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PAGE 2 STATE HEALTH CARE EXPENDITURES 2003 Maryland Health Care Commission STATE HEALTH CARE EXPENDITURES 2003 Maryland Health Care Commission PAGE 3 TABLE OF CONTENTS 6 ACKNOWLEDGEMENTS 8 SUMMARY 12 STATE HEALTH CARE EXPENDITURES 13 How Much Did Maryland Spend for Health Care? 14 How Were Maryland’s Health Care Dollars Spent? 14 How Was Maryland’s Health Care Paid For? 18 How Much Did Health Care Expenditures Grow in Maryland? 19 What Types of Services Accounted for the Growth in Expenditures? 19 What Payers Accounted for Most of the Growth in Expenditures? 22 Did HMOs Have a Different Cost Experience? 23 How Did Maryland Compare to the Nation? 26 What Proportion of the Population Has High Health Care Expenditures? 31 SUPPORTING TABLES 32 Health Care Expenditures by Type of Service 33 Health Care Expenditures by Source of Payment 36 HMO Enrollment 37 United States Health Expenditure Estimates and Projections PAGE 4 STATE HEALTH CARE EXPENDITURES 2003 Maryland Health Care Commission 10 Figure ES- 1: Changes in Health Care Expenditures, 2002– 2003 13 Figure 1: Total Health Care Expenditures in Maryland, 2002 and 2003 13 Figure 2: Per Capita Health Care Expenditures in Maryland and the U. S., 2002 and 2003 14 Figure 3: Percent of Total Health Care Expenditures in Maryland by Type of Service, 2003 15 Figure 4: Percent of Total Health Care Expenditures in Maryland by Source of Payment, 2003 16 Figure 5A: Percent of Expenditures by Type of Service and Source of Payment, 2003 17 Figure 5B: Percent of Expenditures for Administrative Cost and Net Cost of Insurance by Source of Payment, 2003 17 Figure 6: Out- of- Pocket Spending by Type of Service, 2003 18 Figure 7: Percent Change in Total Expenditures by Type of Service, 2002– 2003 19 Figure 8: Change in Expenditures by Type of Service as a Percent of Total Change, 2002– 2003 20 Figure 9: Percent Change in Total Expenditures by Source of Payment, 2002– 2003 20 Figure 10: Growth in Expenditures by Selected Source of Payment as a Percent of Total Expenditure Growth, 2002– 2003 21 Figure 11: Change in Expenditures by Type of Service as a Percent of Total Change for Source of Payment, 2002– 2003 21 Figure 12: Change in Expenditures for Administration and the Net Cost of Insurance as a Percent of Total Change for Source of Payment, 2002– 2003 22 Figure 13: HMO Enrollment as a Percent of Total Enrollment by Major Third- Party Payer, 2002 and 2003 23 Figure 14: HMO Expenditures as a Percent of Total Expenditures by Major Third- Party Payer, 2002 and 2003 23 Figure 15: Per Capita Expenditures in Maryland and the U. S. by Type of Service, 2003 LIST OF FIGURES AND TABLES STATE HEALTH CARE EXPENDITURES 2003 Maryland Health Care Commission PAGE 5 24 Figure 16: Percent Growth in Per Capita Expenditures in Maryland and the U. S. by Type of Service, 2002– 2003 25 Figure 17: Per Capita Expenditures in Maryland and the U. S. by Source of Payment, 2003 25 Figure 18: Percent Change in Per Capita Expenditures in Maryland and the U. S. by Source of Payment, 2002– 2003 26 Figure 19: Distribution of Per Capita Health Expenditures: U. S. Population Over and Under Age 65, 2001 27 Figure 20: Distribution of U. S. Health Care Expenditures and Population, Ages 0– 64, 2001 28 Figure 21: Percent of the U. S. Population Hospitalized Once or More by Relative Total Per Capita Expenditure and Age Cohort, 2001 28 Figure 22: Expenditure by Type of Service as a Percent of Total Expenditure for the Nonelderly Population by Relative Total Per Capita Expenditure and Whether Hospitalized, 2001 32 Table 1A: Total Maryland Health Care Expenditures, 2003 32 Table 1B: Total Maryland Health Care Expenditures, 2002 33 Table 1C: Rate of Growth in Expenditures by Type of Service and Source of Payment, 2002– 2003 33 Table 2: Expenditures by Source of Payment as a Percent of Total Expenditures, 2003 34 Table 3: Per Capita Expenditures by Source of Payment and Type of Service, 2002 and 2003 34 Table 4: Rate of Growth in Per Capita Expenditures by Source of Payment and Type of Service, 2002– 2003 35 Table 5: Expenditures by Type of Service as a Percent of Total Expenditures by Source of Payment, 2003 35 Table 6: Percent of the Growth in Expenditures for Sources of Payment Associated with Different Types of Service, 2002– 2003 36 Table 7: Percent of the Growth in Expenditures for Types of Service Associated with Different Sources of Payment, 2002– 2003 36 Table 8: Number and Percent of Total Enrollment in HMOs by Major Insurer, 2002 and 2003 37 Table 9: Rate of Growth in HMO Enrollment by Major Insurer, 1995– 2003 37 Table 10: Total Expenditures and Rate of Growth, United States, 2002– 2003 38 Table 11: Per Capita Expenditures and Rate of Growth, United States, 2002– 2003 38 Table 12: Percent of Total Expenditures by Type of Service, United States, 2002– 2003 39 Table 13: Total Expenditures and Percent of Total Expenditures by Source of Payment, United States, 2003 PAGE 6 STATE HEALTH CARE EXPENDITURES 2003 Maryland Health Care Commission T his report required the assistance of many individuals and offices in state government, private industry, and federal government. In particular, the Commission wishes to note special contributions from the following individuals and organizations: Patricia Holcomb, Office of Planning, Development and Finance, Maryland Department of Health and Mental Hygiene ( DHMH), and Babi Lamba, Center for Health Program Development and Management, University of Maryland- Baltimore County, provided Medicaid expenditure and enrollment information. Jim Johnson and Hank Fitzer, Budget Management Office, DHMH, and Dr. Anthony Swetz, Maryland Department of Corrections, supplied information on government spending, while Estelle Apelberg, Vital Statistics, DHMH, provided population statistics. In constructing spending accounts of this complexity, the MHCC relied on estimates of private insurance expenditures supplied by Calvert Gorman of the Maryland Insurance Administration. Jake Pyzik, Maryland Department of Budget Management, provided information on health insurance expenditure patterns for state employees. As in previous years, Maribel Franey and Cheryl Sample at the Centers for Medicare & Medicaid Services ( CMS) assisted MHCC with the data use agreements that are necessary before Medicare information can be released. Dinah Horton prepared the extracts of CMS claims data needed to conduct the analysis. Leroy McKnight in the federal government’s Office of Personnel Management supplied information on federal employees’ insurance coverage. Richard D. Barnett ( TRICARE Management Activity) provided spending information on CHAMPUS/ TRICARE programs, and Pat Kane at the Department of Veterans Affairs provided similar spending data on VA programs. Anne Martin of the Office of the Actuary at CMS provided estimates of expenditures for nontraditional Medicare programs. Dr. Patrick Redmon of the Health Services Cost Review Commission ( HSCRC) provided estimates of hospital spending. This year the MHCC further refined the methodology for allocating private sector spending across services categories. Information from the Agency for Healthcare ACKNOWLEDGEMENTS STATE HEALTH CARE EXPENDITURES 2003 Maryland Health Care Commission PAGE 7 Research and Quality’s ( AHRQ) Medical Expenditure Panel Survey ( MEPS) was used extensively in this effort. William Carroll, Karen Beauregard, and Ray Kuntz at AHRQ provided advice on the use of the MEPS data files. We look forward to even greater collaboration in the future. The development of the state health care expenditure analysis would not have been possible without the significant contributions of our consultants. This project was under the direction of Dr. Deborah Chollet, Mathematica Policy Research ( MPR), Thomas Bell of Social & Scientific Systems ( SSS), Dr. Dean Farley of Healthcare Software Synergies, Inc. ( HSS), and Sophie Nemirovsky ( SSS). Dr. Eric Schone of MPR developed the estimation algorithms for private sector spending using the MEPS data. Thomas Bell was assisted by Laurie Hamilton, Adrian Ndikumwami, Cynthia Saiontz- Martinez, John May, and Po- Lun Chou at SSS. Priscilla Thompson and her staff of Solutions Technology, Incorporated, provided data collection and processing support. Beverly Valdez of SSS with the assistance of Laura Spofford and Michael Antonio provided the graphic design services for the report. PAGE 8 STATE HEALTH CARE EXPENDITURES 2003 Maryland Health Care Commission T his report, State Health Care Expenditures: Experience from 2003, contains information on total expenditures for or by Maryland residents, by public and private sources. It includes expenditures for most types of personal health care services, as well as administrative expenses and the net cost of private health insurance. In releasing this report, the Commission meets its mandate to report annually on the state’s total expenditures for health care services in accordance with Maryland law. Total health care spending among Maryland residents totaled $ 26.5 billion, up from $ 24.5 billion in 2002. The 8- percent rate of growth in 2003 is 3 percentage points lower than the growth rate MHCC reported for 2002 and reflects the recent national estimate. 