Minnesota health costs could double to $94 billion

The overall cost of health care in Minnesota grew at a relatively low rate during 2016, according to a new state report, but the broader trend points toward a likely doubling of expenses over the next decade.

Total health costs in 2016 came in at $47.1 billion, a 4 percent increase over the previous year, according to the annual study by the Minnesota Department of Health. The report cited relatively low payments to health insurers that manage care in state public health insurance programs as contributing to the low growth rate.

Long-term projections, however, suggest annual health care spending over the next decade will double to $94.2 billion in 2026. That means Minnesota would be spending $1 out of every $6 generated by the state's economy on health care.

"While growing health care spending could be a feature of economic growth that we as a society accept, indications are that stakeholders virtually across the board worry about the sustainability of trends," the report states. "Cost containment will be challenging: there appears to be no single solution to effectively curtail health care spending growth."

The pace of health care spending growth is expected to accelerate to 7.4 percent per year between 2017 and 2026 due to higher prices, more use of health care and technology costs. Demographic shifts will boost Medicare enrollment and more spending for people with multiple chronic ailments, according to the report.

Historically, private health plans have accounted for the majority of health care spending in Minnesota, but at some point in the next decade the share of public-sector spending is expected to draw even.

"The long-term outlook shows big financial challenges ahead for individuals, employers and government," said Jan Malcolm, the state Health Commissioner, in a statement. "We must do more to limit spending increases, and that will mean a need for continued innovations in public policy approaches, marketplace solutions — and above all a sharpened focus on preventing disease."

Hospital spending was the largest single category of health care expense in 2016. The growth of retail drug spending wasn't a big factor in 2016, the report said, but overall pharmaceutical costs played a bigger role after factoring spending on drugs administered in medical offices and hospitals. It also noted the significant increase in out-of-pocket spending requirements for Minnesotans with health insurance.

"Out-of-pocket spending in the state, which includes spending on deductibles, co-payments and other forms of cost-sharing, grew at double the rate of total spending between 2002 and 2016," said Stefan Gildemeister, the state health economist, in a statement. "For many Minnesotans, that is causing very real pain."

Christopher Snowbeck • 612-673-4744 Twitter: @chrissnowbeck