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Minnesota Health Care Spending Slows, but Still Outpaces Wage Increases

Posted on: Tuesday, 9 August 2005, 21:00 CDT

Aug. 10--Total health care spending by private insurers grew 7.4 percent in Minnesota last year -- a rate that doubles most wage increases and triples inflation.

And yet health policy experts and state leaders, including Gov. Tim Pawlenty, greeted the result with enthusiasm.

The increase is the lowest since 1997, according to a report released Tuesday by the Minnesota Department of Health. The growth statistic also may show that efforts to reign in health care costs are starting to work.

Executives with two of the state's largest insurers, Blue Cross and Blue Shield of Minnesota and HealthPartners, linked the lower growth figure to greater use of cheaper generic drugs and better management of chronic diseases such as diabetes.

Both also credited individual consumers who are making more "conservative" decisions about health care because they are paying higher costs through increased deductibles and co-pays.

"That created some price sensitivity that caused people to contemplate when and whether they would seek care," said Andrea Walsh, chief marketing officer for HealthPartners, which is based in Bloomington.

In a news release accompanying the state report, Pawlenty said, "the slowdown in health care spending growth is good news for families, job providers, government and all health care purchasers."

But the news wasn't all positive for individual consumers. The growth rate only measured the spending by private insurers per person, and didn't include out-of-pocket expenses for individuals. Out-of-pocket spending increased 15.3 percent.

And while private insurers spent 7.4 percent more on individuals in 2004, they also raised premiums on average by 11.3 percent last year.

That was expected, said Julie Sonier, director of the health economics program for the Minnesota Department of Health. Spending actually outpaced premium increases in 2002 and 2003, she said, so insurers were playing catch-up with their premiums this year.

If spending growth continues to be low in the coming years, Sonier said she expects that the premium increases would drop as well.

Partial data for 2005 suggests the growth in spending at Blue Cross will be comparable to the lower growth rate of 2004, said Michael Morrow, senior vice president of business development and network management.

He said the slower growth is partly because there hasn't been any new wonder drug that has caused drug costs to surge. The removal of Vioxx and Bextra, two popular Cox-2 painkiller drugs, from the market brought some cost relief as well.

Spending growth may remain lower for the next few years as insurance programs to encourage generic drugs and healthier decisions reach more people, Morrow said.

Long-term trends aren't as hopeful, though. Morrow and Walsh agreed that the rising rate of obesity, the aging of the Baby Boomers, and the popularity of new drugs and medical devices would fuel increased costs for private insurers and their customers over time.

"We shouldn't kid ourselves," Morrow said, "but right now things are going well."

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Copyright (c) 2005, Pioneer Press, St. Paul, Minn.

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Source: Saint Paul Pioneer Press (St. Paul, Minn.)

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