Health care spending rises

We're just a couple of days away from open enrollment on HealthCare.gov and there have been a number of news articles about the expected price increases in insurance premiums. Unfortunately, it seems that insurance premiums in individual marketplaces are set to increase dramatically in a number of states. The New York Times reports that Minnesota will see an average increase of 49 percent for Blue Cross and Blue Shield of Minnesota plans. Alaskans apparently will also face tremendous increases, although that seems to due to how few people live in that state.

Health Care Cost Institute issued an interesting report about health care costs and utilization. It found that health care spending for individuals younger than 65 on employer-sponsored insurance plans grew by 3.4% in 2014, even though utilization for every subservice category fell, except for use of generic drugs. Meanwhile, the average price paid rose in every service category. In other words, people are using health care less and paying more for it overall. Of special note is that the expensive new drugs used to treat Hepatitis C accounted for about two-thirds of the increased spending per capita for brand medications.

Overall, this suggests that payers generally haven't yet figured out how to reign in unit prices for medical services to be in line with inflation. After enough consumers select high-deductible plans and sufficiently useful tools roll out to support comparison shopping, I would expect the growth in prices of medical services to slow.