Private insurance is health care's pot of gold
Private health insurance is a conduit for exploding health care spending, and there's no end in sight.
The big picture: Most politicians defend this status quo, even though prices are soaring. And as the industry's top executives and lobbyists gathered this week in San Francisco, some nodded to concerns over affordability — but then went on to tell investors how they plan to keep the money flowing.
Where it stands: More than 160 million Americans get private insurance through an employer or on their own, and per-person spending in that market rose by almost 7% in 2018, the highest annual growth rate in 14 years.
- "Prices are definitely going up," Owen Tripp, CEO of health tech startup Grand Rounds, told me this week during the annual J.P. Morgan Healthcare Conference.
- His company's vast amount of commercial health data shows big increases in what companies are spending on hospitals, doctors, specialty drugs, devices and out-of-network services.
What they're saying: Many in the industry admit price inflation has been hammering the commercial markets for years.
- "Cost per unit is the primary driver," Cigna CEO David Cordani said. He did not mention the exploding costs of administering health insurance.
- One hospital system at the conference acknowledged that "the number one cause of personal bankruptcy is our industry" — before going on to tell investors about the hospital's strong margins.
Multiple hospital executives claimed they charge commercial plans higher prices to make up for the lower rates they get from Medicare and Medicaid.
- "Every health system I know of loses money on every Medicaid and every Medicare patient," Amy Compton-Phillips, a top clinical executive at Providence St. Joseph Health, told me.
- But the evidence overwhelmingly shows that hospitals' explanation doesn't hold water.
Drug spending has risen at a slower rate than hospital and physician spending.
- But in the commercial market, drug companies also have tripled their spending on programs that cover all or part of patients' out-of-pocket costs, then bill insurers for the full freight.
- "It's an intriguing theory," said Stephen Ubl, CEO of PhRMA, the pharmaceutical industry's main lobbying group. "But I would be shocked if we were a significant contributor" to the increased private spending.
The bottom line: The private market is the main pot of money that everyone is chasing at the J.P. Morgan conference, and most in the industry don't see the ballooning spending within that market as a problem.