Midweek update

Today's FEHBlog post focuses (as usual) on rising healthcare costs. Last week, S&P which has unveiled a new website for its indices announced that healthcare costs were up in July "Healthcare costs covered by commercial insurance plans increased by 8.34% over the year ending July 2012, up from the +8.06% reported for June 2012. Annual growth rates in Medicare claim costs rose by 2.79%,
according to the S&P Healthcare Economic Medicare Index, up from the +2.27% recorded in June
2012."

The Healthcare Cost Institute, which analyzes deidentified claims date provided by Aetna, Humana, and United Healthcare, reported this week that healthcare spending rose 4.6% in 2011 following two years of slower growth.

Prices rose for all major categories of health care—hospital stays, outpatient care, procedures and prescriptions—outpacing an uptick in the use of many of these services. Prices rose fastest for outpatient care.

“Prices continue be the main culprit for rising health care costs,” said HCCI Executive Director David Newman. “If we are really going to get health care spending under control, we have to better understand why those prices are rising and the implications those increases have for the U.S. health care budget.”

AHIP reports that

An article by Bob Kocher and Ezekiel Emanuel in the Journal of the American Medical Association (subscription required) looks at how hospital consolidation is driving up health care costs, noting that “prices for hospital services are 13% to 25% higher in consolidated hospital markets.” [The ACA is driving this consolidation.]

Hospital spending currently accounts for one-third of all health expenditures. According to the article, “…hospital price increases are now the largest contributor to increases in insurance premiums. According to an estimate for 2013, hospital prices will increase 8.2%—more than any other sector of health care spending.”

The FEHBlog's favorite stories concern hospital and doctor use of their new electronic healthcare technology to recover more dollars from Medicare, Medicaid, and commercal plans. A Forbes columnists explains that "Based on my reporting of the health IT industry, [the increased recoveries likely reflect the fact that] that doctors have been “under coding” medical procedures over the years by using paper charts." Nevertheless, following a New York Times article on Sunday, the federal government sent a "stern letter" to various hospital associations warning against the use of EHRs to artifically inflate recoveries. Healthcare IT News reports that the associations are placing the blame on complex Medicare reimbursement rules. (There is no doubt that Medicare reimbursement rules are hideously complicated.)

No good deed goes unpunished. The federal government has spent nearly $7.0 billion to purchase the technology for the providers. The Institute of Medicine, according to the AMA News, is hoping that this investment will ultimately reduce waste in the healthcare system. However, according to EHR Intelligence, the investment cannot pay off unless Congress permits the establishment of a uniform patient identifier. The bottom line from the FEHBlog's perspective is healthcare technology should be delinked from the law and there should be no free lunch.

The FEHBlog remains concerned that hospitals will use the ICD-10 roll-out to renegotiate its provider contracts. The ICD-10 includes multitudes of new diagnosis codes and new hospital procedure codes.  The implementation date is now October 1, 2014, just about two years from now.

In closing, the FEHBlog again expresses his admiration for the FEHBP carriers for generally holding down premium increases for 2013.