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February 23, 2016

Healthcare Spending on Brand Name Drugs Grew 8% in 2014

IPI expert referenced: Merrill Matthews | In The News | Media Hit
  Health Payer Intelligence

By Vera Gruessner

Healthcare spending for the average insured consumer does not seem to be decreasing or even stabilizing, finds a report from the Health Care Cost Institute (HCCI). In fact, healthcare spending among insured individuals living in the United States has increased over the last five years. In 2014, these costs rose by 3.4 percent while use of medical services fell.

Even though there was a 16 percent fall of brand name prescription drug utilization, healthcare spending on these medications rocketed to $45 per capita in 2014 due to the release of expensive Hepatitis C drugs Olysio, Sovaldi, and Harvoni, the study found.

The Health Care Cost and Utilization report from HCCI took a look at the healthcare spending habits of health insurance consumers under 65 years of age from the years 2010 to 2014. These particular individuals obtained healthcare coverage through their employer. The results show that per capita spending grew anywhere from 3 to 4 percent each year.

Average out-of-pocket healthcare spending rose by 2.2 percent to $810 per consumer in 2014. Brand name prescription drug costs grew by 8.2 percent in 2014, which was the largest increase in recent years.

“It’s striking to see the impact high priced drugs can have on health care spending, particularly in the case of three Hepatitis C drugs, where use is relatively low,” HCCI Senior Researcher Amanda Frost said in a company press release. “With more high-priced drugs set to enter the market, higher spending on brand prescriptions is a potential trend to watch.”

While medical costs have continued to rise, this has led to a decrease in actual utilization of healthcare services, the report discovered. Some areas may be due to new federal regulations stimulating hospitals to reduce readmissions through preventive and well-coordinated services.

For instance, acute admissions fell by 2.7 percent and outpatient visits decreased by about 1 percent. However, the costs of acute inpatient admissions rose by 4.6 percent, which is an extra $831 for each patient admitted to the hospital. On the other hand, the costs of professional services only rose by about $3 in 2014.

Additionally, out-of-pocket spending for acute inpatient admissions and generic prescription drugs decreased in 2014 when compared to the costs of these services in 2013.

Despite some of the provisions of the Affordable Care Act, out-of-pocket spending grew each year for women at faster rates than for men. Additionally, a gap in healthcare spending between the young and old grew at a steady rate between 2010 and 2014.

“We’re pleased to release our fifth annual healthcare spending report,” HCCI Executive Director David Newman said in a public statement. “With the implementation of the Affordable Care Act, HCCI looks forward over the coming years to continue its analysis of healthcare trends, tracking any changes brought by the ACA in order to aid and improve the U.S. healthcare system.”

Despite the rise in healthcare spending among consumers around the nation, health payers and providers are partnering to create solutions that emphasize quality performance and a stabilization of the rise in medical costs. These solutions are often in the form of accountable care organizations, bundled payment models, and value-based care reimbursement.

For example, Blue Shield of California has saved $325 million over the last five years through its accountable care organization. Some of the achievements of this ACO provider include the decline of hospital admissions by 13 percent and the decrease of hospitalized days by 27 percent.

“It’s a hard journey and the quality goals for achieving and keeping savings are very high relative to fee-for-service,” Clif Gaus, the President and CEO of the National Association of ACOs, discussed accountable care organizations with “There’s two different standards here and learning to transform care and provide efficient and better quality takes time.”

“The ACOs have shown that, in the first three years, they’re able to improve the quality. They both provide higher quality and they’re quality-improving from year to year. That’s a home run. In some respects, that’s been the real success story of ACOs. That’s a great story for beneficiaries.”

There are certain methods that payers can stimulate decreased healthcare spending. For instance, adopting the bundled payment model may help reduce costs in the world of oncology treatment, which some providers using this reimbursement system have found. Duplicative and wasteful spending is expected to drop significantly with the implementation of bundled payments while hospital readmission rates are predicted to fall and disease prevention should take top priority.

In addition to adopting bundled payment models and contracting with an accountable care organization, health payers can cut costs by incentivizing the implementation of new technologies and digital tools within its network of providers.

For instance, telemedicine services have shown to decrease healthcare spending and allow physicians to meet with more patients remotely. Improving patient engagement through digital technologies is also expected to boost medication adherence, healthy behaviors, and adherence to medical appointments, which should all lead to decreased medical costs throughout the industry.

“In healthcare, once a drug or device is invented, it seems the prices only go up. In technology, once a product or software is invented, the prices only seem to go down. Fortunately, technology is driving this new healthcare revolution. Letting engineers and entrepreneurs invent and compete is the best way to change the old health system paradigm,” wrote experts from the Institute for Policy Innovation.

Over the coming years, healthcare spending is expected to stabilize as more payers and providers revolutionize the field by adopting new payment models and adhering to value-based care principles.


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