1 The smaller growth rate in health care spending in 2003, when viewed in conjunction with the changes the Maryland Health Care Commission ( MHCC) reported in the previous expenditure reports, suggests that the rapid escalation in spending, which began in 1999 and peaked in 2001, trended modestly lower in 2001- 2003. Nevertheless, growth in health care spending remains high when measured against overall growth in personal income, which increased by 4 percent in 2003.2 Per capita spending, which measures spending change after absolute population increases have been removed, grew at a rate of 7 percent, which was equal to the national increase of about 7 percent. Per capita spending for all Maryland residents stood at $ 4,811, compared to $ 4,826 for the United States. Hospital and professional services each account for about one- third of total health care spending. Expenditures on hospital services totaled $ 8.6 billion in 2003; spending on inpatient services accounted for 24 percent of total health care expenditures and about three- quarters of all hospital spending. Spending on all professional health care services totaled $ 8.5 billion, of which $ 4.9 billion was spent for physician care and $ 3.6 billion for other professional services. Other professional services ( including care provided by nonphysician professionals, clinics, ambulatory surgery centers, and imaging centers) accounted for 14 percent of total health care spending, compared to 19 percent for physician services. Prescription drug spending was $ 3.5 billion, or about 13 percent of SUMMARY 1 National health expenditure ( NHE) estimates and projections are developed by the Centers for Medicare & Medicaid Services, Office of the Actuary. For the purpose of comparison, the NHE estimates are adjusted to parallel Maryland State Health Expenditure Account ( SHEA) sources of payment and service types. 2 Maryland personal income increased from $ 198.5 billion to $ 206.1 billion in 2002– 2003. STATE HEALTH CARE EXPENDITURES 2003 Maryland Health Care Commission PAGE 9 total spending in 2003. Nursing home care and home health care totaled $ 1.9 billion and nearly $ 1.0 billion, respectively, in 2003— together accounting for 11 percent of health care spending in the state. Public and private payers’ expenses associated with plan administration and the net cost of private health insurance accounted for about $ 2.1 billion in health care spending, or about 8 percent of all health care spending. 3 Specific health service sectors showed wide variation in rates of growth during 2002- 2003 ( Figure ES- 1). Growth in both hospital outpatient services and physician care was within 1 percentage point of the overall rate. 4 As the major public and private payers reported fee inflation well under the 3- percent increase in the Medicare Economic Index ( MEI), the faster growth of total expenditures suggests significant growth in the use of physician services in 2003. Growth of expenditures for prescription drugs slowed in 2003. After 2 years of double- digit growth, the 9- percent jump of 2003, while still high, will be seen by some as good progress. Slower growth may reflect increased use of generic drugs ( which are priced lower than brand-name equivalents) and also more intense competition among generic drug manufacturers. Recent purchaser- driven initiatives such as multitiered formularies and increased use of consumer cost- sharing may also have dampened consumer demand. Nationally, inflation in prescription drugs prices ( as reported in the Producer Price Index) was relatively modest in 2002- 2003, with prices growing at just 3 percent. Expenditures for several major service types grew more slowly than total expenditures for all services. Especially noteworthy was the slower spending ( 6 percent) for hospital inpatient services, the largest category of state health expenditures. The hospital spending increases reflect increased utilization and rate increases approved by the Health Services Cost Review Commission ( HSCRC) that averaged about 4 percent for fiscal years 2003- 2004. However, expenditures for other service types grew more quickly. The rapid growth in home health spending ( 20 percent) is in part the result of higher public sector reimbursements and new initiatives to substitute community- based services for nursing home care when available and medically appropriate. Administrative expenses and the net cost of insurance grew more rapidly than any sector in 2003, except for home health care. The growth reflects expanding surpluses that have accumulated as the gap between premiums, medical, and administrative expenses widened. Recent premium increases may have been based on some payers’ decisions to build surplus or by actuaries’ pessimistic forecasts that assumed continued double- digit growth in medical expenses. 5 3 In earlier reports, the State Health Expenditure Accounts ( SHEA) omitted insurer surplus and, therefore, produced a lower estimate of group and individual spending for private insurance in Maryland. 4 An annual MHCC report later in the spring will examine factors driving increases in spending for physician services. 5 Insurers are required to hold reserves under Maryland law. Surpluses include reserves against anticipated claims, as well as funds set aside to account for unexpected changes in health care costs or returns on assets, and funds to finance expenditures on capital assets ( such as information technology), or strategic initiatives. The growth of insurer surpluses is the subject of a Spotlight article that accompanies the release of this report. PAGE 10 STATE HEALTH CARE EXPENDITURES 2003 Maryland Health Care Commission As the sizes of the service sectors vary greatly, the growth rates within sectors contributed differently to the overall spending increase in 2003 ( Figure 1). Physician services and hospital inpatient care, which increased at rates of 9 percent and 6 percent, respectively, accounted for 38 percent of added health care spending in 2003. Conversely, home health services, which increased by 20 percent, accounted for just 8 percent of the total spending increase with most of that increase paid by government payers. The health care spending in the public sector, including Medicare, Medicaid, and other government programs such as veterans’ benefits, funded 41 percent of total health care spending ($ 10.8 billion). Medicare, the largest payer in the state, funded 20 percent of total spending, but funded almost 40 percent of inpatient hospital care. Medicare spending grew about 8 percent, approximately in line with the growth in total spending. Increased Medicare spending for inpatient hospital services accounted for 43 percent of total Medicare spending growth. Medicaid spending accounted for 17 percent of total spending. The program funds 49 percent of nursing home care and two- thirds of home health services. Medicaid spending increased faster than other third- party payers, as the program’s expenditures jumped by 15 percent to $ 4.5 billion in calendar year 2003. Medicaid accounted for 28 percent of the $ 2.1 billion total increase in health care expenditures in 2003. Per capita spending by Medicare grew 6 percent; per capita spending by Medicaid grew 4 percent. Both growth rates exceeded average national rates. All private third- party coverage, including commercial and nonprofit insurers, health maintenance organizations ( HMOs), and self- insured employer plans, accounted for 39 percent of total health care spending ($ 10.4 billion). Private insurers financed 52 percent of physician care services, 46 percent of hospital outpatient care, and 37 percent of hospital inpatient care in 2003. Spending for private coverage grew at 8 percent in FIGURE ES- 1 Changes in Health Care Expenditures, 2002– 2003 PERCENT CHANGE FROM 2002 CONTRIBUTION TO TOTAL SPENDING GROWTH STATE HEALTH CARE EXPENDITURES 2003 Maryland Health Care Commission PAGE 11 2003, an increase of $ 773 million from 2002. Physician services accounted for about 28 percent of the overall growth in private third- party spending. Private insurance spending per insured resident in Maryland ( including Medigap coverage) was less than the national average— approximately $ 2,645 compared to $ 3,149 nationally— and the rate of growth in