Drivers of Increasing Health Care Expenditures:
Simply stated, health care expenditures are a function of utilization of health care services and the unit cost of those services. Increasing expenditures are due, in part, to increasing unit costs resulting from beneficial yet costly new technology, and the staffing and capacity shortages resulting in higher labor costs. Utilization is increasing as the result of the rising prevalence of treated disease, lifestyle changes such as obesity that are linked to increased disease, and direct-to-consumer marketing, such as the television commercials advertising particular drugs.1
Hospital Care Dominates:
Hospital care continues to be the single largest component of personal health care expense, accounting for 36 percent of Hawai'i's health care expense in 2009 (the most recent year available for state data) and 37 percent nationally in 2011.2
Physician and Professional Services:
Physician and professional services rank second, at 31 percent of personal health care services in Hawai'i in 2009 and 27 percent in the nation in 2011. Physician and professional services for Hawai'i have decreased and stabalized as a proportion of all expenditures, after increasing betwen 1990 and 1997.
Medical Nondurables and Prescription Drugs: Medical nondurables, which include prescription and non-prescription drugs, are the third largest component of personal health care expense in Hawai'i and the nation, accounting for 14 percent of Hawai'i's health care expenditures in 2009 and 14 percent of national health care expenditures in 2011. Prescription drug expenditures, the largest component of this sector, have increased much more rapidly than the sector as a whole. Prescription drug expenditures were 85 percent of all medical nondurable expenditures for the nation in 2011. This is up considerably from 1980, when prescription drugs made up 42 percent of medical nondurables expenditures for Hawai'i and 55 percent nationally. In 2002, costs of retail prescription drugs in Hawai'i increased by 12.5 percent (from the previous year), to an average price of $51.18,3 compared to 9.5 percent increase for the nation as a whole.
The Significance of Nursing Home Expenditures:
Nursing homes, also known as long-term care facilities, represented 5.3 percent of personal health care expenditures in Hawai'i in 1991 and 5.4 percent in 2009--below the U.S. rate of 8.7 percent (1991) and 6.6 percent (2011).
These percentages mask the importance of long-term care expenditures.
Viewed from a different vantage point, costs of long-term care facilities represent the single largest component of the Medicaid budget at 22 percent. Long-term care beneficiaries make up only 4 percent of all Medicaid beneficiaries, making this the most expensive group to care for.4