cost trends nov-2009

8/4/2019 Cost Trends Nov-2009

1/27

Massachusetts Health Care Cost Trends

Historical (1991-2004) and Projected (20042020)

November 2009

Deval L. Patrick, GovernorCommonwealth of Massachusetts

Timothy P. Murray

Lieutenant Governor

JudyAnn Bigby, SecretaryExecutive Office of Health and Human Services

Sarah Iselin, Commissioner

Division of Health Care Finance and Policy


2/27

Massachusetts Division of Health Care Finance and Policy - 1

Table of Contents

Executive Summary..2

Data sources and Methodology.3

Trends in Health Care Expenditures.4

Trends in Health Insurance Premiums .10

Projected Trends in Health Care Spending through 2020....17

Potential Savings if Growth Rate Reduced to GDP.....22


3/27


Executive Summary

Focus of this Analysis

To evaluate the historical trends in health care expenditures in Massachusetts and project future trends (assuming no cost-containmentintervention). National trends are provided as a benchmark for comparison.

To estimate the potential savings if cost containment efforts keep the growth of health care expenditures to the same level as per capitaGDP.

To compare the growth of health insurance premiums relative to the growth of health care expenditures.

Major Findings

We spend more on health care in Massachusetts compared to the U.S. Health care expenditures account for a larger and growingshare of the GDP compared to the national average in 2007. By 2007, health care expenditures are expected to account for 15.2% of GDP

in Massachusetts compared to 13.7% for the nation.

Hospital-based expenditures are a primary driver of higher health care costs in Massachusetts . Hospital-based expendituresaccount for one-half of the difference between Massachusetts and U.S. per capita health care spending in 2004.

Medicare and Medicaid share of health spending in Massachusetts grew from 36% to 38% from 1991 to 2004. In 2004,Medicare spending was $7.9 billion and Medicaid spending was $8.3 billion.

The growth in employment-based health insurance premiums in Massachusetts was somewhat faster and more volatile thanthe growth in health care expenditures. In 2007 both family and single premiums were higher in Massachusetts compared to the U.S.,by 12% and 10%, respectively.

Beginning in 2002, health care expenditures in Massachusetts (both actual and projected) grew more rapidly than othereconomic indicators such as wages, consumer prices, and per capita GDP. By 2020, health care expenditures per capita inMassachusetts are expected to be 4.5 times what they were in 1991, while the CPI is projected to be just more than double.

Health care in Massachusetts is projected to cost $3,000 more per person by 2018 compared to the U.S. average. During 2004-2018, compared to the national average, Massachusetts is projected to have a higher annual growth rate in per capita health careexpenditures, reaching about $16,000 per person in 2018. U.S. health care spending is projected to reach about $13,000 per person by2018.

If cost containment efforts are successful, potential savings could be as high as $91 billion over 10 years. If cost containmentefforts result in a slowing of the growth of health care expenditures to the same growth rate as per capita GDP (3.9%), the potential annualsavings would be close to $3,000 per capita for a total accumulated savings of $91 billion over 10 years.


4/27


Data Sources and Methodology

Major Data Sources

Health Care Spending

Massachusetts Data: Center for Medicare & Medicaid Services (CMS), Office of the Actuary, National Health Statistics Group,State Health Expenditure Accounts (SHEA), Massachusetts Personal Health Care Expenditures (PHCE), All Payers, State ofResidence, 1991-2004," 2007.

U.S. Data: Center for Medicare & Medicaid Services (CMS), Office of the Actuary, National Health Statistics Group, NationalHealth Expenditures by Type of Service and Source of Funds, 1960-2007," 2009.

U.S. Projections: National Health Expenditure Projections 2007-2017," 2009.

Massachusetts Population: Population projections based on U.S. Census Bureau, Population Division, Interim State PopulationProjections, 2005.

Health Insurance Premiums

1996-2006 and 2008:Agency for Healthcare Research and Quality (AHRQ), Medical Expenditure Panel Survey-InsuranceComponent (MEPS-IC), health insurance premiums per enrolled employee at private-sector establishments that offer healthinsurance. 2007 premiums are estimated using the average of 2006 and 2008 premiums.

