Minnesota medical costs rebound in 2021

Medical spending in Minnesota returned to its pre-pandemic trajectory in 2021, when a 12 percent increase in payments for surgeries, clinic visits, prescriptions and other services offset a 2 percent decline in 2020.

Waves of COVID-19 in 2021 may have driven up medical costs, but Wednesday’s MN Community Measurement report mostly suggested that people sought out typical forms of care they had put off in 2020.

Growth in health care costs also outpaces wage growth for most Minnesotans, said Julie Saunier, president of MN Community Measurement, a nonprofit that publishes data on health care quality and costs.

“We’re still on a long-term path that’s not really sustainable,” she said. “We still haven’t found the magic bullet for cost containment.”

The report is based on out-of-pocket amounts paid to more than 1 million minor Minnesotans and their private health insurance plans. These sources combined spent $8,244 per patient per year on medical services, a figure heavily influenced by patients with chronic conditions, who had the highest rates.

That compares with $7,332 per patient in 2020 and $5,904 in 2014, when the data was first publicly reported. The data was provided by four of the state’s largest health insurers: Blue Cross and Blue Shield of Minnesota, Medica, HealthPartners and PreferredOne.

The report also reminds that hospital care can cost tens of thousands for Minnesotans who need it, but other sources of medical care add up to shared costs.

“For the people who need it, it’s very expensive,” Sonier said, “but not many of us are hospitalized in any given year.”

When distributed among all non-elderly Minnesotans with private insurance, annual costs for inpatient hospital services totaled $1,176 per person in 2021. Comparative annual costs reached $1,512 per person for prescription drugs and pharmacy services and $3,612 per person for surgeons, primary care physicians, and other clinicians.

Risk-adjusted costs vary by region, topping $10,000 a year for Rochester residents who are more likely to receive care in the southeastern Minnesota market, dominated by the Mayo Clinic.

Minneapolis residents used more medical care on average but spent slightly less, Sonier said, possibly because competition in the Twin Cities’ medical market is driving down prices. St. Cloud residents had even lower annual costs, but mostly because they were less likely to seek medical care in 2021.

Non-elective surgeries were suspended under a state emergency order during Minnesota’s first wave of COVID-19 in the spring of 2020, and many providers canceled them later that winter when a more severe wave hit the state. Some patients stayed away from hospitals and clinics due to concerns about COVID-19 in 2020, but may have had less choice in 2021 when uncontrolled diabetes or painful knees required care.

It’s unclear how that will translate into medical spending in 2022. Allina Health and Fairview Health, two of Minnesota’s largest medical providers, reported improved revenue in 2021 but worsening financial woes in 2022. Their hospitals they lost money especially when staff shortages prevented them from discharging recovering patients to nursing homes and freeing up beds for new patients.

Minnesota’s efforts to control costs have focused on value-based contracts, through which insurers pay for the quality of patient care, not the amount. Cheaper telemedicine has also been suggested as a way to reduce more expensive in-person clinic visits, but its widespread use in 2021 has not had much of an impact.

Clinicians are still figuring out when telemedicine can replace in-person visits and which specialties, such as mental health, offer the most potential, Sonier said.

“The jury is still out on the long-term trends there and where it will offer the most value,” she said

MN Community Measurement allocated patients to primary care clinics based on where they received the majority of their care in 2021. Clinics can be compared to those patients’ risk-adjusted costs—the idea being that efficient clinics have helped patients stay in better health and avoid preventable costs.

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