Health-Care Spending Soars in New York State – Wall Street Journal

Just a few years ago, New York was in the middle of the ranking of state health-care costs, according to the New York State Health Foundation. Now it ranks eighth. Photo: Reuters

Health-care spending on New Yorkers who get insurance through work is higher and rising more sharply than the national average. The main reason, according to a new report, is price growth.

Rising prices of doctor visits, inpatient services and prescription drugs—particularly hormones and anti-infective drugs—drove per-person spending in the state to $6,335 in 2017 from $4,982 in 2013, according to a report Tuesday from the private New York State Health Foundation and the research nonprofit Health Care Cost Institute. Nationally, per-person spending was $5,641 in 2017, up from $4,834 in 2013.

The annual average rate of growth in per-person spending from 2013 to 2017 was 6.2% in New York, compared with 3.9% nationally. The report includes analyzed data for nearly 2.1 million people under the age of 65 covered by group insurance through an employer.

Just a few years ago, New York was in the middle of the ranking of state health-care costs, said David Sandman, the president and chief executive of the New York State Health Foundation. Now it ranks eighth, while New Jersey is sixth.

“The rate of growth is just phenomenal,” Mr. Sandman said. “That translates directly into a pocketbook issue for people.”

Mr. Sandman said greater price transparency would bring meaningful competition to the marketplace and “empower consumers to look for better value.”

On Monday, the Trump administration proposed requiring hospitals to disclose the discounted prices they negotiate with insurance companies. The move is the latest effort by the administration to increase price transparency and create greater competition.

Last year, the New York City Council held a hearing about pricing for common procedures at the city’s various hospital systems. At the hearing, one of the city’s largest unions, Service Employees International Union Local 32BJ, presented claims data showing that prices for such common procedures as hip replacement and delivery of a baby varied by thousands between the city’s biggest health systems.

The Healthcare Association of New York State, a trade group, has said that hospital charges aren’t a good way to inform consumers about what prices they may pay and that the state’s hospitals and health systems are already leaders in advancing productive transparency initiatives.

Carm Basile, the chief executive of the Capital District Transportation Authority, said it recently shifted to a deductible plan and introduced more programs to reduce costs and get employees actively involved in their health care for chronic conditions. The regional transit service, serving the Albany metropolitan region, has almost 1,000 people on its health-insurance plan.

As a result of the changes, Mr. Basile said, health-care costs have gone down a little. But he said his group has had to work aggressively with employees, brokers and health systems for the best prices.

“You have to push back,” he said. “To simply sit back and say, ‘That’s the cost,’ is bad management.”

Partly driving the cost increase in New York are concentrated hospital markets and consolidation of health systems, according to Sherry Glied, dean of New York University’s Robert F. Wagner Graduate School of Public Service.

Upstate New York has three of the most-concentrated hospital markets in Elmira, Utica and Ithaca, said Ms. Glied, leading to higher costs in the absence of substantial competition. Downstate, smaller hospitals that became part of citywide health systems are potentially seeing price increases, she said.

Insurers, employers and health-policy experts have in recent years deployed many tools to cut waste and limit inappropriate care. They have also used deductibles and copayments to help solve the problem of rising costs, said Ms. Glied. The outcome, she said, may be that a squeeze on one end to make sure people aren’t using too many services has created a scenario in which some hospitals are competing in other ways and loading up on pricing.

“We’re moving into an era where the prices are the problem,” Ms. Glied said.

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Spending for all prescription-drug categories in 2017 was more than 20% higher in New York at roughly $1,300 per person, compared with a national average of $1,065, according to the new report. Based on payments at the point of sale for prescriptions, spending increased by 40%, or $374 per person, from 2013 to 2017 in New York. The biggest category of spending on drugs is on hormones, which includes insulin and contraception.

Though 84% of prescription drugs used by New Yorkers are generic, nearly 78% of the cost of prescriptions is for brand drugs in 2017, according to the report.

The volume of health-care services used per person has been declining nationally, but utilization for nearly all services in New York rose about 6% from 2013 to 2017, according to the report.

Write to Melanie Grayce West at melanie.west@wsj.com

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Appeared in the July 30, 2019, print edition as ‘Health-Care Spending Soars in State.’