Purchaser Payer Background Information
In 1999, the United States spent $1.2 trillion on health care, up 5.6% from the previous year.1 Growth in health care expenditures is estimated to increase 8.3% in 2000 and 2001. Total spending on health insurance premiums was $401 billion in 1999, up 6.5% from the previous year. Total spending for clinical research is estimated at over $13.4 billion for 2000.2 This estimate includes private sector spending on phase I-IV clinical trials ($6.7 billion in 1999) and NIH reported clinical research spending. Of the $5.3 billion NIH spends on clinical research an estimated $1.9 billion is spent on clinical trials. Other government agencies add at most $1.4 billion dollars (including: Veterans Affairs, Department of Defense, Agency for Healthcare Research and Quality, Centers for Disease Control, Health Resources and Services Administration, and Centers for Medicare and Medicaid Services, and Food and Drug Administration).
A recent New York Times article noted that large insurance companies observed medical cost increases of 10 to 15 percent in Q1 2001 roughly more than double the 5-6 percent increase seen in the past decade.3 Preliminary estimates from Hewitt Associates show that HMOs are requesting premium in
creases averaging 18.3 percent, with some proposed increases reaching as high as 60 percent.
In 1999, Health Affairs reported health insurance premiums increased 6.5% in 1999, faster than the period between 1993 and 1998, which averaged 5.0% annual growth. In that same year, health insurance premiums totaled $401.2 billion spent on health, while $355.3 billion was spent on benefits. The article predicted that premiums would continue to increase 9.3% in 2000, and 10.5% in 2001. During this period, it was believed that premium growth would surpass benefit growth.4
Also noted in the article, hospitals are requesting double-digit rate increase from insurers due to growing labor and utility costs in 2000 and 2001. Insurers are, in turn, passing additional costs from hospitals and other providers to employers in the form of increased premiums averaging 18%.
Spending on prescription drugs rose 16.2% in 2000.5 The fastest-growing categories of drugs in terms of number of prescriptions written were antihistamines (18.4% increase), cholesterol-lowering drugs (18.1%) and antidepressants (11.3%). Factors influencing health care costs include:
Diminished competition (mergers of providers and insurers)
Increased medical inflation
Increased prescription drug costs
Strong demand for medical services
Growth in technology including information technology investments
The top disease categories based on cost or utilization indicators include: Cancer, Ischemic heart disease, Congestive Heart Failure, Injury, Complications of Medical and Surgical care, Complications of Pregnancy, Psychiatric Conditions, and Asthma (Table 1).
A survey of 20 licensed HMO plans that published research in the public domain and had a specific infrastructure to support research, had 1996 revenue of $92 million and employed 1,273 staff.6 The selected plans covered more than 29 million members. Research conducted by these entities included health services, epidemiology, health economics, and clinical trials. The plan or parent organization and NIH were the largest source of funds (24% and 22%, respectively).
TABLE 1 Ranking of Top 16 Principal Diagnosis Disease Cohorts*