Cost Curve Up

The Standard and Poor’s Healthcare Cost Indices for January 2013 recently were released:

In January 2013 eight of the nine headline healthcare indices we publish showed acceleration in their annual growth rates,” says David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices. While eight of the nine key components increased, the increases were small to moderate.
“The Composite Index posted an annual rate of +3.83%, the Commercial Index +5.41% and the Medicare Index +1.41%. In January, four of the nine healthcare indices ticked up from their historic lows posted in December. They were the Composite Index, the Medicare Index, the Professional Services Medicare Index and the Hospital Index. The Commercial Index at +5.41% went 0.03 percentage points above its recent low posted in December. The only index that decelerated in January was the Hospital Commercial; it posted a historic low of +2.86%.

The Catalyst for Payment Reform issued its first National Scorecard on Payment Reform. The Scorecard shows that notwithstanding the best efforts of insurers and health plans “only about 11 percent of  the health care dollars we pay to doctors and hospitals today are value-oriented — tied to how well they  deliver care or create incentives for both improving quality and reducing waste. Almost 90 percent of  payments reported remain in traditional fee-for-service, paying providers for every test and procedure  they perform regardless of necessity or outcome, or in bundled, capitated, or partially-capitated  payments without quality incentives.”    This employer coalition has created a payment reform toolkit here, but in the FEHBlog’s view the medical profession needs to start healing itself.

Finally, the Society of Actuaries “predicts that expected changes in member composition of the individual
health care market could drive up underlying claims costs by an average
of 32 percent nationally by 2017. In addition, the study predicts high
variability among states, with as many as 43 states experiencing a
double-digit percentage claims cost increase and some states
experiencing a double-digit cost decrease.”  The FEHBP and other private sector health plans are obligated to help stabilize premiums for these individual insureds in the exchanges through $63 per head (in 2014). This study suggests that Congress may wind up extending this subsidization which is now scheduled to end in 2017. This will be a wild ride.

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