Health-Care Costs Rising Faster, Study Shows

After three years of intensive efforts to hold down hospital and physician fees, health-care costs for Los Angeles-area employees and their dependents are beginning to rise rapidly again despite moderating prices in other sectors of the economy, a study has found.

Figures compiled by U.S. Corporate Health Management, a Santa Monica-based health-care cost mangement company, show that charges covered by health insurance plans at nine of Southern California’s largest employers rose 13% in 1985. Covered charges rose 9% in 1984.

Health-care expenditures had generally been slowing down since private insurers and the federal government’s Medicare program first imposed economy measures beginning in 1983. Those measures sought to lower costs by encouraging shorter hospital stays. But the latest figures indicate that those efforts may have reached their limits, experts say.

Medical costs in Southern California are “increasing a lot faster than the consumer price index,” said Patricia Dempster, chairman of the Los Angeles Employers Health Care Coalition, which commissioned the study. “A lot of employers are concerned about it. It seems that if you get things under control in one place by pushing down, it just squirts out someplace else.”

The U.S. Corporate Health Management analysis of 1985 claims data focused on nine employers who had $136 million in total claims in 1985 from insuring 151,666 people.

The study, conducted for the Employers Health Care Coalition, a 35-member group of some of the state’s largest employers, found that the most striking increases in health-care costs came in psychiatric and chemical dependency care, areas not yet fully covered by most federal and private medical cost-containment measures. Psychiatric hospital admissions, for instance, rose 25% over 1984 figures.

Though the study said there was a 3% decrease in overall hospital admission rates, the average length of stay increased 6.4%. And most surprisingly, the study found that the backbone of the cost-cutting efforts--encouraging patients to get treated on an outpatient basis--was being thwarted in part by higher unit prices for some outpatient care, said Paula Nordhoff, a consultant for U.S. Corporate Health Care Management.

Outpatient surgical charges increased by 27%, Nordhoff said, adding: “We have recommended to several employers that they monitor their outpatient care closely.”

The local findings parallel national figures released last week that showed an increase in health-care prices in 1986.

The Bureau of Labor Statistics reported that the price of medical goods and services rose 7.6% in the 12 months ending in July, compared to an overall increase in the consumer price index of only 1.6%.

During the comparable period a year earlier, the cost of medical goods and services increased 6.3% while the overall consumer price index rose 3.7%.

In Los Angeles, the price of medical care rose 7% for the 12 months ending in July, more than double the 3% increase in the cost of all measured goods and services, the bureau said.

Health-care experts offered a variety of explanations for the upturn. But many agreed that various efforts to control utilization of services seem to have been stretched to their limits.

“The easy stuff has been attacked,” said Leonard D. Schaeffer, president of Blue Cross of California, the state’s largest health insurer.

Indeed, many of the factors inflating the cost of health care are beyond the control of present monitoring and cost-cutting measures. Expensive new medical technology, rising medical malpractice awards and the tendency of doctors to practice so-called defensive medicine--ordering more tests and other procedures in order to protect themselves from any subsequent litigation--have all increased costs, experts say.

But most important, the nation’s aging population has put more demands on the health-care system.