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The high cost of living – and health care

New data analysis pinpoints trends that are linked to the continuing rise in health care costs

Image courtesy of R.I. OHIC

A slide from the data analysis of health care spending trends in Rhode Island conducted by Michael Bailit.

By Richard Asinof
Posted 5/3/21
A new data analysis of health cost trends continues to identify retail drug costs as a major driver of increased health care cost trends in Rhode Island.
Is there a flaw in measuring insurance claims paid as best calculator of health care costs, given the continued lack of access to primary care and health insurance by the state’s immigrant population? Does the effort to constrict medical expenses through third-party authorization demands by insurance plans actually increase costs? What are the lessons from the efforts to test, contact trace and vaccinate Rhode Islanders that can be applied to the delivery of health care in the state? How do we measure the increased health care costs caused by the exposure to environmental toxins in our air, water and food?
Misinformation around health care continues to plague efforts to increase the participation in efforts to vaccinate as many Rhode Islanders as possible to combat the spread of COVID-19. The false narratives put out and repeated on social media platforms and by Fox News often create a dangerous level of disbelief – people being treated in ICUs in hospitals for COVID-19 who continue to claim that the virus is a hoax, even as they die, to the chagrin of the doctors and nurses treating them.
Learning to tell data stories in public health remains a big unmet need – one that is not necessarily taught in med school or in public health schools. Perhaps there should be a communications course taught around how to script messaging around public health within the framework of a soap opera – with characters that reflect the frailty of our human condition.

Part TWO

PROVIDENCE – Surprise, surprise, surprise. The most recent data analysis conducted on health care costs trends in Rhode Island found that costs had increased by 4.1 percent between 2018 and 2019, exceeding the voluntary annual cap of 3.2 percent on health care spending, according to the analysis conducted by the R.I. Health Care Cost Trends Steering Committee, in a report released on Thursday, April 29, by the R.I. Office of the Health Insurance Commissioner.

The cost of health care, measured as the cost per patient per year for that time period, was $8,949 for Rhode Islanders covered by health insurance, according to the analysis.

Translated, the cost of health care in Rhode Island has continued to increase at an accelerated pace, news that should shock no one, particularly for consumers and employers paying the bills – and the ever-increasing co-pays.

The analysis, conducted by health consultant Michael Bailit, looked at data provided by all the payers in the insurance market in Rhode Island.

An earlier analysis, released in December of 2020, looking at health care costs between 2016 and 2018, had found a 4.4 percent increase. [See link below to ConvergenceRI story, “Prescription drugs, not utilization, are driving higher health are costs in RI.”]

As ConvergenceRI had reported: “The news [was] not good.”

• The per capita total health care expenditures in Rhode Island rose from $7.001 billion in 2017 to $7.309 billion in 2018, a 4.4 percent increase, 28 percent higher than the goal of 3.2 percent.

• The total spending and trend by service category [net of rebates] showed that retail pharmacy costs had increased 9.8 percent in 2018, the highest trend in increasing costs, to $1.155 billion, followed by hospital outpatient, with the next highest trend in increase cost being driven hospital outpatient services, at 7.2 percent, at $1.254 billion. 

 In comparison, the cost trend for hospital inpatient services fell 0.9 percent, to $1.433 billion.

Shifting numbers
The numbers from the most recent report seemed to show some shifts in the cost dynamics. The latest analysis found that across all markets, the top three most significant contributors to per capita health care spending growth were:

• Hospital outpatient services, which contributed to 33.2 percent of statewide spending growth

• Retail pharmacy [costs], which contributed to 25.4 percent of statewide spending growth

• Professional physician services, which contributed to 14.8 percent of statewide spending growth

The increasing cost of retail pharmaceuticals in Rhode Island was identified as a continuing driver of overall health care costs in the state in both reports.

The high cost of pharma
The increases in retail pharmacy spending in Rhode Island, highlighted in the first report by the Rhode Island Cost Trends Project and again in the second report, is slated to receive more focused attention in the coming year, according to an OHIC newsletter published on Friday, April 30.

“The first [data] spotlight, published in December 2020, showed the degree to which pharmacy price increases have been driving total health care spending in our state,” the newsletter said.

“This second [data] spotlight presents additional findings from a deeper analysis and further demonstrates that price is the primary driver of growth in pharmaceutical spending,” the newsletter continued. “Even as utilization of pharmaceuticals decreased or remained flat, prices increased, driving up total spending. Continuous increases in pharmaceutical prices hinder the efforts of the state, payers, and providers to control total health care costs and meet the health care cost growth target.”

In response, as a potential solution, the newsletter continued, “The Steering Committee [of the R.I. Cost Trends Project] is recommending that legislative action be taken to address pharmaceutical price increases by imposing a financial penalty on manufacturers that increase their drug prices more than CPI [Consumer Price Index] plus two percent.”

