Health Costs Rise Sharply

U.S. health care spending grew at a faster pace than expected in 2011, breaking a two-year trend of smaller cost increases, according to a new report out Tuesday from the Health Care Cost Institute.

Costs for people with employer-sponsored insurance plans jumped 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, the Washington-based nonprofit group said.

Additionally, 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.

“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,” says Martin Gaynor, an economics professor at Carnegie Mellon University and chairman of the HCCI. “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.”

With a sluggish economy, experts anticipated health care would grow more modestly. Analysts at the institute attributed the increase more to rising prices than increased utilization of the health care system.

“Prices continue be the main culprit for rising health care costs,” says 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.”

The Health Care Cost Institute used data from 40 million Americans with private insurance provided by health plans such as Aetna, UnitedHealth, Humana and Kaiser Permanente.

{via BenefitsPro}

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Eric is a Producer at Lockton Insurance Brokers, Inc., the world’s largest privately held commercial broker. Eric has over 23 years of experience in the insurance industry and has spent the last 11 years with Lockton. Eric specializes in Health & Welfare Benefits, Retirement Planning, and Executive Benefits. Eric's clients utilize his expertise in the areas of Plan Due Diligence, Transaction Structure, Fiduciary Oversight, Investment Design, Compliance and Vendor negotiation to improve the operational & financial outcome for each client. The Benefit Blog is a place to share that expertise and industry news.
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