private insurance expenditures in 2003 was slightly lower, 10 percent versus 11 percent nationally. Out- of- pocket spending ( including coinsurance, copayments, deductibles, and full direct payments) grew at 8 percent in 2003, the same rate of growth as in private insurance spending. These results are consistent with recent MHCC insurance coverage reports that found Maryland’s uninsured rate was statistically unchanged from 2001- 2002 to 2002- 2003, although the rate nominally trended upwards. Greater spending for physician services, other professional services, and prescription drugs accounted for 70 percent of the growth in out- of- pocket spending. Prescription drug spending alone accounted for 34 percent of the growth in out- of- pocket spending. These shares comport with usual patterns of out- of- pocket spending and with recent insurer cost containment strategies. Out- of- pocket spending per capita was greater in Maryland than the national average ($ 944 versus $ 671), and it grew slightly faster in 2003 ( 7 percent versus 6 percent). Enrollment in HMOs grew 5 percent in 2003, with virtually all of the increase occurring among privately insured Marylanders. This increase reverses a 25- percent decline in HMO enrollment over the past 5 years. Recent premium increases, the roll- back of some HMO management practices limiting access, and perhaps better consumer understanding of how to access care may have combined to create the surge in private enrollment. While HMO enrollment under Medicare and Medicaid was essentially flat, the Medicare Modernization Act, which gives seniors strong incentives to participate in private plans, may lead to a surge in enrollment after 2005.6 Spurred by recent federal legislation and supported by state regulatory changes, new consumer- directed products also began to take root in Maryland in 2003. Whether the new consumer- directed options will attract segments of the nonelderly population with differing levels of illness is unknown. Most of the population of the United States, and also in Maryland, has low expenditures for health care services. Health care spending is highly skewed: among the nonelderly population, half of the population accounts for less than 4 percent of all health care spending, while 20 percent generates the vast majority— 80 percent— of all health expenditures for the nonelderly population. The fact that a relatively small segment of the nonelderly population accounts for nearly all its health care spending means that initiatives aimed at curbing the growth of overall health care spending must attract a significant portion of the higher cost users that account for the bulk of expense. 6 The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 ( PL 108- 173) was enacted on December 8, 2003. The act added a prescription drug benefit to Medicare and provides significant incentives for seniors to join private health plans. PAGE 12 STATE HEALTH CARE EXPENDITURES 2003 Maryland Health Care Commission A basic mission of the Maryland Health Care Commission ( MHCC) is the dissemination of information to monitor the health care market in Maryland. Such information prominently includes the level and growth of health care spending. This report provides information about health care expenditures by Maryland residents in 2003, and how they differ from expenditures in 2002. It was developed to meet the requirement under Health- General Article, § 19- 134( g), which directs the MHCC to report annually on total payments in the State for health care services. The estimates provided in this report will help users to understand how aggregate health care spending changed from 2002 to 2003, and how spending levels and growth differed among service categories and the major payer groups in Maryland’s health care system. This year’s report incorporates refinements to a number of methodological changes introduced last year to improve estimates of private insurance spending and out-of- pocket spending. These improvements are intended to support presentation of a more consistent time series of information about nongovernmental health care spending in Maryland in future reports. They are documented in the technical notes that are available separately at www. mhcc. state. md. us. This year’s report includes two additional changes that also affect estimates of private health expenditures in Maryland. First, in previous years, MHCC reported medical expenses and administrative costs associated with those expenses; this method omitted expenses associated with additions to insurer surplus ( or unobligated funds). This year, the SHEA reconciles total spending starting with premiums earned, accounting for medical expense, administrative costs, and additions to insurer surplus. Second, the 2002 data have been revised to correct for an error in the calculation of out- of- pocket spending in last year’s report. This correction has the most impact on those services with large out- of- pocket expenditures, such as prescription drugs. STATE HEALTH CARE EXPENDITURES STATE HEALTH CARE EXPENDITURES 2003 Maryland Health Care Commission PAGE 13 FIGURE 2 Per Capita Health Care Expenditures in Maryland and the U. S., 2002 and 2003 United States 2002 Maryland $ 4,486 $ 4,811 $ 4,504 $ 4,826 2003 Finally, this year’s report introduces more extensive comparisons of health care spending in Maryland to national averages. With these improvements, MHCC hopes to address the information needs of the various stakeholders in Maryland’s health care system more effectively. How Much Did Maryland Spend for Health Care? In 2003, Maryland residents spent $ 26.5 billion for health care services, averaging $ 4,811 per person. Total health care spending increased 8.4 percent from 2002– 2003, but health care spending per capita increased more slowly— by 7.2 percent— as the State population increased. Per capita spending growth in Maryland approximately equaled the national average in 2003, and the level of per capita spending in Maryland also very nearly equaled the projected U. S. average ($ 4,826). 7 FIGURE 1 Total Health Care Expenditures in Maryland, 2002 and 2003 ($ billions) 2002 2003 $ 24.5 8.4% growth $ 26.5 7.2% growth 7.2% growth 7 Developed from national health expenditure estimates produced by the Centers for Medicare & Medicaid Services. For details see http: www. mhcc. state. md. us/ health_ care_ expenditures/ shea03/ technicalnotes. pdf. PAGE 14 STATE HEALTH CARE EXPENDITURES 2003 Maryland Health Care Commission How Were Maryland’s Health Care Dollars Spent? Nearly one- third of Maryland’s health care dollars were spent on hospital care— approximately $ 8.6 billion in 2003. ( Numbers in the figures and tables may not add to totals due to rounding.) Inpatient hospital care accounted for 24 percent ($ 6.4 billion) of total health care spending; outpatient hospital care accounted for 8 percent ($ 2.2 billion). Physician and other professional services together accounted for another one- third of health care spending by Maryland residents in 2003. Approximately 19 percent of health care spending— just over $ 4.9 billion— was for physician services. Spending for other professional services accounted for 14 percent, or $ 3.6 billion. Spending for outpatient prescription drugs in Maryland was 13 percent of total health care spending, totaling $ 3.5 billion in 2003. Administrative costs and the net cost of health insurance ( called “ addition to surplus”) together accounted for 8 percent of total health care spending. How Was Maryland’s Health Care Paid For? Many more Maryland residents have some form of private health insurance as their primary source of coverage than have public coverage. However, in Maryland as in other states, public insurance programs cover many of those who have the greatest health care needs— such as elderly and disabled residents. As a result, expenditures covered by insurance in Maryland are almost evenly divided between the private and public sectors. Medicare, the federal program that finances care for the elderly and disabled, is the largest government source of payment for health care in Maryland. In 2003, Medicare accounted for 20 percent of total health care spending in the State. FIGURE 3 Percent of Total Health Care Expenditures in Maryland by Type of Service, 2003 8% Administration and Net Cost of Insurance 24% Hospital Inpatient 8% Hospital Outpatient 19% Physician Services Other Professional Services 14% Prescription Drugs 13% Nursing Home Care 7% Home Health Care 4% Other Services 4% STATE HEALTH CARE EXPENDITURES 2003 Maryland Health Care Commission PAGE 15 Medicaid is the state program that finances care for low- income Marylanders in certain eligibility categories— including low- income mothers and children, as well as costs