Monday, January 07, 2013

How to Save $5 Billion in Healthcare Spending for Employers and Taxpayers

In all of the many discussions about how to control healthcare costs, there’s one topic that you almost never hear about: maternity care.

Maternal and newborn care together represent the largest single category of hospital expenditures for most commercial health plans and state Medicaid programs.  That means that if there are ways to reduce maternity care costs,  insurance premiums for employers could be reduced and  Medicaid coverage could be more affordable for taxpayers.

Nobody wants to cut spending on maternity care if it’s going to harm mothers or babies, but there is at least one aspect of maternity care that’s not only expensive but bad for both mothers and babies, and that’s the high rate of Cesarean sections.  One-third of the 4 million babies born in the U.S are delivered by C-section rather than vaginal delivery.  That’s a 50% increase in the past decade.  In some states, the C-Section rate went up by 70 or 80%.

How much do all those C-sections cost?

A lot.  If the rate of C-sections were reduced back down to 15% (the rate recommended by the World Health Organization), it would save about $5 billion, based on data in a new report released today called The Cost of Having a Baby in the United States.   For commercially insured patients, the report shows that the average cost of a birth by C-section was $27, 866 in 2010, compared to $18,329 for a vaginal delivery.  Medicaid programs paid nearly $4,000 more for C-sections than for vaginal births.

The report also shows that there is significant variation in costs for each type of delivery both within states and across states, which means there are additional opportunities for savings.  The average payment by commercial insurers for a vaginal birth (not including newborn care) was $10,318 in Louisiana and $11,692 in Illinois, but payments were nearly 50% higher in California ($15,259) and Massachusetts ($16,888).  The average payment for a c-section was $13,943 in Louisiana and $15,602 in Illinois, but $20,620 in Massachusetts and $21,307 in California. There is also significant variation in costs for births even within individual states.  For example, although the average maternal cost for vaginal birth in Massachusetts was $16,888, 25% of vaginal births cost more than $19,000 and 25% cost less than $13,000.  (Although the study was not designed to determine the causes of this variation, other studies have shown that variation is due to different prices charged by different hospitals and clinicians as well as different needs of women and babies.)

Other findings in the report include:

  • Increases in the cost of care.  The cost of maternal care (not including newborn care) increased by over 40% between 2004 and 2010 for commercially insured women.
  • High costs for newborn care.  Total commercial payments for care of newborns were $5,809 for babies delivered vaginally and $11,193 for cesarean births.  Total Medicaid payments for newborn care were $3,014 for vaginal births and $5,607 for cesarean births.  Reducing the rate of prematurity among infants could significantly reduce these costs.
  • High charges for the uninsured.  Uninsured parents could be charged over $50,000 for a baby born by c-section and over $30,000 for a baby born by vaginal birth.  Average provider charges for a c-section in 2010 were $51,125, but commercial insurance plans only paid $27,866, 55% of what an uninsured patient could be asked to pay.
  • High costs of hospital-based delivery.  The largest share of all combined maternal-newborn costs goes to pay for hospital or other facility costs regardless of the type of birth.  59% of total maternal and newborn care costs for vaginal births are used to pay facility fees, and 66% of costs for c-sections are for facility fees.  Similarly, the hospitalization phase of childbirth consumed from 70% to 86% of all maternal and newborn care costs, depending on payment source and type of birth.  (Consequently, increasing the use of birth centers for women who want to use them can greatly reduce procedure use and healthcare spending while improving quality.)

There are many examples of physicians, midwives, hospitals, and birth centers around the country that are reducing maternity care costs in ways that improve quality and outcomes for both mothers and babies, a win-win for both payers and patients.   However, a major barrier to changes in care delivery is the current healthcare payment system.  Instead of being on what achieves the best outcomes for mothers and babies, payments today are based on what specific procedures were used.  Fortunately, there are better ways to pay for maternity care, such as paying a single amount for a delivery (regardless of the method used).  More information on payment reform and delivery redesign opportunities in maternity care are available from CHQPR’s website, and comprehensive information on how to improve maternity care is available from Childbirth Connection’s Transforming Maternity Care website.

Improving maternity care should be a priority for every state and region in the country.  It will both save money and improve outcomes for hundreds of thousands of mothers and babies every year.  What bigger win-win opportunity could there be?


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