Methodology Used for Cost Projection

The annual growth rate of per capita health expenditures in Massachusetts for 2004-2010 is assumed to keep the sameaverage annual growth rate of 7.4% experienced in 2000-2004. This is assumed because in the short run, trends are likely tokeep the same momentum as the most recent annual trends.

The annual growth rate of per capita health expenditures in Massachusetts for 2010-2020 is assumed to be at the loweraverage annual growth rate of 5.7% experienced in the longer period of 1991-2004 in Massachusetts. This reflects a moresteady state trend that the state is likely to return to in the longer term.

Total health care expenditures is calculated based on projected per capita health expenditures multiplied by total populationin Massachusetts. Projected population comes from U.S. Census Bureau, Population Division, Interim State PopulationProjections, 2005, which factors in migration trends.

Projections for U.S. health care cost trends come directly from the Centers for Medicare and Medicaid Services (CMS).


5/27


Trends in Health Care Expenditures


6/27


Annual Growth Rate of MA Per Capita Health SpendingTracked U.S. but Generally Grew Faster After 2000Annual Rate of Change in Per Capita Health Expenditures in MA and U.S., 1992-2007

Note: Health expenditures are defined by residence location and as personal health expenditures by CMS, which exclude expenditures on administration, public health, and construction. Data for Massachusetts areonly available through 2004. 2005, 2006, and 2007 growth rates for MA are projected.

Source: Centers for Medicare & Medicaid Services (CMS), Office of the Actuary, National Health Statistics Group, 2007.

7.4%7.4%7.4%

5.7%

7.2%

8.0%

8.7%

5.7%

2.2%

5.0%5.0%

4.0%4.2%

4.7%

7.0%

6.9%

5.4%5.6%

5.9%

6.2%6.8%

7.2%7.6%

5.5%4.5%

4.1%4.2%

4.2%5.2%

4.0%

4.8%

7.0%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Massachusetts U.S.


7/27


123% 123%

125%126%

125% 125%126%

127%

124% 124%

126%127% 127% 127%

100%

105%

110%

115%

120%

125%

130%

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Per Capita Health Spending Increased from 23% Higher

in MA Than U.S. in 1991 to 27% Higher in 2004Ratio of Health Expenditures Per Capita in MA and U.S., 1991-2004

Note: The health expenditures are defined by residence location and as personal health expenditures by CMS, which exclude expenditures on administration, public health, and construction.



8/27


MA Health Care Expenditures Are Higher than U.S.and Represent a Growing Share of the EconomyHealth Expenditures in MA and U.S., 2000 and 2007

Health Expenditures Per Capita

$5,021

$4,039

$8,281

$6,227

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

Massachusetts U.S.

2000 2007

Note: Health expenditures are defined by residence l ocation and as personal health expenditures by CMS, which exclude expenditures on administration, public health, and construction. Data for Massachusettsare projected for 2007.


Health Expenditures as Percent of GDP

11.5% 11.7%

15.2%

13.7%

0%

2%

4%

6%

8%

10%

12%

14%

16%

Massachusetts U.S.

2000 2007

65%

54%


9/27


Hospital-Based Expenditures Account for Half of the

Difference Between MA and U.S. Per Capita SpendingHealth Expenditures Per Capita by Services in MA and U.S., 2004

Note: Health expenditures are based on residence location. Prescription drugs include only outpatient drug expenses Source: C enters for Medicare & Medicaid Services, Office of the Actuary, National HealthStatistics Group, 2007.

MA Per Capita Spending: $6,683

U.S. Per Capita Spending: $5,283

Difference: $1,400

$2,620

$1,616

$957

$849

$641

$1,931

$1,520

$683$757

$392

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

Hospital Care Physician &

Other

Professional

Other Health

Care

Prescription

Drugs

Nursing Home

Care

Massachusetts U.S.

Per capita hospital-based expenditureswere 36% higher inMassachusettscompared to the U.S.

Nursing homespending per capita inMA was 64% higher

than in the U.S., thehighest percentagedifference amongthese five healthexpenditurecategories.

$689


10/27


Medicare and Medicaid Share of Health Care Spending in MAGrew From 36% to 38% from 1991 to 2004Share of Medicare and Medicaid of Total Personal Health Expenditures in MA (billion $),1991-2004

Note: The health expenditures are defined by residence location and as personal health expenditures by CMS, which exclude expenditures on administration, public health, and construction.