for low- income elderly or disabled residents that Medicare does not pay. In 2003, Medicaid accounted for 17 percent of total expenditures for health care in Maryland. Together, both programs accounted for 37 percent of health care expenditures in 2003, compared to 39 percent paid by private insurance arrangements— including commercial insurance, health maintenance organizations ( HMOs), and self- insured employer health plans. Various other small government programs— including the military and veterans programs and various targeted government assistance programs— accounted for 4 percent of the total. Marylanders paid 20 percent of the cost of their health care—$ 5.2 billion in 2003— out- of- pocket. Because Maryland’s various payers serve different populations and provide different coverage for some health care services, their importance in financing health care varies by type of service. Public programs are the largest source of payment for inpatient hospital care and nursing home care. In 2003, they financed 61 percent of inpatient hospital care and 67 percent of nursing home care. Medicare is the largest single insurer for inpatient hospital care. Accounting for 38 percent of all expenditures for inpatient hospital care in 2003, Medicare financed a slightly larger proportion of inpatient care than all private insurance combined ( 37 percent). Medicaid and other government programs paid for nearly 23 percent of inpatient care in 2003. Private insurance is the largest payer for both outpatient hospital care and physician services in Maryland, financing nearly 46 percent of all outpatient hospital care and 52 percent of expenditures for physician services in 2003. Nevertheless, Medicare is still a major source of payment for both types of expenditures, accounting for 30 percent of expenditures for outpatient hospital care and 23 percent of expenditures for physician services. FIGURE 4 Percent of Total Health Care Expenditures in Maryland by Source of Payment, 2003 Other Government 4% Medicaid 17% Medicare 20% 20% Out- of- Pocket 39% Private Coverage PAGE 16 STATE HEALTH CARE EXPENDITURES 2003 Maryland Health Care Commission As in other states, Medicaid is the largest source of financing for nursing home care and home health care. In part, this is because conventional insurance provides little coverage for these services. In 2003, Medicaid paid for 49 percent of all expenditures for nursing home care in Maryland, and nearly 66 percent of expenditures for home health care. In contrast, private insurance and Medicare combined accounted for 23 percent of expenditures for nursing home care, and 24 percent of expenditures for home health care. While Marylanders paid a relatively low proportion of the cost of hospital care— and inpatient hospital care in particular— out- of- pocket, they paid 26 percent of the cost of nursing home care out- of- pocket in 2003. In addition, nearly 16 percent of expenditures for physician care and 42 percent of other professional services were paid out- of- pocket. Eighty- one percent of expenditures for prescription drugs were financed by private insurance plans and consumer out- of- pocket spending. Maryland residents paid as much out- of- pocket for prescription drugs ( 40 percent) as private insurers paid. The Medicaid program accounted for 18 percent of spending for prescription drugs, a disproportionate amount given the size of the Medicaid population. In 2003, Medicare covered outpatient prescription drugs only for beneficiaries enrolled in managed care; as a result, Medicare accounted for a negligible share of total expenditure for prescription drugs. Medicare prescription drug spending will climb rapidly after January 2006, when Part D benefits enacted under the Medicare Modernization Act of 2003 begin. FIGURE 5A Percent of Expenditures by Type of Service and Source of Payment, 2003 Medicare Medicaid Other Government Private Coverage Out- of- Pocket Hospital Inpatient Hospital Outpatient Physician Services Other Professional Services Prescription Drugs Nursing Home Care Home Health Care Other Services 38% 18% 4% 37% 2% 30% 13% 3% 46% 8% 23% 7% 3% 52% 16% 6% 6% 14% 32% 42% 18% 2% 40% 40% 16% 49% 2% 7% 26% 14% 66% 1% 10% 10% 14% 4% 2% 9% 71% Note: Prescription drug expenditures for Medicare were less than 0.5% STATE HEALTH CARE EXPENDITURES 2003 Maryland Health Care Commission PAGE 17 The administrative cost associated with public insurance programs accounted for just 3 percent of Medicare expenditures and 6 percent of Medicaid expenditures in Maryland. Higher expenditures for the administration of Medicaid are largely related to the greater complexity of determining eligibility for the program. However, the administrative expense and net cost of private insurance accounted for 15 percent of total private insurance expenditures in 2003. While Marylanders paid 20 percent of all health care expenditures out- of- pocket in 2003, these expenditures included a much larger share of total spending for some services and a smaller share for others. Differences in out- of- pocket spending for specific service categories reflect both private insurance and Medicare benefit designs that cover hospital and physician care more extensively than other professional services, prescription drugs, or nursing home and home health care. In 2003, other professional services and prescription drugs together accounted for 56 percent of consumer out- of- pocket spending. In contrast, hospital and physician services accounted for just 6 percent and 15 percent of out- of- pocket spending, respectively. Home health care and nursing home care together accounted for about 11 percent of out- of- pocket spending for health care. FIGURE 5B Percent of Expenditures for Administrative Cost and Net Cost of Insurance by Source of Payment, 2003 Total Medicare Medicaid Other Government Private Coverage 8% 3% 6% 1% 15% FIGURE 6 Out- of- Pocket Spending by Type of Service, 2003 29% Other Professional Services 15% Physician Services Other Services 13% 6% Hospital Services Home Health Care 2% Nursing Home Care 9% Prescription Drugs 27% PAGE 18 STATE HEALTH CARE EXPENDITURES 2003 Maryland Health Care Commission How Much Did Health Care Expenditures Grow in Maryland? Total health care spending in Maryland grew by 8 percent in 2003, although spending for some service types grew faster. The fastest- growing components of spending included physician services ( which grew 9 percent), prescription drugs ( 9 percent), and home health care ( 20 percent). The sharp increase in spending for home health care— a relatively small component of total health care spending— reflected expanded eligibility for Medicaid- covered services in home and community- based settings and an increase in wages paid to community workers. 8 The administrative and net cost of insurance also grew rapidly in Maryland ( 15 percent), largely reflecting additions to private insurer surplus in 2003. Expenditures for hospital care grew more slowly— 6 percent and 8 percent, respectively, for inpatient and outpatient care. These increases reflected the Health Services Cost Review Commission ( HSCRC) updates to inpatient and outpatient payment rates during the year. 9 Spending for other professional services and nursing home care also grew just by 5 percent and 6 percent, respectively. FIGURE 7 Percent Change in Total Expenditures by Type of Service, 2002– 2003 Total Hospital Inpatient Hospital Outpatient Physician Services Other Professional Services Prescription Drugs Nursing Home Care Home Health Care Other Services Administration and Net Cost of Insurance 8% 6% 8% 9% 5% 9% 6% 20% 11% 15% 8 Maryland Medicaid funds six waivers for home and community- based services ( HCBS), that served just over 12,300 people as of January 2004. These waivers provide services for individuals with developmental disabilities, medically fragile children and children with autism spectrum disorder, and elderly and other adults with physical disabilities or traumatic brain injury. 