Katie Martin, M.P.A., on soaring prescription drug spending and relatively stable out-of-pocket costs

Prescription drugs posted the largest spending increase among the four service categories examined in the Health Care Cost Institute’s (HCCI) latest Health Care Cost and Utilization Report, released today. Drug spending grew by $460 per person, or 40%, from 2019 through 2023, outpacing inpatient care, outpatient care and professional services.

Katie Martin, M.P.A., president and CEO of HCCI, acknowledged that the figure reflects gross prices and doesn’t take into account rebates. Another part of the report estimates that the increase with rebates and coupons would be $245 per person, or 27%. Martin spoke about the price of progress. “There are remarkable advances in technology and therapeutics that are life changing for people, but those are coming at a higher and higher cost,” Martin said in an interview with Managed Healthcare Executive (MHE).

HCCI’s data set includes 30 million covered lives of people under age 65 who get insurance through work. According to the report, health care spending per person grew by 18.8% from 2019 to 2023, which translates to $1,068 of additional spending per person. Prices increased by 17.7% during those years, while utilization grew by just 1.8%. The report stops in 2023 because of the lag of when claims are complete and validated.

Martin also explained in the MHE interview why the share of spending that employees pay out of pocket has changed little — in 2023, it was 13.6%, or $923 out of $6,743 — despite rising overall costs and years of discussion about high-deductible plans and greater cost sharing. Out-of-pocket spending in the report is averaged across everyone with employer coverage, so some of the consistency reflects a law of large numbers, she said. The HCCi report notes that in any given year, approximately a quarter of the people with employer-based health insurance are “nonutilizers” of medical services. Out-of-pocket maximums under current law also put a ceiling on what people can be required to pay, and Martin said HCCI’s past analyses have found the highest spenders sit right up against those maximum.

That protection does not eliminate the burden on patients, she said. “That doesn’t mean that people can easily afford what that out-of-pocket max is or the deductible. So the pain that people are feeling, the financial crunch, is very real,” Martin said. The out-of-pocket trend has been slower and lower than overall spending, and the proportion stays fairly consistent from report to report.

Martin also discussed a steep, 51% decline in inpatient spending on musculoskeletal services from 2019 to 2023, which she suspects reflects procedures such as hip and knee replacements moving to outpatient settings. HCCI has begun a study to answer that question.