Report: Insurers' costs rising faster than inflation

Insurers are facing high costs for many common medical services because doctors, hospitals and drugmakers are raising prices faster than inflation, according to a new report released Monday from the Health Care Cost Institute (HCCI).

The report, which was based on claims data from Aetna, Humana and UnitedHealthcare, found that costs rose 3.3 percent in 2010--twice the general inflation rate. Yet enrollment in employer-sponsored plans declined, Bloomberg reported.

"Most of the increase was driven by increases in price," Martin Gaynor, report author and Carnegie Mellon University economist, told Bloomberg. "We see utilization falling moderately, and the spending is still going up."

Insurers saw the biggest price increases in an 11 percent jump for emergency room visits, an 8.9 percent increase in outpatient surgery and an 8.6 percent increase in mental health and substance abuse treatments. Plus, the price for a primary care physician visit rose 5.3 percent, the Philadelphia Inquirer reported.

Meanwhile, people with employer-sponsored insurance had 3.3 percent fewer inpatient admissions, 3.1 percent fewer outpatient visits and almost no change in the amount of procedures performed at doctor's offices. And enrollment in these plans dropped 1 percent to 156.5 million, according to The Washington Post.

Gaynor suggested that provider consolidation may be driving the artificially inflated prices. "There's been an awful lot of consolidation in certain sectors of the healthcare industry, and we know that tends to lead to higher prices, but we can't draw any conclusions yet," he told Bloomberg. As a result, he said, policymakers may need to consider ways to tame providers' market power so they can't continue the current cost trend.

The report marks the first time insurers' claims data has been analyzed. HCCI reviewed 3 billion claims, which were scrubbed of identifying details for 33 million individuals covered by employer-based health insurance from 2007 through 2010.

To learn more:
- read the HCCI report
- see the Bloomberg article
- read the Washington Post article
- check out the Philadelphia Inquirer article

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