9 In fiscal year 2003 ( first half of CY 2003) HSCRC updated both inpatient and outpatient rates by 3.2 percent and in fiscal year 2004 ( last half of CY 2003) by 5.2 percent and 4.3 percent, respectively. STATE HEALTH CARE EXPENDITURES 2003 Maryland Health Care Commission PAGE 19 What Types of Services Accounted for the Growth in Expenditures? Growth in expenditures for physician services, inpatient care, and prescription drugs, as well as growth in the administrative and net cost of private insurance, accounted for two- thirds of the increase in total expenditures from 2002 to 2003. Increased spending for physician services and inpatient care accounted for 20 percent and 18 percent of total spending growth, respectively, while greater spending for prescription drugs and net insurance costs accounted for 14 percent and 13 percent of total spending growth, respectively. In 2003, Marylanders paid $ 417 million more for physician services, $ 376 million more for inpatient care, and $ 293 million more for prescription drugs than in 2002. They also paid $ 275 million more in 2003 for the administration and the net cost of insurance than in 2002. What Payers Accounted for Most of the Growth in Expenditures? In 2003, the cost of Medicaid ( including expenditures for health care and administration) grew faster than that of either Medicare or private insurance. The cost of Medicare and private insurance each increased approximately 8 percent in 2003. The cost of Medicaid increased 15 percent, reflecting both higher utilization in the program and the shifting of prescription drug subsidies for low- income Marylanders aged 65 or older from other government programs into Medicaid. 10 Consumer out- of- pocket spending grew in proportion to Medicare and private insurance expenditures— by approximately 8 percent. 10 HealthChoice, Maryland’s 1115 waiver project, was amended effective October 1, 2002, to extend Medicaid pharmacy coverage to persons not otherwise eligible for Medicaid. Federal matching funds cover 50 percent of the cost of this coverage. Most of those now enrolled in the Medicaid pharmacy program had previously been enrolled in the State- funded Maryland Pharmacy Assistance Program. FIGURE 8 Change in Expenditures by Type of Service as a Percent of Total Change, 2002– 2003 Administration and Net Cost of Insurance 13% Other Services 5% Home Health Care 8% Nursing Home Care 5% Prescription Drugs 14% Other Professional Services 8% 20% Physician Services 8% Hospital Outpatient 18% Hospital Inpatient PAGE 20 STATE HEALTH CARE EXPENDITURES 2003 Maryland Health Care Commission Consistent with the relatively fast growth of Medicaid expenditures in Maryland in 2003, Medicaid paid 28 percent of every additional dollar spent for health care in 2003 ( 26 percent, net of the reduction in spending by other government programs). However, the growth of private insurance expenditures accounted for a much greater share of the increase in total spending— 38 percent— reflecting the much larger role of private insurance in financing health care in Maryland. Medicare paid 18 percent of the additional health care expenditures in 2003, the same proportion of additional expenditures as consumers paid out- of- pocket. Differences in the growth of expenditures within service types affected Maryland’s third- party payers differently, in general due to differences in the extent to which public and private insurance plans cover different services. Higher spending for hospital care accounted for 59 percent of the increase in Medicare spending in 2003; increased spending for inpatient services alone accounted for 43 percent of the increase in Medicare spending. In contrast, increased spending for inpatient and outpatient care accounted for just 27 percent of the change in spending by Medicaid and 20 percent of the increase in spending by private insurance. FIGURE 9 Percent Change in Total Expenditures by Source of Payment, 2002– 2003 Total Medicare Medicaid Other Government Private Coverage Out- of- Pocket 8% 8% 15% 8% 8% – 4% FIGURE 10 Growth in Expenditures by Selected Source of Payment as a Percent of Total Expenditure Growth, 2002– 2003 28% Medicaid Out- of- Pocket 18% 18% Medicare Private Coverage 38% Note: Figure omits a 2- percent reduction in spending by other government programs. STATE HEALTH CARE EXPENDITURES 2003 Maryland Health Care Commission PAGE 21 The relatively fast growth of expenditures for physician services affected both Medicare and private insurers to a larger degree than other payers in Maryland. Greater spending for physicians accounted for 22 percent of Medicare’s increase in total spending and 28 percent of the increase in total spending by private insurers. Increased spending for prescription drugs accounted for just 13 percent of the growth in private insurance expenditures, but 34 percent of the increase in consumer out- of-pocket expenditures in 2003. Growth in out- of- pocket spending on prescription drugs is consistent with a variety of private insurance benefit changes, including increased deductibles and higher copayments in multitiered drug formularies. Growth in spending for prescription drugs accounted for 19 percent of the increase in Medicaid spending, reflecting the movement of some low- income residents from Maryland’s Pharmacy Assistance Program into the Medicaid pharmacy program ( see footnote 10). 31% FIGURE 12 Change in Expenditures for Administration and the Net Cost of Insurance as a Percent of Total Change for Source of Payment, 2002– 2003 Total Medicare Medicaid Other Government Programs Private Coverage Note: 0 percent indicates less than 0.5 percent. 13% 0% 6% 2% FIGURE 11 Change in Expenditures by Type of Service as a Percent of Total Change for Source of Payment, 2002– 2003 Hospital Inpatient Hospital Outpatient Physician Services Other Professional Services Prescription Drugs Nursing Home Care Home Health Care Medicare Total Expenditures Private Coverage Medicaid Out- of- Pocket 18% 8% 20% 8% 14% 5% 8% 43% 16% 22% 7% 6% 1% 0% 21% 6% 10% 3% 19% 10% 24% 12% 8% 28% 8% 1% 0% 13% 1% 4% 17% 17% 34% 5% 5% Note: Does not equal 100 percent because administrative expense is not shown. PAGE 22 STATE HEALTH CARE EXPENDITURES 2003 Maryland Health Care Commission Increases in administrative cost accounted for very small shares of the increase in either Medicare or Medicaid expenditures in 2003. However, together with the net cost of insurance, it accounted for nearly a third of the increase in expenditures for private insurance in Maryland ( 31 percent). Virtually all of this increase is associated with additions to private insurer surplus in 2003 ( premiums that exceed medical benefit expense and administrative cost). Insurers’ surplus may be used for strategic reasons ( including protection of market share or unanticipated changes in medical costs or rates of return to investment), to fund capital expenditures such as information systems, or to pay dividends to shareholders of for- profit plans. Did HMOs Have a Different Cost Experience? In 2003, 32 percent of privately insured Marylanders were enrolled in HMOs, compared to 83 percent of Medicaid beneficiaries and 3 percent of Medicare beneficiaries. Reversing a 6- year trend of declining HMO enrollment, private HMO enrollment increased by 2 percentage points in 2003— a 5- percent increase in the number of enrollees. HMO enrollment among Medicare and Medicaid beneficiaries was stable. HMOs accounted for 25 percent of total health care expenditures in Maryland in 2003, but a larger share of expenditures by both Medicaid and private insurers. Approximately 35 percent of Medicaid expenditures were for beneficiaries enrolled in HMO plans. Among Maryland residents with private coverage, 31 percent of expenditures were associated with those enrolled in HMOs. The proportion of total expenditures financed through HMOs increased slightly ( from 24 percent in 2002 to 25 percent in 2003), reflecting the increase in privately insured HMO enrollment. FIGURE 13 HMO Enrollment as a Percent of Total Enrollment by Major Third- Party Payer, 2002 and 2003 Medicare Medicaid Private Coverage 3% 3% 30% 32% 2002 2003 81% 76% STATE HEALTH CARE EXPENDITURES 2003 Maryland Health Care Commission PAGE 23 How Did Maryland Compare to the Nation? Spending per capita for all health care services in Maryland is near the national average, but Maryland’s pattern of spending by service type differs. Specifically, Marylanders spend much less per capita for physician care, but much more for other professional services. In 2003, Marylanders spent $ 1,544 per capita for physician and nonphysician professional services combined, compared to the U. S. average of $ 1,494. Marylanders also spent slightly less for hospital and nursing home care, about 4 percent less than the national average. FIGURE 14 HMO Expenditures as a Percent of Total Expenditures by Major Third- Party Payer, 2002 and 2003 2002 2003 Total Expenditures Medicare Medicaid Private Coverage 24% 25% 3% 2% 36% 35% 30% 31% FIGURE 15 Per Capita Expenditures in Maryland and the U. S. by Type of Service, 2003 Hospital Services Physician Services Other Professional Services Prescription Drugs Nursing Home Care Home Health Care and Other Services Administration and Net Cost of Insurance Maryland United States $ 1,569 $ 1,626 $ 890 $ 1,097 $ 654 $ 397 $ 630 $ 624 $ 341 $ 355 $ 353 $ 343 $ 373 $ 385 Note: Home Health Care and Other Services are shown as one category since payments provided through Home and Community- based waivers in the Medicaid