Medical spending in Minnesota rebounded in 2021

Medical spending in Minnesota returned to a pre-pandemic trajectory in 2021, when a 12% increase in payments for surgeries, clinic visits, prescriptions and other services offset the 2% decline in 2020.

COVID-19 waves in 2021 could have increased medical spending, but Wednesday's report from MN Community Measurement mostly suggested that people sought typical forms of care that they put off in 2020.

Spending growth in health care also exceeded wage growth for most Minnesotans, said Julie Sonier, president of MN Community Measurement, a nonprofit organization that publishes health care quality and cost data.

"We're still on a long-term path that isn't really sustainable," she said. "We have not yet found the magic bullet for cost containment."

The report is based on amounts paid out of pocket by more than 1 million non-elderly Minnesotans and by their private health insurance plans. Those sources combined to spend $8,244 per patient per year on medical services — a figure heavily influenced by outlier patients with chronic diseases and the highest costs.

That compares to $7,332 per patient in 2020, and $5,904 in 2014, when the data was first publicly reported. The data is provided by four of the state's largest health insurers: Blue Cross and Blue Shield of Minnesota, Medica, HealthPartners and PreferredOne.

The report also is a reminder that inpatient hospital care can costs tens of thousands for Minnesotans who need it, but other sources of medical care drive total spending.

When spread across all non-elderly Minnesotans with private insurance, annual spending on inpatient hospital services amounted to $1,176 per person in 2021. Annual spending by comparison reached $1,512 per person on prescription drugs and pharmacy services and $3,612 per person on surgeons, primary care doctors and other clinicians.

Risk-adjusted spending varied by region, exceeding $10,000 per year for Rochester residents who were more likely to receive care in a southeast Minnesota market dominated by Mayo Clinic.

Minneapolis residents used more medical care on average, but spent slightly less, Sonier said, probably because competition in the Twin Cities medical market drives down prices. St. Cloud residents had even lower annual spending, but mostly because they were less likely to seek medical care in 2021.

Non-elective surgeries were suspended under a state emergency order during Minnesota's first COVID-19 wave in spring 2020, and many providers canceled them later that winter when a more severe wave hit the state. Some patients stayed away from hospitals and clinics due to COVID-19 fears in 2020, but may have had less choice in 2021 when unmanaged diabetes or painful knees demanded care.

How that translates into medical spending in 2022 is unclear. Allina Health and Fairview Health, two of Minnesota's largest medical providers, reported improved revenues in 2021 but worsening financial problems in 2022. Their hospitals especially lost money when staffing shortages prevented them from discharging recovering patients to nursing homes and freeing up beds for new patients.

Clinicians are still figuring out when telemedicine can replace in-person visits and which specialties, such as mental health, offer the most potential, Sonier said.

"The jury is still out on the long-term trends there and where it will offer the most value," she said