$3.5 $4.0 $4.5$4.9 $5.5 $5.9 $6.0 $5.8 $5.8 $6.0

$6.5 $6.9 $7.3$7.9

$3.5 $3.7$3.7

$4.4 $5.0 $4.8 $5.2 $5.6 $6.0

$6.4$7.0

$7.8 $7.9$8.3

$12.6$13.2

$14.3$14.4

$14.5$15.4

$16.3$17.8 $18.2

$19.5

$21.4

$23.2

$25.5$26.8

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

$50

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Medicare Medicaid Other

1991:Medicare: 17.8%Medicaid: 17.7%--------------------Subtotal: 35.5%

2004:Medicare: 18.4%Medicaid: 19.3%--------------------Subtotal: 37.7%

$20 $21$23

$24$25

$26$28

$29 $30$32

$35

$38

$41

$43


11/27


Trends in Health Insurance Premiums


12/27


Premiums Rose More Rapidly after 2000 in MA, Similar to theAcceleration of Health Care Expenditures GenerallySingle Health Insurance Premiums in MA, 1996-2008

Sources:1996-2006 and 2008: Agency for Healthcare Research and Quality (AHRQ), Medical Expenditure Panel Survey (MEPS)-insurance component. 2007 premiums are estimated using the average of 2006 and2008 premiums.

$2,329$2,237

$2,392$2,539

$2,719

$3,086

$3,353$3,496

$4,141$4,235

$4,448

$4,642

$4,836

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

1996 - 2000

MA 3.9% (U.S. 7.4%)

2000 - 2008

MA 7.5% (U.S.: 6.5%)


13/27


Premiums Grew Faster than Per Capita Health Spending in MAMA Health Expenditures and Insurance Premiums in MA, 2000 and 2008

Sources: Health expenditure data for 2000 are from Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group, 2007 (by Residence Location). Data for 2007 are estimated byDHCFP. Premium data for 2000 from Agency for Healthcare Research and Quality (AHRQ), Medical Expenditure Panel Survey (MEPS) Insurance Component. 2007 premiums are estimated using the average of 2006and 2008 premiums.

Health Expenditures Per Capita

$5,021

$8,895

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

Health Expenditures

2000 2008

Annual Health Insurance Premium

Per Enrolled Employee

$2,719

$7,341

$4,836

$13,788

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

Single Family

2000 2008

77%

78%

88%


14/27


Premium Growth in MA Is More Volatile than Growthin Health Care SpendingAnnual Rate of Increase in Health Expenditures Per Capita and Single Premiums in MA, 1992-2008

Sources: Per capita health expenditures: Centers for Medicare & Medicaid Services (CMS), Office of the Actuary, National Health Statistics Group, 2007; 2005-2007 data are projected. Single premiums: 1997-2006 and 2008: Agency for Healthcare Research and Quality (AHRQ), Medical Expenditure Panel Survey (MEPS)-insurance component. 2007 premiums are estimated using average of 2006 and 2008 premiums.

-5%

0%

5%

10%

15%

20%

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Health Expenditures Per Capit a Single Premiums


15/27


Growth of Single Premiums in MA Was Higher thanNational Average in Recent YearsAnnual Growth Rate of Single Insurance Premiums in MA and U.S., 1997-2008

1997-2000 average annual growth rate

MA: 3.9%; U.S.: 7.4%


MA: 7.5%; U.S.: 6.5%


-4.0%

6.9%

13.5%

18.4%

5.0%4.4% 4.2%

3.0%

6.9%

14.2%

10.4%

9.2%

7.7%

6.1%

7.1%

8.7%

4.3%

2.3%

6.0%

8.8%

6.4%

3.2% 3.3% 3.2%

-5%

0%

5%

10%

15%

20%

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Massachusetts U.S.


16/27


Growth in Family Premiums in MA Was Higher thanNational Average in Recent YearsAnnual Growth Rate of Family Insurance Premiums in MA and U.S., 1997-2008


MA: 5.2%; U.S.: 8.1%


MA: 8.2%; U.S.: 7.7%


-3.5%

6.0%

12.1%

11.4%

12.4%

8.3%

7.5%

6.1%5.7%

7.6%

8.4%

12.8%

8.2%

6.6%

7.4%7.0%

6.1%

4.0% 3.9%

4.8%

11.8%

10.9%

9.2%

7.2%

-5%

-3%

-1%

1%

3%

5%

7%

9%

11%

13%

15%

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Massachusetts U.S.