program are included in the Other Services group in the National Health Expenditure Accounts. PAGE 24 STATE HEALTH CARE EXPENDITURES 2003 Maryland Health Care Commission The growth in spending per capita for hospital care in Maryland was approximately equal to the national average in 2003. Thus, if current rates of growth in per capita spending for hospital care continue, per capita spending for hospital services in Maryland will remain below the national average. Per capita expenditures for physician care in Maryland rose faster than the national average in 2003— 8 percent, compared to 6 percent nationally— while per capita expenditures for other professional services increased more slowly. This pattern suggests that the level of expenditure per capita for physician care relative to other professional services is moving toward the national average. Per capita spending for prescription drugs in Maryland grew much more slowly in Maryland than the national average— 8 percent versus 12 percent nationally. In recent years, prescription drug spending has increased faster than the national average. The slowing of spending growth in Maryland suggests that it tracks with longer term national trends, despite some year- to- year variation. Per capita spending to finance administration and the net cost of insurance are on par with the United States, and are growing at similar rates. Both major public insurance programs— Medicare and Medicaid— paid more per beneficiary in Maryland than the national average in 2003. In 2003, expenditures FIGURE 16 Percent Growth in Per Capita Expenditures in Maryland and the U. S. by Type of Service, 2002– 2003 Total Expenditures Hospital Services Physician Services Other Professional Services Prescription Drugs Nursing Home Care Home Health Care and Other Services Administration and Net Cost of Insurance Maryland United States 7% 7% 4% 4% 8% 12% 5% 3% 14% 7% 14% 15% 6% 6% 8% 6% STATE HEALTH CARE EXPENDITURES 2003 Maryland Health Care Commission PAGE 25 for Medicare beneficiaries were about 14 percent more than the national average ($ 7,719 versus $ 6,795), while Medicaid paid 13 percent more per beneficiary ($ 7,381 versus $ 6,537). Moreover, per capita spending in both programs grew faster than the national average, especially in Medicaid. In 2003, Medicare spending per capita in Maryland increased 6 percent, compared to 4 percent nationally. Medicaid spending per capita increased 4 percent, compared to 2 percent nationally. The faster growth in Maryland’s spending per Medicaid beneficiary largely reflected an increase in the number of low- income residents eligible for Medicaid— including the addition of beneficiaries for prescription drug coverage under Maryland’s new waiver. Private insurance spending per insured resident in Maryland was less than the national average— approximately $ 2,645 compared to $ 3,149 nationally, and the rate of growth in private insurance expenditures in 2003 was lower: 10 percent versus 11 percent nationally. In contrast, out- of- pocket spending per capita was much greater in Maryland than the national average ($ 944 versus $ 671), and it grew faster in 2003 ( 7 percent versus 6 percent). Higher cost- sharing requirements in private insurance plans, intended to slow the growth of insured health costs, may account for the faster growth of out- of- pocket per capita expenditures in Maryland. FIGURE 18: Percent Change in Per Capita Expenditures in Maryland and the U. S. by Source of Payment, 2002– 2003 Medicare Medicaid Private Insurance Out- of- Pocket Maryland United States 6% 4% 4% 2% 10% 11% 7% 6% FIGURE 17 Per Capita Expenditures in Maryland and the U. S. by Source of Payment, 2003 Medicare Medicaid Private Insurance Out- of- Pocket $ 7,719 $ 6,795 $ 7,381 $ 6,537 $ 2,645 $ 3,149 $ 944 $ 671 Maryland United States PAGE 26 STATE HEALTH CARE EXPENDITURES 2003 Maryland Health Care Commission What Proportion of the Population Has High Health Care Expenditures? Most of the population of the United States, and also in Maryland, has low expenditures for health care services. In 2001, half the population under age 65 residing in the community used less than $ 467 per person, and 80 percent used less than $ 2,197.11 Just 10 percent used more than $ 4,522. Health care spending is highly skewed: 78 percent of the population under age 65 had per capita health care spending below the average for this cohort, $ 1,944. As a point of reference, for a working- age adult, the national average premium for employer- sponsored health insurance in 2001 was $ 2,889.12 Among the nonelderly population, half of the population accounted for less than 4 percent of all health care spending for this age group. Another 30 percent used about 17 percent of the care, while 20 percent generated the vast majority— 80 percent— of all health expenditures for the nonelderly population. Consequently, employer and insurer efforts directed at curbing health care use by the “ typical” nonelderly person have a small effect on the overall level of health care spending in this age group. Reducing spending by half for the lowest- cost 80 percent of the nonelderly population would reduce total spending by just 10 percent. Both public and private payers have increasingly tailored disease management and various utilization control programs to coordinate care and better manage expenditures, but evidence about whether these programs save money is limited. 11 The data presented in this section come from the Medical Expenditure Panel Survey - Household Component ( MEPS- HC) for CY2001 ( the most recent year available) and pertain only to persons living in the community. Those residing in nursing homes or in other institutional settings, and their associated health care spending, were not included in the survey. Most of the institutionalized have high expenditures for health care and would likely qualify as high- cost users. Less than 1 percent of the Maryland’s population is institutionalized. 12 Medical Expenditure Panel Survey, http:// www. meps. ahrq. gov/ MEPSDATA/ ic/ 2001/ Tables_ I/ TIC1. pdf, accessed December 6, 2004. FIGURE 19 Distribution of Per Capita Health Expenditures: U. S. Population Over and Under Age 65, 2001 Source: AHRQ, Medical Expenditure Panel Survey, 2001. STATE HEALTH CARE EXPENDITURES 2003 Maryland Health Care Commission PAGE 27 Average health care expenditures among the population over age 65 are about three times the average among those under age 65, and a larger share of the elderly population has relatively high expenditures. In 2001, the elderly comprised 13 percent of the population but accounted for 34 percent of all health care spending. Health care spending is also highly skewed among the elderly: 74 percent had per capita spending below the average for this age group, $ 6,791. Half of the elderly population used less than $ 2,891 per person, but 20 percent used more than $ 17,064 per person, accounting for 69 percent of all health care used by the elderly. Among either the population under age 65 or the elderly, per capita spending accelerates rapidly above the 80th population percentile ranked by expenditures per capita. Persons with health care costs above the 80th percentile are more likely than the population as a whole to have at least one hospitalization and are much more likely to have more than one hospitalization. In 2001, 27 percent of high- cost users under age 65 and 75 percent of high- cost users over age 65 were hospitalized at least once during the year. In contrast, among the large majority of the population— those with expenditures below the 80th percentile— just 1 percent were hospitalized during the year, including less than 1 percent of the population under age 65 and 7 percent of the population aged 65 or older. Taken together, the top 20 percent of the population accounts for nearly all ( 97 percent) of total spending on inpatient care. Among the nonelderly population, they accounted for 99 percent of inpatient care in 2001; among the elderly, they accounted for nearly 94 percent. Applying the 97- percent figure to Maryland inpatient spending in 2003, high- cost users ( about 1 million people) accounted for an estimated $ 6.2 billion of the $ 6.4 billion inpatient total and virtually all of the 680,000 inpatient stays. 13 Although high- cost users are almost exclusively the FIGURE 20 Distribution of U. S. Health Care Expenditures and Population, Ages 0– 64, 2001 Source: AHRQ, Medical Expenditure Panel Survey, 2001. 