Overview. Chartbook 2003 After a decade hiatus, debate on health care reform at the national level...

Overview

Chartbook 2003

After a decade hiatus, debate on health care reform at the national level has re-emerged. Recognizing that health care spending is growing rapidly, every 2004 Democratic presidential hopeful has unveiled a plan to overhaul the health care system and provide coverage to the growing ranks of the uninsured. Policy makers, researchers and other constituencies are discussing whether and what interventions may be necessary to control health care costs, as they did in the early 1990s.

Premiums for private health coverage are continuing their double-digit increases, after abating in the mid-1990s due, in part, to tightly managed care. With the labor market becoming less tight, employers are attempting to pass more of the costs of health care onto employees by increasing cost sharing and considering other cost containment strategies. The long-term effects of these strategies remains to be seen.

In addition, Congress and the Administration are again considering changes to Medicare, including adding a prescription drug benefit for seniors. Despite declining enrollment and widespread health plan withdrawals from the Medicare+Choice program, many decision makers are committed to an active role for private health plans in Medicare.

Meanwhile, old problems are re-surfacing with a new urgency for states as they face their worst fiscal crisis in decades. States are struggling to fund Medicaid in the wake of a sharp drop in tax revenues resulting from national manufacturing and stock market declines, the economic impact of terrorism, and a recession. In fiscal year 2003, states closed their largest budget gaps in 50 years and, for many states, the fiscal year 2004 budget gaps are just as large. In spite of a new federal law providing $10 billion in fiscal relief to states for their Medicaid programs, many states are still facing difficulties funding current levels of benefits. The Congressional Budget Office is projecting average annual growth rates of 8.5 percent for Medicaid – slower than in the past decade, but still a funding challenge for states.

Overview

Overview

2

Chartbook 2003

Hospitals continue to cope with challenges that they have faced in the past. After leveling off between 1999 and 2000, total hospital margins have continued their slide since the mid-1990s. Decreases in non-operating income contributed to the decline in total margins, cushioned by increases in operating margins. Margins for patient care, up slightly, remain negative and 29 percent of hospitals are losing money. Half of hospitals rated by Standard & Poor’s received BBB or below credit ratings, which likely affects their ability to access capital – necessary for modernizing aging hospital facilities. Yet, demand for inpatient and outpatient hospital services continues to increase.

Hospitals are also coping with more recent challenges. Between 2000 and 2001, spending on hospital services grew 8.3 percent. Costs are rising sharply for many of the goods and services hospitals purchase to provide care, including labor, pharmaceuticals, and medical devices. It is well-known that hospitals and other health care providers are facing a severe nursing shortage. What is less well-known is that they also are confronting shortages of coding specialists, skilled radiology technicians, and pharmacists. Hospitals must offer increasingly higher wages to be competitive with other health care providers and other opportunities for skilled staff. In addition, demand for progressively newer, more effective drugs and medical devices has also put upward pressure on hospital costs.

Additional provider challenges include the medical liability insurance crisis and its potential impact on access to care. Finally, hospitals must meet new requirements for disaster readiness and the privacy and security of medical information with limited additional public funds.

The following charts present an analysis of trends in the hospital field within the context of the broader environment for health care. Hospital data are drawn primarily from the American Hospital Association Annual Surveys. Other data come from a variety of sources. The Chartbook begins with a chapter on overall trends in health care spending, financing and coverage. The next four chapters examine trends specific to the hospital field, including organizational trends, volume and utilization, financing, and workforce issues.

Overview

3

Chapter 1:Trends in the OverallHealth Care Market

Chartbook 2003

National Health Spending

In 2001, national spending on health services grew by 8.7 percent — the largest increase since 1991. As a consequence, spending per capita continued to rise. Though health spending as a percentage of Gross Domestic Product (GDP) grew by almost one percentage point to 14.1 percent, the greatest increase in over 20 years, this was likely due to slower economic growth, not a jump in health spending(1) (Charts 1.1 – 1.4).

Not surprisingly, national expenditures for health services and supplies grew across the board, with spending on hospital care growing 8.3 percent from 2000 to 2001, as compared to a 5.8 percent increase between 1999 and 2000. While still the largest component of national health expenditures, the percentage of national health expenditures devoted to hospital care was steady (at about 32.9 percent in 2001). Expenditures for physician and other professional services and hospital care saw the greatest increases. After negative growth from 1998 to 2000, spending on home health care increased by 4.5 percent between 2000 and 2001. This turnabout is largely a result of legislative changes including the implementation of the Balanced Budget Act (BBA), the Balanced Budget Refinement Act (BBRA), and the Benefits Improvement and Protection Act (BIPA)(2) (Charts 1.5 – 1.8).

