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Tracking Health Care Costs:
Hospital Care Key Cost Driver in 2000
Data Bulletin No. 21 - Revised
Underlying Cost Trendsn 2000, health care spending reflected significant shifts in growth of underlying cost components, particularly for hospital services (see Figure 1).
Implications for Consumersn 2001, employer-based insurance premiums increased 11 percent-the fifth straight year of rising premiums and the highest increase since 1993. The large difference between the 2001 premium increase and the underlying cost increase in 2000-11 percent vs. 7.2 percent-reflects both expectations of higher costs and the health insurance underwriting cycle, or the pattern of premium trends diverging from expected costs. The expectation of higher costs is reflected in the 9.5 percent premium increase for self-insured plans in 2001. The underwriting cycle is reflected by the much higher premium increase of 12.3 percent for fully insured plans in 2001, signaling insurers willingness to sacrifice market share to restore profit margins. Insured consumers generally have been sheltered from cost increases in recent years because employers have paid a disproportionate share of higher premiums in past years. In 2001, the employee share of premiums remained stable at 15 percent for single coverage and 27 percent for family coverage. But, with a slowing economy, this could change. Indeed, employers have increased patient cost sharing already for pharmaceuticals and are expected to do the same for hospital and physician services. In contrast to the last time cost trends were this high-in the early 1990s-the cost-containment strategies of managed care are now in retreat, leaving few ways to stem the rising cost tide.
This Data Bulletin is based on data from the Milliman USA Health Cost Index ($0 deductible), which is designed to reflect claims increases faced by private insurers; the Kaiser Family Foundation/Health Research and Educational Trust survey of employer-based health plans for 1999-2001; the KPMG survey of employer-based plans for 1991-98; the U.S. Bureau of Labor Statistics Employment, Hours and Earnings series to track payroll costs; and Center for Studying Health System Change 2000-01 site visits (see www.hschange.org). The bulletin is adapted from Tracking Health Care Costs, by Bradley C. Strunk, Paul B. Ginsburg and Jon R. Gabel, Health Affairs, Web-exclusive publication, Sept. 26, 2001, www.healthaffairs.org.Data Bulletins are published by the Center for Studying Health System Change (HSC)
President: Paul B. Ginsburg
Director of Public Affairs: Ann C. Greiner
Editor: The Stein Group