13 Had the institutionalized population been included in the MEPS- HC survey, the high- cost share of inpatient spending might have been slightly higher. PAGE 28 STATE HEALTH CARE EXPENDITURES 2003 Maryland Health Care Commission consumers of inpatient care, a majority of this population is not hospitalized during the year and has no inpatient expenditures. High- cost users account for 71 percent of all physician care. Among the nonelderly population, high- cost users account for 76 percent of all physician expenditures; among the elderly population, the top 20 percent of users account for 56 percent of physician care used by this age group. In Maryland in 2003, high- cost users accounted for an estimated $ 3.5 billion of the $ 4.9 billion spent for physician care. The top 20 percent of users also accounted for 59 percent of spending for prescription drugs. Among the nonelderly population, high- cost users generated 71 percent of all drug expenditures, but among the elderly population, the top 20 percent of users accounted for just 34 percent of total expenditures for prescription drugs. High- cost users generated an estimated $ 2.1 billion of the nearly $ 3.5 billion expended for prescription drugs in Maryland in 2003. For nonelderly high- cost users without a hospital admission, health care spending was concentrated about equally in physician care, prescription drugs, and other professional services. This spending pattern differed from that among the lower- cost users, where expenditures for physician care were more prominent than spending for either prescription drugs or other professional services. Among nonelderly high- cost users with a hospital admission, inpatient care accounted for 51 percent of their total health care spending. As in high- cost users without a hospital admission, physician services accounted for 27 percent of annual health care spending expenditures, but the share allocated to prescription drugs was much lower. FIGURE 21 Percent of the U. S. Population Hospitalized Once or More by Relative Total Per Capita Expenditure and Age Cohort, 2001 Under 65 65 and older Total 0– 80th Percentile 0.7% 6.6% 1.5% > 80th Percentile 27.2% 75.0% 33.3% Source: AHRQ, Medical Expenditure Panel Survey, 2001 . FIGURE 22 Expenditure by Type of Service as a Percent of Total Expenditure for the Nonelderly Population by Relative Total Per Capita Expenditure and Whether Hospitalized, 2001 NOT HOSPITALIZED Hospital Inpatient Physician Services Prescription Drugs Other Professional Services Hospital Outpatient All Other Services 0– 50th Percentile 50th– 80th Percentile 80th– 100th Percentile n/ a n/ a n/ a 38% 30% 27% 20% 28% 28% 31% 27% 27% 4% 9% 15% 7% 6% 3% HOSPITALIZED Hospital Inpatient Physician Services Prescription Drugs Other Professional Services Hospital Outpatient All Other Services 0– 50th Percentile 50th– 80th Percentile 80th– 100th Percentile 13% 39% 51% 43% 36% 27% 32% 13% 9% 4% 5% 5% 3% 5% 6% 5% 1% 2% Source: AHRQ, Medical Expenditure Panel Survey, 2001 . STATE HEALTH CARE EXPENDITURES 2003 Maryland Health Care Commission PAGE 29 The balance of this report offers detailed tables of the information presented in the preceding sections. These tables offer additional detail about changes in health care spending in Maryland and nationally from 2002 to 2003. PAGE 30 STATE HEALTH CARE EXPENDITURES 2003 Maryland Health Care Commission STATE HEALTH CARE EXPENDITURES 2003 Maryland Health Care Commission PAGE 31 SUPPORTING TABLES PAGE 32 STATE HEALTH CARE EXPENDITURES 2003 Maryland Health Care Commission Table 1A: Total Maryland Health Care Expenditures ($ thousands), 2003 Expenditure Components GOVERNMENT SECTOR PRIVATE SECTOR TOTAL EXPENDI-TURES Medicaid Other Government Private Coverage Out- of- Medicare Total Traditional HealthChoice Pocket TOTAL HEALTH EXPENDITURES $ 5,206,310 $ 4,544,367 $ 2,935,949 $ 1,608,418 $ 1,104,521 $ 10,444,435 $ 5,202,947 $ 26,502,580 Hospital Services Inpatient Outpatient 2,454,349 681,873 1,173,134 290,370 640,309 118,355 532,825 172,015 284,107 57,840 2,382,763 1,030,985 106,249 184,381 6,400,602 2,245,448 Physician Services 1,111,775 352,943 75,719 277,224 135,943 2,536,790 766,568 4,904,020 Other Professional Services 230,895 213,014 133,933 79,081 490,760 1,168,868 1,499,537 3,603,075 Prescription Drugs 6,598 607,592 437,022 170,570 57,308 1,402,750 1,397,354 3,471,601 Nursing Home Care 304,903 917,120 875,619 41,501 42,001 133,055 481,951 1,879,029 Home Health Care 135,572 653,107 563,975 89,132 7,883 101,934 95,802 994,297 Other Services 128,532 42,365 34,756 7,608 21,954 84,713 671,105 948,668 Administration and Net Cost of Insurance 151,815 294,721 56,261 238,461 6,727 1,602,577 n/ a 2,055,840 Table 1B: Total Maryland Health Care Expenditures ($ thousands), 2002 Expenditure Components GOVERNMENT SECTOR PRIVATE SECTOR TOTAL EXPENDI-TURES Medicaid Other Government Private Coverage Out- of- Medicare Total Traditional HealthChoice Pocket TOTAL HEALTH EXPENDITURES $ 4,830,429 $ 3,966,085 $ 2,529,659 $ 1,436,426 $ 1,151,512 $ 9,671,300 $ 4,833,136 $ 24,452,462 Hospital Services Inpatient Outpatient 2,290,850 621,573 1,051,450 257,229 561,596 103,265 489,854 153,964 290,754 58,893 2,290,510 971,197 101,057 170,415 6,024,621 2,079,308 Physician Services 1,029,158 293,878 67,001 226,877 138,891 2,323,587 702,006 4,487,519 Other Professional Services 206,161 196,335 125,494 70,841 491,792 1,110,019 1,437,768 3,442,075 Prescription Drugs 6,154 497,394 342,201 155,193 98,662 1,303,315 1,272,853 3,178,378 Nursing Home Care 283,928 859,513 820,619 38,894 38,343 133,247 462,818 1,777,850 Home Health Care 131,104 513,432 424,951 88,481 6,320 97,119 77,426 825,401 Other Services 111,333 36,383 28,441 7,942 20,020 79,797 608,794 856,326 Administration and Net Cost of Insurance 150,167 260,471 56,091 204,380 7,838 1,362,509 n/ a 1,780,985 Note: Types of delivery systems are combined within payer groups. Medicare includes Original Medicare and Medicare+ Choice, and Private Coverage includes Insurers & Self- Funded and HMO plans. Note: Types of delivery systems are combined within payer groups. Medicare includes Original Medicare and Medicare+ Choice, and Private Coverage includes Insurers & Self- Funded and HMO plans. Health Care Expenditures by Type of Service STATE HEALTH CARE EXPENDITURES 2003 Maryland Health Care Commission PAGE 33 Table 1C: Rate of Growth in Expenditures by Type of Service and Source of Payment, 2002– 2003 Expenditure Components GOVERNMENT SECTOR PRIVATE SECTOR TOTAL EXPENDI-TURES Medicaid Other Government Private Coverage Out- of- Medicare Total Traditional HealthChoice Pocket TOTAL HEALTH EXPENDITURES 7.8% 14.6% 16.1% 12.0% – 4.1% 8.0% 7.7% 8.4% Hospital Services Inpatient Outpatient 7.1 9.7 11.6 12.9 14.0 14.6 8.8 11.7 – 2.3 – 1.8 4.0 6.2 5.1 8.2 6.2 8.0 Physician Services 8.0 20.1 13.0 22.2 – 2.1 9.2 9.2 9.3 Other Professional Services 12.0 8.5 6.7 11.6 – 0.2 5.3 4.3 4.7 Prescription Drugs 7.2 22.2 27.7 9.9 – 41.9 7.6 9.8 9.2 Nursing Home Care 7.4 6.7 6.7 6.7 9.5 – 0.1 4.1 5.7 Home Health Care 3.4 27.2 32.7 0.7 24.7 5.0 23.7 20.5 Other Services 15.4 16.4 22.2 – 4.2 9.7 6.2 10.2 10.8 Administration and Net Cost of Insurance 1.1 13.1 0.3 16.7 – 14.2 17.6 n/ a 15.4 Note: Types of delivery systems are combined within payer groups. Medicare includes Original Medicare and Medicare+ Choice, and Private Coverage includes Insurers & Self- Funded and HMO plans. Health Care Expenditures by Source of Payment Table 2: Expenditures by Source of Payment as a Percent of Total Expenditures, 2003 Expenditure Components MEDICARE MEDICAID OTHER GOVERNMENT PRIVATE COVERAGE OUT- OF-POCKET ALL PAYERS TOTAL HEALTH EXPENDITURES 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Hospital Services Inpatient Outpatient 47.1 13.1 25.8 6.4 25.7 5.2 22.8 9.9 2.0 3.5 24.2 8.5 Physician Services 21.4 7.8 12.3 24.3 14.7 18.5 Other Professional Services 4.4 4.7 44.4 11.2 28.8 13.6 Prescription Drugs 0.1 13.4 5.2 13.4 26.9 13.1 Nursing Home Care 5.9 20.2 3.8 1.3 9.3 7.1 Home Health Care 2.6 14.4 0.7 1.0 1.8 3.8 Other Services 2.5 0.9 2.0 0.8 12.9 3.6 Administration and Net Cost of Insurance 2.9 6.5 0.6 15.3 n/ a 7.8 Note: Types of delivery systems are combined within payer groups. Medicare includes Original Medicare and Medicare+ Choice, Medicaid includes Traditional Medicaid and HealthChoice, and Private Coverage includes Insurers & Self- Funded and HMO plans. PAGE 34 STATE HEALTH CARE EXPENDITURES 2003 Maryland Health Care Commission Table 3: Per Capita Expenditures by Source of Payment and Type of Service, 2002 and 2003 Expenditure Components MEDICARE MEDICAID PRIVATE COVERAGE 2002 2003 2002 2003 2002 2003 TOTAL HEALTH EXPENDITURES $ 7,278 $ 7,719 $ 7,122 $ 7,381 $ 2,406 $ 2,645 Hospital Services Inpatient Outpatient 3,451 936 3,639 1,011 1,888 462 1,905 472 570 242 603 261 Physician Services 1,551 1,648 528 573 578 642 Other Professional Services 311 342 353 346 276 296 Prescription Drugs 9 10 893 987 324 355 Nursing Home Care 428 452 1,543 1,490 33 34 Home Health Care 198 201 922 1,061 24 26 Other Services 168 191 65 