Health care spending in R.I. exceeds predictions. A new report looks at why.
Rhode Islanders' health care spending rose 7.8% in 2023 over the previous year — a new state record — thanks in part to more hospital visits and the popularity of pricey weight-loss drugs, according to a new report out Monday.
The finding exceeded the 6% rate anticipated by the Office of the Health Insurance Commissioner (OHIC), which published the annual report on health care spending and quality. The office is charged with multiple duties regulating the Ocean State's health insurance plans, including data collection and yearly review of health insurers' proposed rate increases.
Hospital discharges, outpatient visits, and prescription fills are some of the data points that help OHIC determine utilization, or the overall volume of medical services used by Rhode Islanders. In 2023, Rhode Islanders amassed a total of $9.52 billion in health care spending, or $9,892 per person. All three of the state's major insurance markets — commercial, Medicare, and Medicaid — went past the 6% cap. The growth cap had already been enlarged from the rate used from 2019 to 2022, which was 3.2%.
'We expected growth, but we observed much higher growth than we expected,' Commissioner Cory King said. 'It wasn't just price driven, which would account for inflation, but it was utilization driven.'
A significant driver for increased spending: weight-loss drugs such as semaglutide, sold as Ozempic and Wegovy. The drugs belong to a family of type-2 diabetes management drugs called GLP-1 agonists, which work by suppressing glucagon, a hormone that raises blood sugar.
In 2023, a total of eight branded GLP-1 drugs comprised $63.2 million in insurance claims, compared to $50.7 million for 122 other drugs in the diabetes and weight-loss categories combined.
That's not all that surprising, given that the drugs cost about $1,000 a dose, King said.
'The most frustrating part of my job — and I think other state leaders across the country will agree — is that states just don't have control over drug pricing,' King said.
The 7.8% increase is the highest since OHIC began analyzing spending data in 2019. The office calculates an approximate, annual ceiling for the growth of Rhode Islanders' health care costs, leaving room to accommodate inflation, wages and other economic factors. But prediction could only go so far in a year when inflation soared to its highest in 40 years.
Commercially insured patients saw an increase of about $6,735 per person (a 6.9% increase) and Medicaid patients paid $7,678 more (a 6.7% increase). Medicare represented an 8.7% increase in per person spending, for about $14,400 annual spending per enrollee — something of an anomaly, King thought, as the Medicare growth rate has historically been 'relatively low.'
Spending also differed by insurers, according to OHIC's estimates. In the commercial market, both Tufts Health Plan and Blue Cross and Blue Shield of Rhode Island were under the cost growth target, at a little under 5% growth. United Health Care saw an 8.5% increase in spending, and Neighborhood Health Plan rose 17.4%.
Rhode Island's spending growth was in line with other states that saw unexpected jumps: Connecticut experienced 7.8% growth, Massachusetts 8.6%, and Delaware 9.1%.
After Ozempic secured widespread cultural and clinical popularity for its success in rapidly reducing appetite and weight, the U.S. Food and Drug Administration approved the rebranded-but-identical Wegovy for weight-loss in 2021.
OHIC's analysis found that claims for 30-day prescriptions of the weight-loss drugs doubled from 2022 to 2023, from about 9,000 to over 18,000. Total commercial spending on GLP-1 drugs totaled over $121.4 million from 2021 to 2023, and spending tripled in that time.
As demand for weight-loss drugs rises, states grapple with Medicaid coverage
King acknowledged the long-term benefits or risks of GLP-1 drugs as weight-loss treatments are still unclear. They might save money in the long run, by lowering obesity rates and the chronic conditions associated with it.
'But in the short term, we have a tradeoff as a society, as 'Can we afford to pay the prices that are required?'' King said.
Insurers are asking the same question. Blue Cross and Blue Shield of Massachusetts announced in April it would begin covering GLP-1 drugs for diabetes only.
Blue Cross and Blue Shield of Rhode Island did not have an immediate comment Monday on the status of GLP-1 coverage in Rhode Island. The company noted in December 2024 that in the first three quarters of 2024, it experienced a $30 million operating loss, generated partially by a $29 million increase in prescription drug costs, including GLP-1 agonists.
Health care spending is expected to go up from year to year, the report acknowledges.
'In fact, there are components of Rhode Island's delivery system, such as primary care, community-based behavioral health care and Medicaid-funded community providers, where spending needs to grow to promote access to care in the most appropriate, lowest cost setting,' the report states.
This year's report makes two broad recommendations to improve the state's understanding of how people are spending money on health care:
Boost investment in primary care across all payers, not just commercial ones.
Expand state oversight of health care systems and hospitals by making hospital finances more transparent and publicly accessible.
King foreshadowed the first recommendation on April 29 when he joined Gov. Dan McKee and other state health leaders to announce a slate of initiatives meant to repair the state's primary care challenges.
If the state builds out its primary care infrastructure, the data should reflect fewer emergency department visits and hospitalizations, more efficiency and healthier people, King said.
'I don't want people to walk away with the inference that, 'Oh gosh, health care spending is increasing so rapidly; we can't spend any money anywhere,'' King said.
King cited the pandemic as one possible reason Rhode Island saw more health care spending than predicted, given widespread interruption in regular checkups and delays in preventative care.
The 2023 data also begins to capture the consumer consequences of rising inflation since 2021. OHIC recommends maximum rate increases for commercial insurers, but King said his office can only adjust these levers sparingly because of multiyear contracts in the private market. There aren't opportunities to negotiate higher rates accounting for inflation until contracts are up for renewal, he said.
So far, the preliminary 2024 data shows more of the same, King added, with inflation driving costs,
King's office can't regulate self-funded employer plans, which account for about 60% of employer-sponsored health coverage statewide.
'We don't have any say in those contracts, but I think we have influence,' King said.
That influence is not entirely symbolic, King thought, as many of Rhode Island's self-funded plans are issued by health care systems themselves, like Brown University Health: 'I think they should understand the importance of equitable payment for primary care.'
The report's second recommendation seeking greater state oversight of health care delivery calls for the creation of a statewide data system that can gather, analyze and publicly share information on hospital system finances. The report notes similar databases in Colorado and Massachusetts as examples worth following.
Data like hospitals' operating margins remains somewhat opaque. A unified data system, King said, could help 'create a more balanced picture of how the dollars flow from the taxpayer and the worker down to the provider, and then are redistributed to workers and capital.'
The most frustrating part of my job — and I think other state leaders across the country will agree — is that states just don't have control over drug pricing.
– Rhode Island Health Insurance Commissioner Cory King
In 2023, inpatient and outpatient hospital care combined made up more than 40% of all health care spending in the state, the report states.
In the commercial market, outpatient costs alone increased 11.3%, from $1,618 to $1,801 per person, and emergency department spending rose 12.5%.
Hospitals usually charged more for basic services like lab tests. In 2023, a routine bloodwork panel may cost $39 at a hospital-based provider, compared to $9 in a non-hospital setting. Hospitals were paid up to seven times more than outpatient clinics to deliver injections and chemotherapies. A typical cost for a medicine injection might be $23 at a standalone clinic, but $235 in a hospital setting. Imaging and endoscopies sported price tags triple in size when delivered in hospitals.
'The disclosure of those price differences was not meant to say, 'Oh, gosh, hospitals are bad and non-hospital settings are good,'' King said. 'There are reasonable factors at play for why hospitals charge more…But there is an opportunity for savings, ultimately to the consumer and to the employers and the taxpayer, by shifting more care to these non-hospital settings.'
The full report, plus summaries and a chart book, is available on OHIC's website.
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