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The Health Care Dollar: Provider Cost Drivers and Administrative Expenses Martin Mitchell Regional Director America’s Health Insurance Plans [email protected] 202-861-1476 April 21, 2006 Admin Costs, Taxes and Profits: All Private Health Insurance 20% Percent of Total Premiums Average 12.4% 15% 10% 5% 0% 1965 1970 1975 1980 1985 1990 Source: CMS Office of the Actuary, January 2005 1995 2000 Growth in Premiums by Components, 2004-2005 Component Share of Premium Dollar Growth Rate Physician 24% 7.8% CPI 2.4% Price in Excess of Inflation 2.3% Utilization 3.1% Source: The Factors Fueling Healthcare Costs 2006 Growth in Premiums by Components, 2004-2005 Component Share of Premium Dollar Growth Rate Outpatient 22% 13.6% CPI 2.4% Price in Excess of Inflation 4.0% Utilization 7.2% Source: The Factors Fueling Healthcare Costs 2006 Growth in Premiums by Components, 2004-2005 Component Share of Premium Dollar Growth Rate Hospital Inpatient 18% 7.5% CPI 2.4% Price in Excess of Inflation 4.0% Utilization 1.1% Source: The Factors Fueling Healthcare Costs 2006 Growth in Premiums by Components, 2004-2005 Component Share of Premium Dollar Growth Rate Prescription Drugs 16% 8.6% CPI 2.4% Price in Excess of Inflation 1.1% Utilization 5.1% Source: The Factors Fueling Healthcare Costs 2006 Growth in Premiums by Components, 2004-2005 Component Share of Premium Dollar Growth Rate Other Med Services 6% 7.3% CPI 2.3% Price in Excess of Inflation 2.6% Utilization 2.4% Source: The Factors Fueling Healthcare Costs 2006 2006 Report Conclusions Since 2002 Report: Rate of Growth In Premiums Has Slowed • Fewer New State Mandates; More Mandate Review Commissions • Increases in Prescription Drug Prices Has Eased Healthcare Spending Remains Unmet Challenge • Prices Growing in Excess of General Inflation • Negative Effects Provider Consolidation • Negative Effects from Variation from Evidence-based Med. Practices Increased Attention to Issue of Poor Quality