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AI Columbia Park Medical Group- ,,Ir 0 Rising Costs of Health Care...A Topic for All Businesses Twin Cities North Chamber of Commerce January 15, 2004 Dennis Wipperling, Executive Director Columbia Park Medical Group Three areas of comment: 1. What is the right level of spending in the United States for health care? • According to the Organization for Economic Cooperation and Development, the United States spends more per person than any other developed nation. Is that bad? • The attached article from the Washington Post reports that health care spending grew in the United States by 9.3% in 2002 over the previous year and that this reflects the sixth year of accelerating growth in expenditures. Health care spending now represents 15% of the nation's gross domestic product. Again, is this a good thing or a bad thing? • Are the real issues: 1.) Are consumers getting value for this increase in health care spending? and 2.) Who should pay for health care? III2. Factors driving the rising costs of health care: • Specific factors include general inflation, payments to providers (hospitals, clinics and other health care providers), increase in utilization (consumer demand and use), technology (drugs, medical devices and other medical advances), government regulations, litigation (lawsuits), and fraud and abuse. • The attached information, table 1, from a PricewaterhouseCoopers April 2002 analysis, shows the factors driving rising costs in health care premiums. The largest factor is the category of drugs, medical devices and medical advances, followed by general inflation and rising provider expenses. Government mandates and regulations make up 15% of the cause. • Utilization includes the fact that more individuals are receiving services because of population growth and that individuals are living longer. Consumers are also using more services on an individual basis. • Technology and medical advances account for a substantial portion of the increase in health care spending. Included in this category are all the new pharmaceuticals (drugs) that are now available. • Information from a 2003 Minnesota Department of Labor and Industry Research and Statistics study reports: > There have been changes in the distribution of payments among providers. More payments are being made to hospitals and pharmacies now than prior to 1993. > Physician office visits accounted for almost 25% of costs prior to 1993, they now • represent less than 10% of the charges. Surgical services have increased from 8.8% to 13.3% and radiology services from 7.2% to 9.8%.