Matching a national trend, spending for health care in Maryland moderated in 2003, rising 8.4 percent after two straight years of double-digit increases.
That's still about twice as fast as incomes are rising, Ben Steffen, deputy director of the Maryland Health Care Commission, told the commission yesterday as he presented the annual study of health spending.
Whether Marylanders see a moderation in health premiums will depend in large part on whether insurers continue to post bigger profits and sock away more money in reserves, said Deborah J. Chollet, a senior fellow with Mathematica Policy Research Inc., who is writing a report for the commission on this subject.
Those insurers increased their underwriting gains - the amount left over from premiums after health claims and administrative expenses are paid - to 12 percent of premiums in 2003 from 4 percent in 1999, Chollet told the commission.
During that period, she said, insurers have added substantially to their reserve accounts - going to 654 percent of their "authorized control level" from 457 percent in 1999. The "authorized control level" is a calculation based on the amount of risk an insurer bears. State regulators require reserves at 200 percent or more. The national Blue Cross and Blue Shield Association recommends at least 375 percent.
"Insurers are, if you will, sitting on a rather large asset base," she said.
Chollet will prepare a more detailed report for the commission on the issue. It's likely to serve as fodder for what is already a heated debate in Annapolis.
Some lawmakers say insurers - in particular, CareFirst BlueCross BlueShield, the state's largest health insurer, and Medical Mutual Liability Insurance Society of Maryland, the largest malpractice carrier - are keeping more money than they need, and should use some savings to cut premiums.
One health commission member, Jeffrey D. Lucht, an executive with Aetna Inc., said the surpluses "are not as large as they seem." For example, he said, if a health insurer with 3 million members (about the enrollment of CareFirst) reduced its surplus by $300 million in one year, that would only cut premiums by $100 per person, or less than $10 a month.
Stephen J. Salamon, the commission's chairman, said his panel is unlikely to get drawn into the debate of how much is too much for insurers to keep in reserve.
However, he said, preparation of the Chollet report was intended to provide information for other policy-makers as part of the commission's function to monitor factors contributing to health costs.
As for the commission's overall spending report, Steffen noted a number of areas where health cost growth has slowed. For example, he said, the cost of prescriptions rose 9 percent in 2003 after several years of double-digit growth.
Consumers appear to be shifting to generic or over-the-counter alternatives.
Some areas that showed higher-than-average spending growth might actually reflect changes in patterns of care that result in overall savings, he said.
For example, while spending grew 20 percent for home health care, that represented in part an effort to treat more of the elderly at home rather than in nursing homes. Spending on nursing-home care grew only 6 percent, he said.
The spending report was compiled from insurance claims and other data. Overall, it found that Marylanders spent, directly or through insurers or government programs, $26.5 billion on health in 2003.