provided by hospitals have almost no relation to what insurance companies pay." (Source: "Hospital charges don't tell anything about price of surgeries," March 24, 2008.) However, Medicare, insurers and private businesses all pay far less than the published rate because they have negotiated steep discounts; this results in only uninsured patients paying the amounts reported by the state. For example, Cuyahoga County hospitals' average charge for performing a DRG 544 -- the code for common hip, knee or ankle replacement -- ranges from more than $23,000 to almost $47,000. But Medicare usually pays about $9,000 to $12,000 for a DRG 544.

J.B. Silvers, professor of health systems management at Case Western Reserve University Weatherhead School of Management, said "Charges are almost useless. They have almost nothing to do with costs. They are artificially high, and almost no one pays them. One study revealed that inpatient charges are marked up 156 percent over average costs. Everyone bargains for better prices except the uninsured, and they can't pay."

To learn what health insurers pay for procedures, patents can turn to data from the Centers for Medicare and Medicaid Services; the CMS data can be accessed through private websites like Vimo. In addition, subscribers to Anthem Blue Cross and Blue Shield in Dayton and Cincinnati can turn to an Internet sites where their members can find out the negotiated price for 38 common procedures, such as knee replacements and colonoscopies. Anthem plans to expand this service to Central Ohio by the end of April.

Cardinal Health to purchase infection-prevention company

Dublin-Ohio based Cardinal Health said yesterday that it will pay $490 million in cash to buy the assets of Enturia Inc., a Kansas company that makes infection-prevention products. (Source: "Cardinal acquisition reflects its safety focus," Columbus Dispatch, March 5, 2008.) Cardinal spokesman Troy Kirkpatrick said Enturia focuses on products that enhance patient safety and that Cardinal's purchase complements its "infection-prevention offerings by adding a differentiated and proven product line." Health care providers are extremely Interested in infection prevention, especially since Medicare announced last year that it would no longer pay for preventable errors like infections which occur in hospitals. Many private insurers are expected to eventually follow Medicare's lead.

U.S. health care spending projected to double by 2017

According to new federal projections, "By 2017, total health care spending will double to more than $4 trillion a year, accounting for one of every $5 the nation spends." (Source: "Spending on Health to Rise Dramatically," Associated Press, Feb. 26, 2008.) "The 6.7% annual increase in spending--nearly three times the rate of inflation--will be largely driven by higher prices and an increased demand for care, the Centers for Medicare and Medicaid Services said Monday. Other factors in the mix include a growing and aging population."

The projections were published online in Health Affairs, where the abstract adds that slower growth in private health care spending toward 2017 is expected to be offset by stronger growth in public spending. In addition, the health share of the nation's gross domestic product (GDP) is expected to increase to 16.3% in 2007 and then rise throughout the projection period, reaching 19.5% of GDP by 2017. (Source: "Health Spending Projections Through 2017: The Baby-Boom Generation Is Coming To Medicare," Health Affairs.)

Large health insurance companies accused of "rigging" rates

Top elected officials in New York and California are accusing the nation's largest health insurers of rigging the rates they pay for physician visits, leaving patients with higher medical bills.(Source: "Heat is on health insurers," LA Times, Feb. 14, 2008.) Los Angeles City Atty. Rocky Delgadillo is probing industry practices such as canceling patients' coverage after they get sick and has unveiled "a first-of-its-kind website to solicit information about insurance cancellations and delays and denials of treatment." In New York, Attorney General Andrew Cuomo is conducting an industry-wide investigation of health insurers into allegations that reimbursement rates were manipulated to defraud consumers. (Source: "Medical Rate Setting Is Focus of Fraud Inquiry," NY Times, Feb. 13, 2008.)

At a news conference Wednesday, Cuomo said he intends to sue Ingenix, its parent UnitedHealth Group, and three additional subsidiaries. Ingenix provides health care billing information and serves as a conduit for rate data to the largest insurers in the country. Cuomo claims Ingenix operates a "defective and manipulative" database that other UnitedHealth subsidiaries used to keep reimbursement rates artificially low--sometimes even lower than the actual cost of typical medical expenses--thereby forcing patients to assume more of their health care costs. "For example, (Cuomo) said, a market survey showed physicians typically charge $200 for a routine visit. But the insurers, using Ingenix data, claimed to their members that the typical rate was $77. Applying the 80% reimbursement rate, they covered $62, leaving the patient to pay $138 out of pocket."

In the LA Times article, insurers defended their business practices, saying one of their top goals is to keep health insurance affordable for all and that many of the practices in the spotlight actually are good examples of their value in holding down healthcare costs. Karen Ignagni, president of America's Health Insurance Plans, said "At a time when the costs of medical services soar above inflation every year, health insurance plans' tools and techniques are mitigating the damage done to consumers and employers."

Analysis of proposed bio-med bonding issue

In a follow-up to last week's story about Governor Stickland's proposal to sell state bonds to support infrastructure and jobs programs, the Columbus Dispatch analyzes what $200 million aimed at the bio-medical industry in Ohio might do. (Source: "Biomed = jobs, supporters say," Feb. 10, 2008.) According to Lt. Gov. Lee Fisher, "every public dollar invested in this field has leveraged seven in private and federal funds," while BioOhio, a nonprofit group that promotes the bio-med industry, said "bioscience companies were responsible for 17.6% of the state's total economic output in 2006 and provided jobs for 1.2 million Ohioans." The Dispatch article also profiles several bio-med startup companies in Ohio, while adding that 24 companies have spun off from Cleveland Clinic research and innovations in the last five and a half years.