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Healthcare prices are up, and patients are buying less

Healthcare spending growth for people who get their health insurance at work remained modest last year. Prices edged upward, but people in employer-based plans made fewer trips to doctors, hospitals and pharmacies.

Health spending increased 3.9% in 2013 for roughly 40 million people with health benefits from an employer, according to the latest report from the Health Care Cost Institute. The analysis is based on about 5 billion medical bills submitted to private health plans, offering a snapshot of spending taken from the medical care for nearly 1 in 4 Americans with employer-based health insurance.

Last year's spending growth matches the annual average seen since 2010 among Americans with such plans. The findings echo other recent analyses that show continued slow growth in U.S. health spending as Americans use less medical care since the start of the recession. That spending is expected to accelerate because of the expansions of health coverage launched under the healthcare reform law this year. Still, economists are uncertain how quickly spending will rebound and whether the nation's medical bills will reach the 7.2% average annual growth rate of recent decades.

The drop in demand for care—which grew pronounced as the economy shed millions of jobs—persisted last year, with a continued decline in hospital admissions for medical and surgical services.

Notably, use of outpatient care declined as people used the emergency room and had fewer outpatient surgical procedures. Weak outpatient demand suggests soft demand overall, Moody's Investors Service analysts said this year when reporting the first-ever slowdown in outpatient growth and record-slow revenue growth among roughly 380 hospitals and health systems.

Amanda Frost, senior researcher for the Health Care Cost Institute, said the drop in emergency room utilization among young adults drove the unusual 0.5% decline in outpatient use. Emergency room visits declined by 1.6% last year among privately insured workers after increasing in recent years.

The per capita costs for young adults suggest that people ages 19 to 25 visit the emergency room for less-intensive services. Per capita costs for young adults and older adults (ages 55 to 64) were largely the same, as were the prices, though older adults used the emergency room at lower rates. “The difference is intensity,” said Carolina Herrera, the institute's research director, with older adults using more intensive services.

Demand for outpatient surgery remained weak, dropping 0.7% last year following similar declines the prior two years.

Outpatient observation visits, meanwhile, accelerated, increasing 4.6% last year compared with 2.4% and 2.6% growth in the previous two years. The use of observation stays has increased among Medicare patients under new policies intended to discourage hospitals from short inpatient stays. Medical bills analyzed by HCCI are for individuals younger than 65.

Rising prices offset weak use of services to drive overall health spending growth. Outpatient prices increased 5.8%. The same was true for other major categories of health spending. Inpatient prices increased 6.7% as inpatient use declined 2.7%. Frost said the drop in demand for medical and surgical services largely drove the decline in hospital admissions, even as hospital stays for mental health care and labor and delivery largely held steady.

Spending on professional procedures grew 3.3%, and nearly all of that increase was attributed to higher prices rather than higher utilization.

Spending for brand-name prescriptions grew more slowly in 2013 than any other category. Prescription-drug prices increased last year by 21.2%, but brand-name drug use dropped by 15.5%.

The dynamic was the reverse in generics: Prices declined 0.5% while use increased 4.5%.

Correction: The original version of this story indicated "healthcare spending" remained modest last year. The word "growth" was accidentally omitted, and has been corrected in the article.

Follow Melanie Evans on Twitter: @MHmevans



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