For the second year in a row, growth in drug spending decelerated, though it still represented the highest growth category at 15.7 percent. The decrease may be due to a slowdown in the rate of new product introduction and the introduction of tiered drug plan structures.(3) However, prescription drug spending for both private health plans and consumers continued to rise, as did out-of-pocket payment for health expenditures overall (Charts 1.10 – 1.12).

(1) K. Levit et al, “Trends in U.S. Health Care Spending, 2001”, Health Affairs (Jan/Feb 2003): 154–164.(2) Ibid(3) B. Strunk & P. Ginsburg, "Tracking Health Care Costs: Trends Stabilize But Remain High in 2002," Health Affairs 11 June 2003, http://www.healthaffairs.org/WebExclusives/2204Strunk.pdf

Trends in the Overall Health Care Market

Chapter 1:Trends in the Overall Health Care

Market

6

Chartbook 2003

Trends in Health Care Coverage and Premiums

After a two year decline, the percentage of the population uninsured nationally increased to 14.6 percent in 2001 representing 41.2 million individuals. This change likely reflects the impact of the economic slowdown, rising unemployment, pressures on state Medicaid budgets, and employer efforts to stem premium growth. When the economy lags, employers are more likely to cut health benefits to curtail premium increases and states are more likely to scale back benefits in response to budgetary pressures. Variation in rates of uninsurance is seen throughout the US; states along the southern border have generally higher average rates (Charts 1.15 – 1.16).

Between 2000 and 2001, the percentage of individuals under private coverage decreased from 71.9 percent to 70.9 percent. After a 6.0 point decline between 2000 and 2001, the proportion of employer sponsored health insurance enrollment in HMO plans rose 3.0 points to 26 percent in 2002. The proportion of enrollment in PPOs continued to increase from 48 percent in 2001 to 52 percent in 2002. Enrollment in conventional plans declined from 7 to 4 percent over the same period (Charts 1.14 and 1.22).

Enrollment in public insurance programs increased. Medicare enrollment increased about one half percent between 2001 and 2002 continuing the growth path seen since 1980. In addition, Medicaid enrollment increased slightly with adult enrollment increasing by 1.4 million individuals to 10.4 million. After sharp increases between 1991 and 1998, Medicaid managed care enrollment continued to hold steady, while the percentage of beneficiaries enrolled in Medicare HMOs declined for the second year in a row from 15 percent in 2001 to 13 percent in 2002 (Charts 1.17 – 1.18, 1.23, 1.25). Enrollment in SCHIP continued to accelerate, growing from 4.6 million in 2001 to 5.3 million in 2002 (Chart 1.19).

Double-digit increases in private health insurance premiums seen in 2001 continued in 2002, with a 12.7 percent increase. Consumer backlash against managed care may be contributing to increased premiums as health plans ease controls on choice and utilization (Chart 1.27). The rate of change in spending per enrollee for both private health insurance and Medicare continues to rise; private health insurance spending per enrollee increased more than at any time since 1991 (Chart 1.24).


7

Chartbook 2003

16.0

%

12.6

%

10.1

%

10.4

%

9.4%

7.1%

8.9%

12.1

%

11.6

%

11.8

%

9.5%

8.6%

7.4%

5.5%

5.7%

5.0%

5.1%

5.2% 6.

1% 7.4% 8.

7%

0%

5%

10%

15%

20%

81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01

Chart 1.1:Total National Health Expenditures

1980 - 2001

Chart 1.2:Percent Change in Total National Health

Expenditures1981 - 2001

Bill

ions

Source: Centers for Medicare & Medicaid Services, Office of the Actuary(1) Expressed in 1980 dollars; adjusted using the overall Consumer Price Index for All Urban Consumers

Inflation-adjusted (1)

Source: Centers for Medicare & Medicaid Services, Office of the Actuary


8

Chartbook 2003

8.8

%9.1

%9.8

%

10.0

%9.9

%10.1

%10.3

%10.5

%10.9

%11.3

%

12.0

%12.7

%13.1

%13.4

%13.3

%13.4

%13.3

%13.1

%

13.1

%13.2

%13.3

%14.1

%

0%

2%

4%

6%

8%

10%

12%

14%

16%

80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

$5,000

$5,500

80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01

Chart 1.4:National Health Expenditures

as a Percentage of Gross Domestic Product1980 - 2001

Chart 1.3:Per Capita National Health Expenditures

1980 - 2001

Per

Cap

ita A

mount





9

Chartbook 2003

1980 2001

Chart 1.5:National Expenditures for Health Services

and Supplies(1) by Category1980 and 2001


(1) Excludes medical research and medical facilities construction(2) “Other” includes net cost of insurance and administration, government public health activities, and other personal health care(3) “Other professional” includes dental and other non-physician professional services

