Prices for medical care surged in Minnesota. Here’s what the state is trying to do about it.

The amount of health care Minnesotans got in 2022 didn’t grow much from the year before — but the amount they paid for it sure did.

Health care spending increased 15% from 2021 to 2022, reaching $6,813 per non-elderly adult Minnesotan with private health insurance, according to an analysis of claims paid. Rising prices explain most of the increase, because utilization of health care services increased less than 1% from 2021 to 2022 — although prescription drug usage increased by 4%.

Understanding what’s driving up health care spending is important because the system is pricing itself beyond what some Minnesotans can afford, even if they have insurance, said Stefan Gildemeister, state health economist for the Minnesota Department of Health. “We know there are some Minnesotans who are struggling to afford care and delaying care because of the underlying cost, or their perceptions of the cost of care.”

Simmering anger over rising health care costs erupted earlier this month, when the assassination of UnitedHealthcare’s chief executive on a New York sidewalk prompted online and social media backlash against the company, rather than sympathy.

The state report shows many parties bear the blame for rising costs. Some clinicians have raised their prices, for example, and then said it’s partly to recoup the expense of hiring workers to fight with insurance companies when they deny requests to pay for patient care.

The per-person costs in the report reflect the combination of money paid by private insurers for medical claims and by patients out of their own pockets.

About 40% of spending on privately insured adults in Minnesota paid for office visits and doctors’ fees. Another 25% went to outpatient facilities and surgery centers, 18% paid for prescription drugs, and 17% covered inpatient hospital care, according to the state report. But when it comes to the causes of the recent increase, prescription drugs take more blame.

Spending on retail prescription drugs increased 30% in 2022, the result of a 25% net increase in prices and just 4% more usage. And those numbers reflect a time before the explosion of costly GLP-1 medications for weight loss, so economists expect those trends to be even more dramatic in 2023 and 2024.

The bill for these drugs surged so much over the past year that even medical providers such as Hennepin Healthcare and Mayo Clinic started capping how much their employee health plans would pay for them.

By comparison, prices for inpatient care increased 25% as hospitals had to pay more to overcome shortages of doctors, nurses and other caregivers, while utilization actually decreased nearly 19%.

Gildemeister said that’s an important trend to monitor because hospitals are starting to lose patients with less intense care needs to outpatient clinics and surgery centers. But they need to remain financially healthy because Minnesota relies on them for emergency and intensive care.

The report is based on Minnesota’s statewide database of insurance claims, but only focuses on privately insured health care and excludes treatments covered by government-funded Medicare and Medicaid programs for people who are elderly, disabled or have lower incomes. Gildemeister said the government caps how much it reimburses medical providers under these public plans, so they aren’t as useful for analyzing price changes.

All told, health care spending on publicly and privately insured patients in Minnesota reached $66.8 billion in 2022, according to the report. Nationally, the figure was $4.5 trillion.

Health care spending has yo-yoed in Minnesota, declining in 2020 after a state emergency order restricted access to hospitals and clinics to slow the spread of COVID-19. Spending rebounded in 2021, when doctors sought to reschedule care that had been delayed for patients in the first year of the pandemic.

The year 2022 was more of a return to normal health care patterns, even though a wave of COVID-19 omicron variant cases peaked in its early months.

Price increases have been the cause of spending growth in so many non-pandemic years that it’s become almost expected, Gildemeister said. “Some health economists have coined the term, ‘It’s the prices, stupid.’”

Gov. Tim Walz and a DFL-led state Legislature targeted the price issue over the last two years with a variety of regulatory and oversight solutions, such as the creation of a prescription drug affordability board to review drug spending and potentially set payment limits for state health plans. Minnesota is also collecting data from drug manufacturers and distributors and publicly highlighting cases in which they appear to be grossly overcharging for medications.

Such efforts are still in their beginning stages, though. After a year, the affordability board is still in the process of hiring an executive director.

Minnesota also announced this month it is seeking bids for an analyst to run simulations comparing whether health care would be cheaper under a single-payer, government-run system than under the current private system. State officials have also been studying the feasibility of a so-called “public option” health plan that would use the size and negotiating power of the state to create a competitive option in the private insurance marketplace.

Both options are favored by DFL leaders but not as much among Republicans, who gained some seats in the state House and will have more clout next session.

State Sen. Jim Abeler, R-Anoka, predicted a busy session on health care topics, ranging from the fate of the University of Minnesota hospital to insurance coverage for undocumented immigrants. But he hoped there would be discussion on the use of re-insurance to prevent health insurance premiums from rising too much, and scrutiny over the administrative waste in health care.

“We’re paying the middleman,” he said, “and I think Democrats and Republicans would agree that we don’t want to pay so much to middlemen.”