69 20 21 Administration and Net Cost of Insurance 226 225 468 479 339 406 Expenditure Components MEDICARE MEDICAID PRIVATE COVERAGE TOTAL HEALTH EXPENDITURES 6.1% 3.6% 9.9% Hospital Services Inpatient Outpatient 5.4 8.0 0.9 2.1 5.9 8.1 Physician Services 6.3 8.6 11.1 Other Professional Services 10.2 - 1.9 7.2 Prescription Drugs 5.5 10.5 9.6 Nursing Home Care 5.7 - 3.5 1.7 Home Health Care 1.8 15.1 6.9 Other Services 13.6 5.3 8.1 Administration and Net Cost of Insurance – 0.5 2.3 19.7 Note: Types of delivery systems are combined within payer groups. Medicare includes Original Medicare and Medicare+ Choice, Medicaid includes Traditional Medicaid and HealthChoice, and Private Coverage includes Insurers & Self- Funded and HMO plans. Note: Types of delivery systems are combined within payer groups. Medicare includes Original Medicare and Medicare+ Choice, Medicaid includes Traditional Medicaid and HealthChoice, and Private Coverage includes Insurers & Self- Funded and HMO plans. Table 4: Rate of Growth in Per Capita Expenditures by Source of Payment and Type of Service, 2002– 2003 STATE HEALTH CARE EXPENDITURES 2003 Maryland Health Care Commission PAGE 35 Table 6: Percent of the Growth in Expenditures for Sources of Payment Associated with Different Types of Service, 2002– 2003 Expenditure Components GOVERNMENT SECTOR PRIVATE SECTOR TOTAL Medicare Medicaid Private Coverage Out- of- Pocket TOTAL HEALTH EXPENDITURES 100.0% 100.0% 100.0% 100.0% 100.0% Hospital Services Inpatient Outpatient 43.5 16.0 21.0 5.7 11.9 7.7 1.4 3.8 18.3 8.1 Physician Services 22.0 10.2 27.6 17.5 20.3 Other Professional Services 6.6 2.9 7.6 16.7 7.9 Prescription Drugs 0.1 19.1 12.9 33.7 14.3 Nursing Home Care 5.6 10.0 0.0 5.2 4.9 Home Health Care 1.2 24.2 0.6 5.0 8.2 Other Services 4.6 1.0 0.6 16.8 4.5 Administration and Net Cost of Insurance 0.4 5.9 31.1 n/ a 13.4 Table 5: Expenditures by Type of Service as a Percent of Total Expenditures by Source of Payment, 2003 Expenditure Components GOVERNMENT SECTOR PRIVATE SECTOR TOTAL Medicare Medicaid Other Government Total Government Private Coverage Out- of- Pocket Total Private TOTAL HEALTH EXPENDITURES 19.6% 17.1% 4.2% 41.0% 39.4% 19.6% 59.0% 100.0% Hospital Services Inpatient Outpatient 38.3 30.4 18.3 12.9 4.4 2.6 61.1 45.9 37.2 45.9 1.7 8.2 38.9 54.1 100.0 100.0 Physician Services 22.7 7.2 2.8 32.6 51.7 15.6 67.4 100.0 Other Professional Services 6.4 5.9 13.6 25.9 32.4 41.6 74.1 100.0 Prescription Drugs 0.2 17.5 1.7 19.3 40.4 40.3 80.7 100.0 Nursing Home Care 16.2 48.8 2.2 67.3 7.1 25.6 32.7 100.0 Home Health Care 13.6 65.7 0.8 80.1 10.3 9.6 19.9 100.0 Other Services 13.5 4.5 2.3 20.3 8.9 70.7 79.7 100.0 Administration and Net Cost of Insurance 7.4 14.3 0.3 22.0 78.0 n/ a 78.0 100.0 Note: Types of delivery systems are combined within payer groups. Medicare includes Original Medicare and Medicare+ Choice, Medicaid includes Traditional Medicaid and HealthChoice, and Private Coverage includes Insurers & Self- Funded and HMO plans. Note: Types of delivery systems are combined within payer groups. Medicare includes Original Medicare and Medicare+ Choice, Medicaid includes Traditional Medicaid and HealthChoice, and Private Coverage includes Insurers & Self- Funded and HMO plans. Note: 0.0 means less than 0.5. PAGE 36 STATE HEALTH CARE EXPENDITURES 2003 Maryland Health Care Commission Table 7: Percent of the Growth in Expenditures for Types of Service Associated with Different Sources of Payment, 2002– 2003 Expenditure Components GOVERNMENT SECTOR PRIVATE SECTOR TOTAL Medicare Medicaid Traditional Medicaid HealthChoice Other Government Private Coverage Out- of- Pocket TOTAL HEALTH EXPENDITURES 18.3% 19.8% 8.4% – 2.3% 37.7% 18.0% 100.0% Hospital Services Inpatient Outpatient 43.5 36.3 20.9 9.1 11.4 10.9 – 1.8 – 0.6 24.5 36.0 1.4 8.4 100.0 100.0 Physician Services 19.8 2.1 12.1 – 0.7 51.2 15.5 100.0 Other Professional Services 15.4 5.2 5.1 – 0.6 36.6 38.4 100.0 Prescription Drugs 0.2 32.3 5.2 – 14.1 33.9 42.5 100.0 Nursing Home Care 20.7 54.4 2.6 3.6 – 0.2 18.9 100.0 Home Health Care 2.6 82.3 0.4 0.9 2.9 10.9 100.0 Other Services 18.6 6.8 – 0.4 2.1 5.3 67.5 100.0 Administration and Net Cost of Insurance 0.6 0.1 12.4 – 0.4 87.3 n/ a 100.0 Table 8: Number and Percent of Total Enrollment in HMOs by Major Insurer, 2002 and 2003 YEAR HMO ENROLLMENT NUMBER Medicare Medicaid Private Coverage 2002 19,164 453,114 1,197,351 2003 21,499 468,377 1,262,060 YEAR PERCENT OF TOTAL ENROLLMENT Medicare Medicaid Private Coverage 2002 2.9% 81.4% 29.8% 2003 3.2% 76.1% 32.0% Note: Types of delivery systems are combined within payer groups. Medicare includes Original Medicare and Medicare+ Choice, and Private Coverage includes Insurers & Self- Funded and HMO plans. HMO Enrollment STATE HEALTH CARE EXPENDITURES 2003 Maryland Health Care Commission PAGE 37 Table 9: Rate of Growth in HMO Enrollment by Major Insurer, 1995– 2003 YEAR MEDICARE MEDICAID PRIVATE COVERAGE 2002– 2003 12.2% 3.4% 5.4% 2001– 2002 3.5 7.4 – 7.1 2000– 2001 – 71.6 8.5 – 9.3 1999– 2000 – 19.5 10.0 – 2.0 1998– 1999 – 3.1 11.4 – 1.6 1997– 1998 5.3 79.4 – 0.4 1996– 1997 125.0 30.4 5.6 1995– 1996 131.8 – 0.1 6.6 Table 10: Total Expenditures and Rate of Growth, United States ($ millions), 2002– 2003 Expenditure Components 2002 2003 PERCENT CHANGE TOTAL HEALTH EXPENDITURES $ 1,296,917 $ 1,403,553 8.2% Hospital Services 441,631 472,993 7.1 Physician Services 297,802 318,883 7.1 Other Professional Services 109,673 115,351 5.2 Prescription Drugs 160,168 181,557 13.4 Nursing Home Care 99,445 103,170 3.7 Home Health Care and Other Services 92,210 99,727 8.2 Administration and Net Cost of Insurance 95,988 111,872 16.5 United States Health Expenditure Estimates and Projections Source: National health expenditure ( NHE) estimates and projections are developed by the Centers for Medicare & Medicaid Services, Office of the Actuary. For the purpose of comparison, the NHE estimates are adjusted to parallel Maryland State Health Expenditure Account ( SHEA) sources of payment and service types. For details see http: www. mhcc. state. md. us/ health_ care_ expenditures/ shea03/ technicalnotes. pdf. PAGE 38 STATE HEALTH CARE EXPENDITURES 2003 Maryland Health Care Commission Table 11: Per Capita Expenditures and Rate of Growth, United States, 2002– 2003 Expenditure Components 2002 2003 PERCENT CHANGE TOTAL HEALTH EXPENDITURES $ 4,504 $ 4,826 7.2% Hospital Services 1,534 1,626 6.1 Physician Services 1,034 1,097 6.0 Other Professional Services 381 397 4.2 Prescription Drugs 556 624 12.2 Nursing Home Care 345 355 2.7 Home Health Care and Other Services 320 343 7.1 Administration and Net Cost of Insurance 333 385 15.4 Expenditure Components 2002 2003 TOTAL HEALTH EXPENDITURES 100.0% 100.0% Hospital Services 34.1 33.7 Physician Services 23.0 22.7 Other Professional Services 8.5 8.2 Prescription Drugs 12.3 12.9 Nursing Home Care 7.7 7.4 Home Health Care and Other Services 7.1 7.1 Administration and Net Cost of Insurance 7.4 8.0 Table 12: Percent of Total Expenditures by Type of Service, United States, 2002– 2003 Source: National health expenditure ( NHE) estimates and projections are developed by the Centers for Medicare & Medicaid Services, Office of the Actuary. For the purpose of comparison, the NHE estimates are adjusted to parallel Maryland State Health Expenditure Account ( SHEA) sources of payment and service types. For details see http: www. mhcc. state. md. us/ health_ care_ expenditures/ shea03/ technicalnotes. pdf. Source: National health expenditure ( NHE) estimates and projections are developed by the Centers for Medicare & Medicaid Services, Office of the Actuary. For the purpose of comparison, the NHE estimates are adjusted to parallel Maryland State Health Expenditure Account ( SHEA) sources of payment and service types. For details see http: www. mhcc. state. md. us/ health_ care_ expenditures/ shea03/ technicalnotes. pdf. STATE HEALTH CARE EXPENDITURES 2003 Maryland Health Care Commission PAGE 39 Table 13: Total Expenditures and Percent of Total Expenditures by Source of Payment, United States, 2003 ($ millions) Expenditure Components 2003 PERCENT OF TOTAL TOTAL HEALTH EXPENDITURES $ 1,403,553 100.0% Medicare 279,203 19.9 Medicaid 279,410 19.9 Other Government 43,174 3.1 Private Coverage 606,696 43.2 Out- of- Pocket 195,070 13.9 Source: National health expenditure ( NHE) estimates and projections are developed by the Centers for Medicare & Medicaid Services, Office of the Actuary. For the purpose of comparison, the NHE estimates are adjusted to parallel Maryland State Health Expenditure Account ( SHEA) sources of payment and service types. For details see http: www. mhcc. state. md. us/ health_ care_ expenditures/ shea03/ technicalnotes. pdf. PAGE 40 STATE HEALTH CARE EXPENDITURES 2003 Maryland Health Care Commission |