Prescription Drugs - 5.2%


Physician Services - 20.2%

Hospital Care - 43.5%

Nursing Home Care - 7.6%

Other(2) - 9.5%

Other Medical Durablesand Non-durables - 5.9%

Home Health Care - 1.0%

Other Professional(3) - 7.3%

$233.5 B $1372.6 B

Other Medical Durables andNon-durables – 3.7%

Prescription Drugs – 10.2%

Home Health Care - 2.4%

Other Professional(3) - 7.9%

Physician Services - 22.9%

Hospital Care - 32.9%

Other(2) - 12.9%

Nursing Home Care - 7.2%

10

Chartbook 2003

15.7%

11.2%

8.6% 8.4%

5.5%4.5%

2.4%

8.1%8.3%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Chart 1.6:Percent Change in National Expenditures

for Health Services and Supplies(1) by Category

2000 - 2001


(1) Excludes medical research and medical facilities construction(2) “Other professional” includes dental and other non-physician professional services(3) “Other” includes government public health activities and other personal health

care

11


Prescription Drugs

Other (3)Physician Services Other

Professional (2)

HospitalCare

Nursing HomeCare

Home Health

Care

OtherMedical Durables

and Non Durables

Admin.and NetCost of

Priv. Health

Insurance

8.7%All Health Services &Supplies

Chartbook 2003

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

80 90 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

Chart 1.7:Percent Change in National Expenditures

forSelected Health Services and Supplies

1992 - 2001

Chart 1.8:National Health Expenditures(1)

1980 - 2012


(1) Years 2002 – 2012 are projections



12

-5%

0%

5%

10%

15%

20%

25%

92 93 94 95 96 97 98 99 00 01

Prescription DrugsAdmin. & Net Cost of Private Health Ins.Hospital CareNursing Home CareHome Health Care

Bill

ions

Chartbook 2003

$0$10$20$30$40$50$60$70$80$90

$100$110$120$130$140$150

80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01

Chart 1.10:Total Prescription Drug Spending

1980 - 2001


Bill

ion

s



13

$0

$25,000

$50,000

$75,000

$100,000

$125,000

$150,000

$175,000

$200,000

$225,000

90 91 92 93 94 95 96 97 98 99 00 01

Chart 1.9:Out-of-Pocket Payments for Health Expenditures

1990 - 2001


Chartbook 2003

$0

$10

$20

$30

$40

$50

$60

$70

80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01

Chart 1.12:Consumer Out-of-Pocket Spending vs. Private Health Insurance Spending for

Prescription Drugs1980 - 2001


Out-of-Pocket

Private Health Insurance

Bill

ion

s


14

0%

5%

10%

15%

20%

25%

30%

81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01

Chart 1.11:Growth in Total Prescription Drug Spending

as a Percentage of Total Growth in National Health Expenditures1980 - 2001


Chartbook 2003

80 90 01

14.6%

3.4%

11.2%

13.5%

14.0%

3.0%

10.6%

13.5%

72.4%

13.9%

4.0%

9.7%

13.0%

73.2%

70.9%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Uninsured

Other Government

Medicaid

Medicare

Private

Chart 1.13:Distribution of National Health

Expendituresby Source of Payment1980, 1990, and 2001


Chart 1.14:Distribution of Health Insurance Coverage

Percentage of Population Covered by Payer1990, 2000, and 2001(1)


1990 2000 2001

Medicare - 15.2%

Total Medicaid - 10.6%

Other Government - 16.9%

Other Private - 5.9%

Out of Pocket - 23.7%

Private Insurance - 27.8%

$245.8 B $696.0 B $1424.5 B

19.7%

6.1%

33.5%

14.2%

10.6%

15.8%

Out ofPocket

OtherPrivate

PrivateInsurance

OtherGovernment

Total Medicaid

Medicare

Out of Pocket – 14.4%

Other Private - 5.4%

Private Insurance - 34.8%

Other Government - 12.7%

Total Medicaid - 15.7%

Medicare - 17.0%

15

Source: US Census Bureau

(1) 2000 and 2001 data use population estimates based on Census 2000.

