According to a new report from the Health Care Cost Institute (HCCI), between 2007 and 2010, health care cost for children grew faster than for adults.

The increase in spending is due to higher costs for all categories of goods and services. The Children’s Health Care Spending Report: 2007-2010 indicates that the increase in spending occurred even though the numbers of commercially insured children fell and despite a decline in using expensive health care services, such as hospital stays and using brand-name drugs. This is the first analysis of its kind, which tracks changes in spending, prices, and health care services used by children who are covered by private employer-sponsored health insurance.

The report states that the increase in prices surpassed changes in the amount of health care used by children and overtook the rate of inflation from 2007-2010. The fastest increase was observed in the cost for outpatient visits, which increased 34.4% over four years to almost six times of the rate of inflation, whilst the inflation rate grew by 5.2%.

In 2010, per capita spending on children’s health care increased to $2,123, which is an 18.6% increase from 2007, with spending on health care for infants and toddlers being noted as disproportionately high. Even though children below the age of 3 made up 17% of the covered child population, they cost the government 31.4% of the total amount for children’s health care, with a per capita spending reaching $3,896 in 2010. Teenagers also had the highest increase in per capita spending, increasing to 22.3% between 2007-2010. In this age group, more money was spent on prescription drugs and outpatient care.

Over the 4-year period children’s use of mental health and substance abuse services increased almost 24%, with the majority of children using these services being aged between 9 to 18 years. The use of central nervous system drugs like antidepressants, anti-anxiety drugs, and drugs for treating attention-deficit hyperactivity disorder also increased by over 10%. Teenagers had the highest consumption of central nervous system drugs, with prescriptions exceeding 1 per insured 14 to 18 year-old in 2010.

HCCI Governing Board Chairman Martin Gaynor, PhD, Professor of Economics and Public Policy at Carnegie-Mellon University states:

“Children tend to use less expensive health care, so a bump in children’s health care spending is troubling because it could indicate that kids are getting sicker or receiving unnecessary tests or excess procedures. The data on spending for mental health and substance abuse services is particularly worrying. We need to look further into why there is such a high use of prescription drugs for mental health problems among children and whether this expenditure is yielding valuable health outcomes.”

Based on one of the largest collections of private health insurance claims data that has ever been assembled, the HCCI’s Children’s Health Care Spending Report 2007-2010 provides a unique insight into children’s health care spending trends that are covered by their parents’ or guardians’ employer-based health insurance. In the U.S., employer-sponsored insurance (ESI) is the largest single source of coverage for children. The report states that in 2010, insurers and consumers spent almost $88 billion on children’s health care, which is an increase of almost 12% compared with 2007.

Despite a decline of 5.7% in the number of children covered by ESI from almost 44 million in 2007 to 41.4 million in 2010, children’s health care spending still increased.

The majority of children’s healthcare money (40.3%) was spent on professional procedures, including primary care office visits, immunizations and preventive care; the trend remained consistent over the 4-year period. The average cost of professional services per child was $855, which is an increase of 16.5% compared to 2007.

High user rates contributed in making professional procedures the largest area of children’s healthcare spending, but higher prices raised the amount of the money spent. In 2010, children had on average 10 professional procedures, which is a 6.7% increase compared to 2007. However, price increases for preventive care, office visits and other services overtook this growth with an increase of 9.2% over the 4-year period.

People also paid more out-of-pocket for professional procedures, which made up nearly half of all out-of-pocket spending. The average cost per child in 2010 for professional procedures, co-pays, deductibles and other out-of-pocket costs was $182, which is 7.1% more than in 2009.

Outpatient visit facility charges climbed to more than double the rate of inpatient admission facility charges with the highest care registered in emergency departments, where the average facility fee for an emergency room visit rose by 35% from 2007 to 2010 from $684 to $923. Additional Report Highlights:

West Spends Less Than Northeast: Across the country, the growth in children’s per capita spending differed substantially, but the most notable gap was seen between the West and Northeast. Whilst spending increased by more than 25% in the Northeast between 2007 and 2010, the increase in the West was just 14.8%. In comparison with the Northeast, per capita spending for children in the West was $105 less in 2007, which increased to $311 in 2010.

Cost-Sharing Rises: In 2010, people picked up a slightly higher tab of 17.5% for all children’s healthcare costs. This is higher than the cost-sharing rate for the overall population of 16.2% from 2009 to 2010. Whilst the out-of-pocket spending was highest for children under 4, i.e. $491 in 2010, the fastest increase was noted for teens with an increase of 8.8 from 2009 to 2010 to $433.

Prescription Drug Increase: Even though prescription drug use dropped by 1.6%, overall, compared to 2007, the most rapid increase in children’s prescription drugs was by 24.8% for cardiovascular drugs, 20.8% for hormones and 10.4% for central nervous system drugs. The latter rate being almost doubled 1,191 per 1,000 amongst teens aged between 14 to 18 compared with that of children overall, i.e. 692 per 1,000 insured children.

HCCI Executive Director David Newman concludes:

“We hope this report gives researchers and others a much clearer picture about why health care spending for children has risen so quickly. While we now know prices are the underlying cause, further research on services with high expenditures and high growth in prices is needed for us to understand what is driving these price increases.”

Written by Petra Rattue