Academic journal article Health Care Financing Review

Physician Cost Experience under Private Health Insurance Programs

Academic journal article Health Care Financing Review

Physician Cost Experience under Private Health Insurance Programs

Article excerpt


Expenditures for physician services are a large and growing component of total health care expenditures. In 1980, physician-service expenditures were $41.9 billion. By 1988, those expenditures had risen 151 percent to $105.1 billion (Office of National Cost Estimates, 1990). The ratio of physician expenditures to hospital expenditures (inpatient and outpatient services combined) increased from 41 percent in 1980 to 50 percent in 1988.

Much of what I know regarding expenditure trends for physician services relates to government-sponsored programs, primarily the Medicare and Medicaid programs (Fisher, 1988; Kay, 1990; Helbing and Keene; 1989; and Mitchell, Wedig, and Cromwell, 1989).(1) However, although public-program expenditures account for the majority of expenditures for hospital services, they represent less than one-third of physician costs. The largest source of payment for physician services is private health insurance. In 1988, private health insurance accounted for 48 percent of total physician costs, followed by public program (33 percent) and direct consumer payments (20 percent). Yet little is known about physician-cost experience and trends under private health insurance. Some obvious questions addressed in this article are:

* What is the cost per enrollee under private insurance programs for physician services?

* How rapidly are physician costs increasing? What is the rate of change (measured on a per enrollee basis) in physician claims costs? in allowed charges? in submitted charges?

* How do private insurance trends for physician services compare with Medicare program trends?

* What is the rate of change in allowed charges and volume of services for narrowly defined categories of physician services for specific procedures?

Information on physician-claims cost trends under private health insurance programs is of obvious interest to private insurance payers, who would find it useful to compare their own claims-cost trends with those of other payers. But claims-cost trend data are also of interest from a public policy perspective. Physician expenditures (a major and growing component of total health care costs) and cost experience under private health insurance programs can serve as useful comparisons with cost experience under government-sponsored programs. In this article, I present data on levels of physician-cost experience under private insurance programs by type of service for 1988 and growth trends for 1986-88. Comparisons are also made with national health expenditure trends and with Medicare program trends for the same period.

Overview of study methodology

During the fall of 1988, letters were sent to the presidents of all Blue Cross and Blue Shield plans, inviting them to participate in a multiplan study of physician cost experience. Nineteen plans contracted with the Center for Health Policy Studies to participate in the study. The cost of the study was shared by each of the participating plans. The specific project objectives were:

* To develop and compare among plans accurate measures of physician charge, utilization, and claims-cost experience on a per member basis in 1988 and during 1986-88.

* To analyze in detail charge, allowance, utilization, and claims-cost data for major type-of-service (TOS) categories and for a sample of approximately 90 high-dollar-volume procedures.

* To analyze changes in the health insurance and physician environments and evaluate their impact on physician charge, utilization, and cost trends.

* To examine specific physician cost and utilization problem areas and identify attractive cost-containment strategies that have been implemented by plans to respond to these problems.

The multiplan study (Dyckman, 1990) commenced in November 1988 and was completed for each of 19 participating Blue Cross and Blue Shield plans, with the preparation of a final report for each plan, in January 1990. …

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