The Continuing Saga of “It’s the Prices”

Today’s Managing Health Care Costs Indicator is 3.8%

I’m still making my way through the September Health Affairs, and Roehrig and Rousseau have used National Health Expenditure data to demonstrate what portion of the increase in the cost of health care is due to increasing prevalence of disease, and what portion is due to increased prices.

You can tell from the graphic and the title – prices trump again.   Over the 260 conditions the authors reviewed, the overall cost increase in the decade from 1996-2006 was 3.8%.  Roughly three quarters of this difference was due to increasing costs, and only a quarter was due to increased prevalence.  Shockingly, as our population becomes more obese and we worry about our sedentary kids, the increased prevalence of disease wasn’t even more disease – it was rather a higher penetration of treatment of existing disease.  For instance, while there was more hypertension, hyperlipidemia and diabetes – but this was offset by lower prevalence of cigarette-related lung disease and strokes.

Not all unit cost increases are bad.  New drugs that make various cancers and HIV into treatable chronic diseases represent important advances that we want and need. (Of course, over time these will also raise true clinical prevalence of disease. See, for instance, the increase in prevalence of Chronic Myelogenous Leukemia). However, our payment system rewards increased use of technology and increased use of new procedures, and we preferentially disseminate innovation that continues to ratchet up the cost of care.  

This article provides further evidence that we won’t be able to solve our health care cost crisis by focusing all of our attention on improving American lifestyles.  We’ll also have to address our high and rising unit costs.

Below are graphics for the decomposition of increase in costs for a few other conditions:

Note that the large decrease in prevalence of chronic obstructive pulmonary disease still couldn't overcome the increased cost per case - so overall per capital spending growth was still positive.