Success of U.S. Healthcare Reforms Linked to Sharper Focus on Spending Patterns of Privately Insured, IMS Health Says
IMS Institute for Healthcare Informatics
IMS Institute Report Examines Cost Drivers, Member Characteristics and Utilization Trends of Commercially Insured, Under Age 65 Population
PARSIPPANY, NJ, Feb. 28, 2012 – As the healthcare industry, payers and policymakers look to curb the growth of U.S. health costs, new efforts are required to understand the substantial differences in spending and utilization between the privately insured under age 65 and Medicare age 65 and over populations, according to an IMS Institute for Healthcare Informatics report released today.
The privately insured segment within the U.S., particularly those health plan members under age 65, will remain the dominant part of the payment system even as the healthcare landscape transforms with the implementation of the Affordable Care Act. The report, Healthcare Spending Among Privately Insured Individuals Under Age 65, finds that care setting and treatment use vary considerably between the two segments, resulting in a different distribution of costs across outpatient, inpatient and pharmacy services.
"As states look to define their essential health benefits packages, a deeper understanding of actual utilization patterns, especially for the small number of patients driving the lion’s share of costs, is critical," said Murray Aitken, executive director, IMS Institute for Healthcare Informatics. "Further, effective benefits packages will need to fully consider services used by the three high-cost member segments – those with cancer, chronic conditions, and those with auto-immune or other specialty diseases."
An additional 44 million Americans are expected to have health insurance coverage by 2020, including 25 million through insurance exchanges established under the Affordable Care Act.
The IMS Institute report uses comprehensive, proprietary de-identified data consisting of more than 10 million privately insured members under age 65 to examine the distinctions between IMS aggregated healthcare use and spending patterns and those commonly cited among health service researchers, including the Agency for Healthcare Research and Quality, and Centers for Medicare and Medicaid Services.
Among the report’s key findings:
- Distribution of healthcare costs differs from commonly cited research. For the privately insured under age 65 segment, outpatient and inpatient services represent 59 percent and 20 percent of total spending, respectively. This compares with Medical Expenditure Panel Survey (MEPS) findings of 39 percent and 43 percent, respectively, for outpatient and inpatient services spending within the Medicare age 65 and over population.
- Outpatient services represent the largest share of overall spending. Spending for outpatient services for the privately insured under age 65 population averages more than $2,200 per member per year ($188 per member per month). Professional and facility visits account for 74 percent of all outpatient spending, while emergency room visits and outpatient medical drug therapy represent 10 percent and 5 percent of spending, respectively.
- Inpatient spending is highest among those with chronic conditions. Average spending for each inpatient admission is $14,248, with inpatient services representing 20 percent of total annual spending. Patients with chronic conditions account for 63 percent of all hospital admissions, averaging $15,566 per admit. Oncology patients make up the highest average cost per admission, exceeding $20,000, but average only 2.8 admissions per 1,000 health plan members. This compares with 29.3 admissions per 1,000 for members with chronic conditions.
- Pharmacy spending represents 21 percent of overall spending. Health plan members with chronic conditions are filling 78 percent of all prescriptions, while specialty medicines account for 17 percent of retail pharmacy spending. Overall, spending on specialty medicines dispensed by a pharmacy or administered in an outpatient setting accounts for 6 percent of all spending by health plan members. By contrast, pharmacy spending represents 33 percent of total spending for members with auto-immune or other specialty conditions. This reflects the growing availability of treatment options for members with specialty conditions, where medications can be administered outside of the hospital setting.
- Healthcare spending is highly concentrated. Consistent with patterns across the healthcare system, privately insured under age 65 health plan members who are among the top 1 percent in annual spending are vastly disproportionate users of healthcare resources. The top 1 percent of health plan members spend nearly $100,000 annually per member on health services, in contrast to $3,837 per member for the overall plan population. Of this group, 77 percent are diagnosed with at least one chronic condition, and 16 percent have at least one cancer. The top 20 percent of members with the greatest need for healthcare services are responsible for more than 80 percent of total healthcare spending.
"Payers and regulators need to understand at a more granular level the profile, behavior and use patterns of plan members who will have the greatest overall impact on healthcare costs," said Dan Malloy, vice president, IMS Payer Solutions. “Generalizations looking at the 'average patient' are woefully inadequate for designing and implementing more effective, efficient care management programs, and pricing their services optimally.”
The IMS Institute report, Healthcare Spending Among Privately Insured Individuals Under Age 65, including additional findings and details on methodology, is available at www.theimsinstitute.org/healthspending.
About the IMS Institute for Healthcare Informatics
The IMS Institute for Healthcare Informatics provides key policy setters and decision makers in the global health sector with unique and transformational insights into healthcare dynamics derived from granular analysis of information. It is a research-driven entity with a worldwide reach that collaborates with external healthcare experts from across academia and the public and private sectors to objectively apply IMS’s proprietary global information and analytical assets. More information about the IMS Institute can be found at www.theimsinstitute.org.
About IMS Health
IMS Health is a leading provider of information, services and technology for the healthcare industry around the world. The company draws on its global technology infrastructure and unique combination of in-depth, sophisticated analytics, on-shore and off-shore commercial services, and software platforms to help clients better understand the performance and value of medicines. With a presence in 100+ countries and more than 55 years of industry experience, IMS serves leading decision makers in healthcare, including pharmaceutical manufacturers and distributors, providers, payers, government agencies, policymakers, researchers and the financial community. Additional information is available at http://www.imshealth.com.
IMS Payer Solutions provides comprehensive provider and de-identified patient insights, clinical benchmarks and analytical services to more than 50 health plan and pharmacy benefit management clients. In its services, IMS leverages the largest non-plan-owned integrated medical claims database with more than 75 million lives and the most comprehensive pharmacy data platform covering three-quarters of all prescription activity in the U.S. IMS’s proprietary suite of evidence-based quality metrics drives performance programs for both primary care and complex specialty and hospital care.