Analyzing the health care cost curve: a case study

Abstract

This case study uses data from a self-insured employer plan to perform an analysis into the properties of the health care cost curve. The analysis shows that one statistical property of the health care cost curve is that costs rise continuously, not on an annual or monthly basis. Graphical analysis indicates that managed care techniques used to restrain costs can also smooth utilization, producing the continuously growing cost curve observed. The analysis further illustrates that there is no one "cost curve"-analysis must be segmented by population. Finally, the power of predictive models to fit the cost curve varies by population. To the extent that these results generalize to other health plans, this analysis should be used to inform the implementation of strategies to bend the cost curve. Population health management programs and health policy should be based on continuous analysis and adaption rather than implemented as one-off changes.