Chartbook 2003

0

5

10

15

20

25

30

35

40

45

50

85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 010%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Chart 1.15:Number and Percent Uninsured(1)

1985 - 2001


(1) 1999, 2000, and 2001 data use population estimates based on Census 2000

Chart 1.16:Percent Uninsured by State

2001



Num

ber

of

Unin

sure

d(M

illio

ns)

Perc

en

t of

Tota

l Popu

lati

on

Number Percent

16

(1)(1)(1)

< 10.0%

10.0% to 14.9%15.0% to 19.9%20.0% and above

RI 7.7%DE 9.2%DC 12.7%

Chartbook 2003

Chart 1.17:Medicare Enrollees(1)

1980 - 2002

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

1990 1995 2000 2001

Source: Centers for Medicare & Medicaid Services

(1) Does not include S-CHIP Enrollees

Chart 1.18:Medicaid Enrollees(1)

1990, 1995, 2000, and 2001


17

28.1

28.6

29.1

29.6

30.0

30.6

31.2

31.9

32.4

33.0

33.7

34.4

35.2

35.9

36.5

37.1

37.7

38.1

38.4

38.7

39.2

39.6

0

5

10

15

20

25

30

35

40

45

80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 01 02

Mill

ions


(1) Hospital insurance (Part A) enrollees only; includes all persons (aged and disabled)

Mill

ions

Aged

Blind/Disabled

Children

Adults

Other Title XIX

25.3 M

36.3 M

46.1 M

42.5 M

Chartbook 2003

Chart 1.19:National SCHIP Enrollment(1)

FY 1999 - FY 2002

Chart 1.20:Percent Change in SCHIP Enrollment By

StateFY 2001 - FY 2002 (1)


(1) Number of children enrolled at any point in the year

(2) Preliminary data for 2002 updated as of January 30, 2003

1,959,330

3,333,879

4,622,204

5,315,229

FY 1999 FY 2000 FY 2001 FY 2002


RI 12%DE 74%DC 80%

1% to 50%0%

Less than 0%

51% - 100%

Over 100%

18

(2)

Unknown

(1) Preliminary data for 2002 updated as of January 30, 2003

Chartbook 2003

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1988 1993 1996 1998 1999 2000 2001 2002

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1988 1993 1996 1999 2000 2001 2002

Conventional

PPO

HMO

POS

(1)

Chart 1.21:Percentage of Employees with Employer-based

CoverageWho Can Choose Conventional, PPO, HMO and POS

Plans1988 - 2002

Source: The Kaiser Family Foundation and Health Research and Educational Trust, Employer Health Benefits 2002 Annual Survey

(1) Point-of-service plans not separately identified

Chart 1.22:Distribution of Employer-sponsored Health Insurance

Enrollment by Type of Plan1988 - 2002

Conventional

PPO

HMO

POS


(1)

Source: The Kaiser Family Foundation and Health Research and Educational Trust, EmployerHealth Benefits 2000, 2001, and 2002 Annual Surveys

(1) Point-of-service plans not separately identified

19

Chartbook 2003

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01

15%

13%

17%17%16%

13%

10%

8%

6%5%

4%4%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

91 92 93 94 95 96 97 98 99 00 01 02


Chart 1.23:Percentage of Medicare Beneficiaries Enrolled

in Medicare Managed Care1991 - 2002


(1) Percentages are risk enrollees divided by enrollees who have both hospital insurance and supplementary medical insurance

Chart 1.24:Percent Growth in Medicare Spending per Beneficiary

vs.Private Health Insurance Spending per Enrollee

1980 - 2001


Private Health Insurance

Medicare

20

(1)

Chartbook 2003

Chart 1.25:Percentage of Medicaid Beneficiaries Enrolled

in Medicaid Managed Care1991 - 2001

Chart 1.26:Percentage of Medicaid Beneficiaries Enrolled

in Medicaid Managed Care by State2001


25% - 49%50% - 74%


75% - 100%

1% - 24%

0%


RI 68.5%DE 81.8%DC 64.4%

10%12%

14%

23%

29%

40%

48%

54%56% 56% 57%

0%

10%

20%

30%

40%

50%

60%

91 92 93 94 95 96 97 98 99 00 01

21

Chartbook 2003

Source: Interstudy Competitive Edge: HMO Industry Report 12.2

Chart 1.28:HMO Plan Median Operating Margins

1990 - 2001

Source: The Kaiser Family Foundation and Health Research and Educational Trust, Employer Health Benefits 1999, 2000, 2001, and 2002 Annual Surveys

Chart 1.27:Annual Change in Health Insurance Premiums

1988 - 2002


22

12.0%

8.5%

0.8%

3.7%

4.8%

8.3%

11.0%

12.7%

0%

2%

4%

6%

8%

10%

12%

14%

1988 1993 1996 1998 1999 2000 2001 2002

2.1% 2.1% 2.2%2.5% 2.4%

1.2%

-0.9%

-3.5% -3.5%

-1.3%

-0.6%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

90 91 92 93 94 95 96 97 98 99 00

0.2%

01

Chartbook 2003

Source: Milliman USA

Chart 1.29:Blue Cross/Blue Shield Underwriting Gain/Loss

1965 - 2001


23

-6%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01

Cycle Year 1 Cycle Year 2 Cycle Year 3

Overview. Chartbook 2003 After a decade hiatus, debate on health care reform at the national level...

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