Health care costs are biting Alaskans, businesses harder

The estimates were developed for the Alaska Health Care Commission by the University of Alaska’s Institute of Social and Economic Research.

Businesses and families are getting hit: At $11,926 per employee, Alaska has the highest average annual cost for employee health benefits in the nation, twice what employers in some other states pay. Between 2003 and 2010 the share of health benefits paid by employees increased from 17 percent to 22 percent for family coverage.

Dr. Ward Hurlburt, the state’s chief medical officer, briefed state legislators in Juneau on the commission’s 2011 findings. The health care commission is a state advisory panel that includes health care providers and insurance companies as well as state officials.

There are effects on Alaska businesses and employees: Higher health costs mean fewer employers can offer health benefits. The percentage of Alaska employers offering benefits dropped from 35 percent to 30 percent between 2003 and 2010, and during the same period, health insurance premiums climbed 35 percent for families over the same period, to an average premium cost of $14,230 in 2010.

Insurance premiums are, on average, 30 percent above the comparison states. Annual health insurance costs for a family in 2010 was $1,817 compared to $1,413 in Washington state.

On a national level, the rising cost of health insurance, driven mainly by rising medical costs, have far outpaced general inflation and growth of workers’ earnings. From 1999 to 2011, insurance premium costs increased 160 percent  and workers’ contribution to premiums by 168 percent while workers’ earnings increased 50 percent and overall inflation was 38 percent.

Here’s more: Since 1982 the Consumer Price Index for Anchorage has increased 95 percent while costs for medical care over that same period rose 320 percent. Just in the last decade, medical costs in Anchorage have increased 46 percent compared to 27 percent nationwide, according to the commission’s report.

“This is unsustainable,” both on the state and national levels, Hurlburt said.

Rep. Wes Keller, R-Wasilla, chairman of the House Health and Social Services Committee, one of the legislative committees Hurlburt briefed, was shocked at the $7.5 billion annual spending number.

“That’s half of overall wages paid in Alaska. It’s spooky,” Keller said.

Rep. Paul Seaton, R-Homer, said the $7.5 billion may be conservative because it probably does not include spending by Alaskans on out-of-state medical services.

The real rub is that, for all this money, Alaskans aren’t getting healthier. The state is second highest in the nation in per-capital health care spending but the quality of health care is ranked 38th in the nation and Alaska ranked 35 in overall health, according to the report.

“Our kids will be the first generation that will not live as long as their parents,” Hurlburt told the House Health and Social Services Committee in the Juneau briefing.

It’s not just an Alaska problem, of course, but the trends here seem worse. The state’s small, dispersed population and the long distances between populated areas make efficient delivery of medical services difficult.

The cost problem is huge for state government. Of the $7.5 billion paid annually in Alaska for medical services $2 billion is paid by the state. Much of this is in the state’s roughly 50 percent share of Medicaid, the health program for lower-income Alaskans, but also medical benefits for public employees and retirees. Medicaid, at about $800 million a year, is the largest state budget item aside from state funding for school districts.

If the state’s share of overall medical spending stays constant and doubles to $4 billion a year by 2020 it could seriously crowd other state programs at a time when declining oil production will bring less revenue to the state.

In the briefing, Hurlburt laid out a number of findings from the report but also highlight areas where the increases could be slowed while overall health care would be improved.

• Almost 60 percent of Alaska health care spending goes to hospitals and physicians. Hospital costs were about 37 percent above the average of hospital costs in a group of five comparison states, and physicians’ compensation is 60 percent to 69 percent, according to a report to the health care commission by a consultant, Milliman Inc.

• There are a wide range in price differentials among the medical practice specialties. Pediatricians, for example, charged rates 43 percent higher on average, while cardiologists charged an average of 83 percent higher than the comparison states.

• Differences were dramatic for certain procedures. A diagnostic colonoscopy cost, on average, $1,199 in Alaska in 2010. In Washington state a colonoscopy cost $488.

• A physician’s office visit cost $194.83 on average in Alaska compared with $140 in Washington.

• A hip arthroplsty (replacement) cost $10,557 in Alaska compared with $2,263 in Washington.

The Milliman study for the commission found that the major reason why physician’s prices were much higher in Alaska was lack of competition.

Hurlburt and others on the health care commission have some ideas of what can be done to slow the medical cost growth.

“Generally, we find that 5 percent of our population, those with health problems, consume 50 percent of medical services paid for; 1 percent of those, in fact, consume 30 percent. In contrast, 50 percent of our population, being healthy, consume only 3 percent,” Hurlburt told the House committee.

The best approach is to keep the 50 percent healthy and even improve their health, but investments should really be made in ensuring that the 5 percent get the most effective care and at the right time.

Hurlburt told the committee about an experience he had as chief medical officer for an Outside health provider group. A decision was made to invest in coordinated care for patients with health problems where registered nurses managed groups of 50 to 60 individuals.

“We had a return on investment of 15 to 1,” just in monetary savings through more effective care, not even considering the improvements in health.

In Alaska, an opportunity could be strategic intervention with children with asthma, to reduce the number of hospital emergency room visits, Hurlburt said.

“Put money into case management,” because there’s a big payback, he urged the legislators.

Along this line the commission also has considered the experience of other states with “medical home” concepts, where patient care would be coordinated by a team, Deb Erickson, executive director of the commission, told the House committee. Pilot programs being done in North Carolina and Michigan were investigated, she said.

Alaska’s Department of Health and Social Services will experiment with this concept this year, according to Bill Streur, the commissioner. Contracts will be let later this spring for pilot programs in Alaska, one managed by a for-profit provider, one by a nonprofit and one by a tribal health provider.

02/16/2012 - 7:38am