For sure, the content of the OHIC news release and newsletter could have been easily overlooked, given that it came during a week of big news on the health care delivery system front: the merger moving forward between Lifespan, Brown, and Care New England; the official announcement of the acquisition of Coastal Medical by Lifespan, and the public relations battle launched by CharterCARE against the R.I. Attorney General, attempting to evade financial conditions imposed on the proposed sale of assets by a private equity firm which has majority control over the health system. [See link below to the ConvergenceRI story, “A wealth extraction system run amok?”]

Searching for cause and effect – and correlation
By definition, the analysis is a backward looking exercise, looking at past claims data, as an attempt to better understand the drivers of cost increases of health care in Rhode Island. Here we are, moving into the second quarter of 2021, but the latest analysis only covers 2019 – and the cost trends for 2020, during the year of COVID-19 pandemic, may make it more difficult to determine longitudinal patterns, given the major disruptions the virus caused to the health care delivery system.

Why measure health care cost growth?” the PowerPoint slide deck had asked, at the beginning of the presentation, and then answered: “Health care is unaffordable for many Rhode Islanders. D’oh.

In the news release, a rationale for the effort was provided by Patrick Tigue, the R.I. Health Insurance Commissioner. “Public transparency of health care cost growth in Rhode Island is a central tenet of the Rhode Island Health Care Cost Trends Project,” said Tigue, who serves as co-chair. “These data show that we still have work to do to lower health care cost growth in order to improve affordability for Rhode Islanders.”

Releasing these data is a significant step forward for Rhode Island and will help us understand what actions payers, providers, state government, and others can take together to make meaningful progress on cost containment,” claimed co-chair Dr. Alan Kurose, president and CEO of Coastal Medical [which was recently acquired by Lifespan], in the news release.

As a health care community, we must continue to invest in and support this work as progress is only possible through continued transparency and a commitment to meaningful action,” offered Michele Lederberg, executive vice president, chief legal officer, and chief administrative officer at Blue Cross & Blue Shield of Rhode Island, as quoted in the news release.

What is missing?
Some potential salient data points around health costs that were not included in the analysis include:

• The percentage of insurance claims for services that were denied, compared to those that were paid

• The level of capacity of inpatient beds at Rhode Island hospitals for the time period being analyzed

• The waiting time for referrals to be seen by patients from primary care practices to specialists, as a factor of how delays in treatment result in worsening health conditions

• The ratio of increased compensation for administration executives, compared with increases in salaries for providers, including nurses, physician assistants and community health care workers.

• Health care costs as a factor of social disparities and toxic stress; for two years running, the R.I. Life Index has identified lack of affordable housing as the number-one issue affecting perceptions of health outcomes. One data trend – not yet asked in the data analysis around claims – would be to measure how many Rhode Islanders have trouble paying their medical bills as a percentage of increased costs.

Another important cost factor seemingly missing from the data analysis are legal expenses. For instance, recently, an email was sent out to potential claimants after a federal court judge granted preliminary approval of a class action settlement against the national Blue Cross Blue Shield association in antitrust litigation. The lawsuit claimed that the health insurer violated antitrust laws by entering into “an agreement not to compete with each other and to limit competition among themselves in selling health insurance and administrative services for health insurance.” While the lawsuit was settled without the defendant admitting to any wrongdoing, the number of consumers who could seek damages is expansive: individuals and insured groups from Feb. 7, 2008, through Oct. 16, 2020, and for self-funded accounts, from Sept. 1, 2015, through Oct. 16, 2020.

Interview with consultant Michael Bailit
To get a better idea about some of the parameters of the data analysis, ConvergenceRI conducted an interview with Michael Bailit, the principal of the consulting firm that had done the data analysis.

ConvergenceRI: In the previous report published by OHIC, the main culprit in the rise of health care costs was drug prescription costs; they were a “factor” in the current analysis, but not the top factor; what changed?
BAILIT: Drug spending patterns can be volatile on a year-to-year basis based on new brand and generic drug market entries, as well as changes in manufacturer pricing behavior. Also, I note that while retail drug spending did not grow dramatically between 2018 and 2019 for the commercial market, it did so for the Medicaid market.

ConvergenceRI: Today’s report was based on payer data; what I couldn’t tell was how many claims were rejected by insurers across the different sectors of health care; do you measure those at all?
BAILIT: We did not collect data on rejected claims. We only measured payments.

ConvergenceRI: How are co-pays a part of the equation? How are they included, or not included, in the cost breakdown?
BAILIT: Our calculations included both the payer share and the member obligation. This means that member responsibility for copayments, deductible and coinsurance was included.

ConvergenceRI: Given that Lifespan, Care New England, Brown Physicians Inc and Coastal Medical may become part of the same entity, how will that impact costs? [I believe that you did a survey analysis of potential cost increases for the potential Care New England Mass General merger].
BAILIT: Our analysis did not assess the potential impact on health care spending of market consolidation activity.

ConvergenceRI: How are cost increases correlated with health outcomes?
BAILIT: Our analysis did not consider health outcomes.


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