From an aging population to Affordable Care Act mandates, there are a number of factors influencing healthcare costs in the U.S. Here are 40 things to know about those costs.
The difference between costs, charges and payments
1. Before delving into an analysis of healthcare costs, it is critical to understand the difference between healthcare costs, charges and payments. Hospital charges are essentially their list prices for medical services, which are different from hospitalization costs, or the actual amount of money insurers, patients or the government ends up paying hospitals in exchange for the services.
2. Hospital input costs are the costs a hospital incurs to provide care to a patient. This includes both variable costs (salaries of clinicians, costs of supplies and medications) and fixed costs (overhead expenses and cost of equipment, land and buildings), according to a report from The Advisory Board Company.
3. The prices on a hospital's chargemaster bear little relationship to the amount most patients are asked to pay. That's because commercial insurers negotiate discounts with healthcare providers on behalf of their members, and Medicare and Medicaid set fixed payment rates for hospital services, which are often less than the actual cost of care. Additionally, most hospitals allow low-income patients who are uninsured to receive free care or care for a reduced charge.
4. Hospital list prices aren't completely irrelevant, however, as they usually serve as a starting point for negotiations with commercial payers.
Healthcare spending on the rise
5. Healthcare spending grew by 5.3 percent in 2014, as millions of new people with health insurance coverage under the Affordable Care Act and rapidly rising prescription drug prices drove spending upward, according to a study by CMS' Office of the Actuary.
6. Total U.S. healthcare spending hit $3 trillion in 2014.
7. Total healthcare spending grew 1.2 percentage points faster than the overall economy in 2014, resulting in a 0.2 percentage-point increase in the health spending share of gross domestic product — from 17.3 percent to 17.5 percent.
8. From 2000 to 2009, the decade prior to the ACA, healthcare spending grew by an average of 6.9 percent annually, 2.8 percentage points faster than GDP.
9. Total private health expenditures, which represented 33 percent of total healthcare spending, grew 4.4 percent in 2014, reaching $991 billion. That's compared to spending growth of 1.6 percent in 2013 — the slowest rate since 1967.
10. The faster rate of growth for private health expenditures was attributable to several factors, including expanding health coverage through the ACA marketplace plans. The insured share of the population increased from 86 percent in 2013 to 88.8 percent in 2014.
Costs broken down by hospital type and state
11. The average cost per inpatient day in 2014 at state/local government hospitals was $1,974, according to the latest statistics from Kaiser State Health Facts. That's up from $1,878 per inpatient day in 2013.
12. The average cost per inpatient day in 2014 was $2,346 at nonprofit hospitals, compared to $2,289 per inpatient day the year prior.
13. The average cost per inpatient day at for-profit hospitals in 2014 was $1,798, up slightly from $1,791 per inpatient day in 2013.
14. In 2014, the cost per inpatient day at state/local government hospitals was highest in New Jersey ($4,656) and lowest in South Dakota ($434).
15. Among nonprofit hospitals, the cost per inpatient day in California was $3,533 — the highest of any state in 2014 — and in South Dakota the average cost was lowest at $1,321.
16. The cost per inpatient day at for-profit hospitals was highest in North Dakota ($4,023) in 2014 and lowest in Maine ($825).
Spending on prescription drugs is growing
17. Prescription drug spending represented 9.3 percent of overall health spending in 2013. Spending on prescription drugs increased to 9.8 percent of overall health spending in 2014 and is projected to hit 10.4 percent by 2024, according to a report by The Peterson Center on
Healthcare and the Kaiser Family Foundation.
18. Overall drug prices jumped an alarming 12.2 percent in 2014, which marked the highest rate of increase in more than 10 years, according to a study published in Health Affairs.
19. Rising prices for brand-name drugs, the emergence of new medications and increasing prices for generic drugs were some of the main drivers of increased spending on pharmaceutical drugs in 2014.
20. Specialty drugs have fueled increased spending on prescription drugs. Medicare expenditures were highest in 2014 for hepatitis C drug Sovaldi, which made headlines after it hit the market with a $1,000-per-pill price tag. Total Medicare spending on Sovaldi was $3.1 billion in 2014.
21. More than a quarter of working age Americans, those with and without insurance combined, experience problems paying their medical bills, according to a poll conducted by the Kaiser Family Foundation and New York Times.
22. Among Americans aged 65 or under who have insurance, 20 percent reported problems paying medical bills in the past year. That figure is greater for the uninsured, as expected, with 53 percent experiencing serious financial challenges.
23. Drug shortages and industry consolidation will likely drive pharmaceutical drug prices higher in 2016, according to a report by Moody's Investors Services. To help reign in drug prices, there will likely be an increased focus on driving market competition in 2016, according to a Health Affairs blog post by Susan DeVore, president and CEO of Premier, Inc.
Out-of-pocket healthcare costs
24. Annual out-of-pocket spending on hospital care fell 4.1 percent to $31.4 billion in 2014, according to the Peterson-Kaiser Health System Tracker.
25. Per capita out-of-pocket spending on hospital care was $99 in 2014, a 4.8 percent decrease from the year prior.
26. In 2014, out-of-pocket spending on physician services hit $54 billion, a 0.3 percent increase from 2013.
27. Per capita out-of-pocket spending on physician services fell 0.4 percent to $170 in 2014.
28. In 2014, annual out-of-pocket spending on prescription drugs increased 2.7 percent to $44.7 billion.
29. Per capita out-of-pocket spending on prescription drugs increased 1.9 percent to $140 in 2014.
Spending by private insurers
30. Private health insurers spent $362.1 billion on hospital care services in 2014, up 3.5 percent from the year prior, according to the Peterson-Kaiser Health System Tracker.
31. In 2014, private payers spent $254.7 billion on physician care, up 1.2 percent from 2013.
32. Private health insurer spending on prescription drugs rose sharply in 2014 to $127.3 billion, an 11.3 percent increase from the year prior.
33. Medicare spending, which represented 20 percent of total healthcare spending, grew 5.5 percent in 2014 to $618.7 billion. That's compared to spending growth of 3 percent in 2013, according to a study by CMS' Office of the Actuary.
34. Medicare spending on hospital care rose 2.9 percent in 2014 to $250.3 billion, according to the Peterson-Kaiser Health System Tracker.
35. In 2014, Medicare spending on physician care hit $138.4 billion, up 5 percent from the year prior.
36. Medicare spending on prescription drugs jumped 16.9 percent in 2014 to $86.4 billion.
37. Sixteen percent of national healthcare spending was attributable to Medicaid in 2014. Medicaid spending grew 11 percent in 2014, reaching $495.8 billion, a faster increase than the 5.9 percent growth in 2013, according to a study by CMS' Office of the Actuary. Medicaid spending growth was fueled by coverage expansion under the ACA.
38. Medicaid spending on hospital care hit $168.4 billion in 2014, up 7.6 percent from the year prior, according to the Peterson-Kaiser Health System Tracker.
39. In 2014, Medicaid spending on physician care jumped 22.8 percent to $64 billion.
40. Medicaid spending on prescription drugs hit $27.3 billion in 2014, up 24.3 percent from 2013.
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