17/27


Single and Family Premiums in MA Were 10% to12% Higher than U.S. in 2008Health Insurance Premiums in MA and U.S., 2000, 2006, 2008

Single Premiums

$4,836

$4,386

$2,719 $2,655

$4,448

$4,118

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

Massachusetts U.S.

2000 2006 2008

Sources: Agency for Healthcare Research and Quality (AHRQ), Medical Expenditure Panel Survey (MEPS)-insurance component.

The relative differencein premiums betweenMassachusetts and theU.S. tended toincrease over time.The individualpremium inMassachusetts was2%, 8%, and 10%

higher than in the U.S.and the familypremium was 8%, 8%,and 12% higher in2000, 2006, and 2008respectively.

Family Premiums

$13,788

$12,298

$7,341$6,772

$12,290

$11,381

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

Massachusetts U.S.

2000 2006 2008


18/27


Projected Trends in Health Care Spending

through 2020


19/27


Total Health Spending Is Expected to Double from 2009 to2020 (Assumes No Cost Containment Intervention)Massachusetts Total Personal Health Care Expenditures (billion $), 1991-2020

Note: Health expenditures are defined by residence l ocation and as personal health expenditures by CMS, which exclude expenditures on administration, public health, and construction. Projected health expendituresare based on historical growth patterns.

Source: Centers for Medicare & Medicaid Services (CMS), Office of the Actuary, National Health Statistics Group, 2007.2005-2020 data are projected based on projected per capita health expenditures.

$20 $21$23 $24 $25

$26$28 $29

$30$32

$35$38

$41$43

$46$50

$53

$59$63

$68

$72

$77$81

$86

$92

$97

$103

$109

$116

$123

$0

$20

$40

$60

$80

$100

$120

$140

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Actual:1991-2004 MA 6.3% (U.S. 6.7%)

Projection:2004-2020:MA 6.8%

(2004-2017:U.S. 6.7%)


20/27


Per Capita Spending Is Expected to Nearly Double from 2009 to2020 (Assumes No Cost Containment Intervention)Massachusetts Per Capita Personal Health Care Expenditures, 1991-2020

Note: Health expenditures are defined by residence l ocation and as personal health expenditures by CMS, which exclude expenditures on administration, public health, and construction. Data for 2005 2020 areprojected and are based on historical growth patterns. Source: Centers for Medicare & Medicaid Services (CMS), Office of the Actuary, National Health Statistics Group, 2007.

$5,021

$6,683

$10,262

$17,872

$3,249

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Actual:1991-2004: MA 5.7%

(U.S. 5.5%)

Projection2004-2020: MA 6.3%

(U.S. 5.8%)


21/27


Gap in Per Capita Health Spending between MA andU.S. Projected to WidenIndex of Per Capita Health Expenditures in MA and U.S., 1991-2020

Note: Health expenditures are defined by residence l ocation and as personal health expenditures by CMS, which exclude expenditures on administration, public health, and construction. Data for 2005 2020(Massachusetts) and 2008-2017 (U.S.) are projected. Projected growth is based on hi storical growth patterns.


100107 114

120 125130 136

143 146155

168181

195206

221237

255274

294

316334

353

373

394

417

441

466

492

520

550

100 107 113 117

123 128133 138

145 153164

176188

200211

223235

248263

278294

311330

349370

392

415

0

100

200

300

400

500

600

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

201

9

202

0

Massachusetts U.S.


22/27


Growth in Health Spending in MA Expected to SurpassOther Economic IndicatorsIndex of Health Expenditures Per Capita and Other Indicators in MA, 1991-2020

Sources: 1991-2007: Per capita health expenditures: Centers for Medicare & Medicaid Services (CMS), Office of the Actuary, National Health Statistics Group, 2007 (2004-2020 data are projected). Per capita GDPand wage and salary: Regional Economic Information System, Bureau of Economic Analysis, U.S. Department of Commerce. CPI-Urban for Boston area: Bureau of Labor Statistics, U.S. Department of Labor.

