Summary: Healthcare affordability varies significantly by state, and local conditions significantly impact affordability, potentially limiting national/universal solutions.
How Much Does Hospital Utilization Vary Anyway?
If higher hospital utilization rates are associated with less affordable health care, one might wonder how much hospital utilization varies from one region to another. Table 3 shows some interesting statistics about this.
Hospital Utilization Levels by State
(commercial under-age 65 bed-days/1,000)
|Alphabetical State||Days/1,000 (including SNF days)||% of National Average||Estimated Potential For Reduction|
|Maryland & DC||310||0.98||0.49|
Inpatient hospital utilization ranges from a low of 72% of the national average in Oregon to a high of 144% in New York, a significant variation. Based upon industry best practice performance of highly efficient health care programs as documented in the AHP Best Practice Norms™, ideal inpatient hospital utilization rates for the typical population described in Table 3 is about 159 bed days/1,000, about 50% of national observed average of 316 days/1,000. This suggests that as much as 50% of the current utilization might be eliminated if potentially avoidable days could be eliminated. The potential reduction ranges from 30% in Oregon to 65% in New York. The ability to achieve these reductions in these communities is impacted by many factors:
For our three targeted states, California and Minnesota show a 41% opportunity for improvement with Washington showing a 35% opportunity. This shows that significant opportunity exists to improve the affordability of health care services in these states even though they enjoy favorable affordability already.
Since actual hospital inpatient utilization rates vary so much by community, the opportunity to improve the affordability of health care varies significantly by market. During the late 1990s and continuing into the next two decades, there has been a considerable negative market reaction to programs focused on reducing inpatient utilization. Although much of this has been based upon very few highly publicized cases, a general fear of the unknown, and a significant lack of hard facts supporting the opinion, the realistic potential for such improvement has decreased. The actual potential is as large as ever; however, the willingness to pursue such changes is minimal. Continued higher than average increases in health care costs combined with the ongoing affordability concerns described earlier in this paper have encouraged many more organizations to take a second look at the opportunity for reduced utilization.
How Much Does Provider Supply Vary by Region?
Provider supply varies significantly by region. Table 4 shows that supply varies from 70% of the average to almost 150% of the average.
Relative Provider Supply by State
|Alphabetical State||Relative Beds/1,000 Population||Relative MDs/100,000 Population||Overall Relative Supply|
|Maryland & DC||0.74||1.55||1.15|
Lower supply doesn't always imply under-supply, and in many cases might imply "right" supply. Table 1 (from Part 2 of this series) shows that California, Washington and Minnesota have more affordable health care. Of these three states, two have lower than average supply rates. Minnesota's higher than average provider supply is partially caused by significant in-migration of patients to both the Twin Cities and Rochester. Both California and Washington have a much lower hospital bed supply rate and a more normal physician supply rate. Local efficiencies drive down the hospital bed supply rate much more than the physician supply rate.
How Much Does Employee Affordability Vary?
In addition to being one of the three factors used to derive affordability index values, individual employee affordability itself is highly correlated with health care affordability. Regional personnel practices, labor negotiation practices and trends, individual and corporate expectations all influence how much cost is passed on to employees in the form of both premium sharing and cost sharing. Table 5 shows the variation in the AHP Employee HCAI™ by state.
2008 AHP Employee Health Care Affordability Index
|Alphabetical State||HCAI™||Ranked State||HCAI™|
|New Jersey||0.83||New Hampshire||1.14|
|South Dakota||1.41||New Mexico||1.20|
|West Virginia||1.06||North Dakota||0.93|
Values range from .73 to 1.33 showing a wide range of employee affordability by state. For the three states we have been tracing we find that both California and Washington have much more favorable than average employee affordability at .82 and .87, respectively. Minnesota's employee affordability is much higher at 1.14. Minnesota's employees pay a much higher portion of the costs of their health care than similarly situated employees in California and Washington.
How Much Does the Government Health Care Affordability Vary?
By design we would expect the government affordability index to vary significantly from one state to another. Certain states regularly pay into the system far more than they consume. Indices range from .48 to 1.74 a very wide range.
2008 AHP Government Health Care Affordability Index
|Alphabetical State||HCAI™||Ranked State||HCAI™|
|New York||1.27||Rhode Island||1.13|
The results from the three states we have been tracking show California at .89, Minnesota at .59 and Washington at .75. These metrics have a 1/3rd weight in determining the overall affordability index. Minnesota's .59 significantly drives its favorable overall score, offsetting some of the higher than average affordability of the employee index.
It is informative to draw some intermediate observations from the above information to potentially identify broad initiatives and/or issues that might improve overall affordability. Some of these are:
David Axene collaborated with Nicholas Yphantides in writing this series of articles. Dr. Nicholas Yphantides serves as the Consulting Chief Medical Officer for San Diego County and is the National Director for Health & Wellness with Axene Health Partners. He is a cancer survivor and is an advocate for those in his community who need it the most. For nine years, Dr. Nick served as Chief Medical Officer of one the largest network of Community Clinics in San Diego County.
David Axene started Axene Health Partners in 2003 after a successful career at Ernst & Young and Milliman & Robertson. He is an internationally recognized health consultant and is recognized as a strategist and thought leader in the insurance industry. He earned an MS Degree in Applied Mathematics from the University of Washington and a BS degree in Physics and Engineering from Seattle Pacific University.
More articles, videos, and podcasts by David Axene:
Unintended Consequences Of Exchange Rate Filings
19 Specific Taxes Directly Related To Healthcare Reform
So What Is the Actuarial Value Of My Health Benefit Plan?
Medicare Implements Value-Based Purchasing
The Insurance Rate Public Justification & Accountability Act - Does It Get To The Real Problem?
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