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Thursday, March 10, 2016

Minnesota’s health care spending growth rate remains at near-historic low

Minnesota's growth in health care spending during 2013 remained at historically low levels, according to a new report from the Minnesota Department of Health (MDH). Spending increased just 3.1 percent in 2013, reaching $40.9 billion. That growth rate is the fourth-lowest recorded in Minnesota (2011 and 2010 both had growth rates of just 1.7 percent).

Actual health care spending was 5.9 percent lower than projected before the recession, a reduction of $2.4 billion that was largely due to economic factors. State-administered programs accounted for $200 million of this reduction. The MDH report is available online on the Health Economics Program website.

Overall growth in Minnesota health costs remained below the national average in 2013, the most recent year for which data are available. Key findings of the report include:

  • Minnesota's per capita spending on health care in 2013 was $7,552 – more than $1,000 below the national average of $8,713 per capita.
  • Minnesota's health care spending increased at a rate of 3.1 percent in 2013 (reaching $40.9 billion), more slowly than the national growth rate of 3.8 percent.
  • Health care spending accounted for 13.3 percent of the Minnesota economy in 2013, compared to 16.5 percent of the total U.S. economy.

The latest data continue to show a trend in health care spending of modest growth over the past six years even as the economy has improved.  However, the report finds challenges ahead – future state health care spending is still expected to double by 2023.

"It is good news that Minnesota's health care spending grew more slowly than that of the nation as a whole in 2013," said Minnesota Commissioner of Health Dr. Ed Ehlinger. "However, we cannot afford to treat our way to full health. We will face significant challenges related to health care costs unless we sharpen our focus on preventing costly chronic diseases."

For the first time, a separate analysis identified drivers of private market spending on a more granular level. This analysis found that between 2011 and 2013, increases in prices were the primary driver of private insurance spending growth, while changes in service mix and volume of health care services played a smaller role.

"Growth in medical services' prices has been the main culprit in both Minnesota and national spending trends as well," said Stefan Gildemeister, MDH's state health economist. "We expect the introduction of new pharmaceutical therapies with high treatment costs, layered on top of medical inflation in other sectors, to further fuel spending growth in the upcoming years."

Future spending projections

Recent projections estimate that state health care spending will grow 7.8 percent per year and will double by 2023, reaching $85 billion. This is lower than the growth experienced for the 10-year period prior to the recession when health care spending grew at 8.5 percent per year. However, by 2023, MDH estimates that nearly 20 percent of the economy will be attributable to health care spending, compared to 13.3 percent in 2013.

Some of the main drivers of future spending growth include price pressure from pharmaceuticals, as well as demographic shifts that result in growing numbers of older Minnesotans living with complex chronic diseases. The Dayton administration will continue to pursue innovative policy efforts to reduce the growth of health care costs. Initiatives such as the Integrated Health Partnerships (IHPs), where providers assume responsibility for complex patients' total cost of care, and the Health Care Homes program, which enhances primary care for patients with chronic conditions and disabilities, have shown some success.

"Some recent findings related to these initiatives, such as IHPs and health care homes, have shown some early successes related to cost containment," Gildemeister said.

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