2008-2020 (except for health spending): U.S. Social Security Administration, The 2008 OASDI Trustees Report, Supplemental Sing le-Year Tables, i ntermediate projection, www.ssa.gov/OACT/TR/Tr08/index.html.Per capita GDP index: real GDP annual change + GDP price index annual change population annual change; wage index: average annual wage in covered employment.

100

150

200

250

300

350

400

450

500

550

600

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

201

9

202

0

Per Capita Health Expenditures Per Capita GDP in MA Average Wage and Salary in MA CPI Boston

Per Capita HealthExpenditures:550 in 2020

Per Capita GDP:337 in 2020

Wage and Salary:325 in 2020

Consumer PriceIndex (CPI):

224 in 2020
http://www.ssa.gov/OACT/TR/Tr08/index.htmlhttp://www.ssa.gov/OACT/TR/Tr08/index.htmlhttp://www.ssa.gov/OACT/TR/Tr08/index.htmlhttp://www.ssa.gov/OACT/TR/Tr08/index.htmlhttp://www.ssa.gov/OACT/TR/Tr08/index.html


23/27


Potential Savings if Growth Rate

Reduced to GDP


24/27


$10,262$10,848

$11,467$12,121

$12,812

$13,543

$14,316

$15,132

$15,995

$16,908

$17,872

$10,262$10,675

$11,104$11,551

$12,006$12,467

$12,947$13,447

$13,954$14,480

$15,029

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Massachusetts Based on per capita GDP growth rate

Estimated Impact if MA Per Capita Health SpendingGrows at Same Rate as GDPProjected Per Capita Health Expenditures in MA, 2010-2020

Sources: Per capita GDP growth rate is based on national projection data. U.S. Social Security Administration, The 2008 OASDI Trustees Report, Supplemental Single-Year Tables, intermediate projection,www.ssa.gov/OACT/TR/Tr08/index.html. Per capita GDP index: real GDP annual change + GDP price index annual change population annual change.

No Cost Control: average annual growth rate of totalhealth spending is projected to be 5.7%

Cost Control: average annual growth rate of per capita health spending isset to be same as the projected per capita GDP growth rate of 3.9%
http://www.ssa.gov/OACT/TR/Tr08/index.htmlhttp://www.ssa.gov/OACT/TR/Tr08/index.html


25/27


$68$72

$77 $81

$86

$92$97

$103

$109

$116

$123

$68$71

$74$78

$81$84

$88$91

$95$99

$103

$0

$20

$40

$60

$80

$100

$120

$140

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Massachusetts Based on per capita GDP growth rate

Estimated Impact on Total Health Spending if MA PerCapita Spending Grows at Same Rate as GDPProjected Total Personal Health Expenditures in MA (billion $) , 2010-2020

Sources: per capita GDP growth rate is based on national projection data. U.S. Social Security Administration, The 2008 OASDI Trustees Report, Supplemental Single-Year Tables, i ntermediate projection,www.ssa.gov/OACT/TR/Tr08/index.html. Per capita GDP index: real GDP annual change + GDP price index annual change population annual change. U.S. Census Bureau, Population Division, Interim StatePopulation Projections, 2005.

No Cost Control: average annual growth rate of totalhealth spending is projected to be 6.0%

Cost Control: average annual growth rate of total health spending is projected tobe 4.2% based on the projected per capita health spending growth rate of 3.9%

Projected Total Health Spending = Projected Per Capita Health Spending x Projected Total PopulationBillions


26/27


Estimated Savings in Total Health Spending in MAIf Growth of Per Capita Health Expenditures Were Held to the Same Rate as Growth inprojected Per Capita GDP, 2010-2020

Sources: per capita GDP growth rate is based on national projection data. U.S. Social Security Administration, The 2008 OASDI Trustees Report, Supplemental Single-Year Tables, i ntermediate projection,www.ssa.gov/OACT/TR/Tr08/index.html. Per capita GDP index: real GDP annual change + GDP price index annual change population annual change.

Billions

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Accumulated savings Annual savings

$91

Billion

$20

Billion


27/27

Division of Health Care Finance and Policy

Two Boylston Street

Boston, Massachusetts 02116

Phone: (627) 988-3100

Fax: (617) 727-7662

Website: www.mass.gov/dhcfp

Publication Number: 10-308-HCF-01

Authorized by Ellen Bickelman, State Purchasing Agent

Printed on Recycled Paper

cost trends nov-2009

Documents