U.S. News Examines Rising Health Care Costs
U.S. News & World Report last week examined the rise in health care premiums and the reasons behind steadily increasing health costs. "Just a few years ago," it seemed that managed care had ended the problem of health inflation, as managed care organizations "pushed down premiums" and "[f]lush employers ... expand[ed] coverage to keep workers happy," the magazine notes. But a survey released last month by Hewitt Associates found that insurers on average are seeking a premium of $5,450 per worker next year, up from $4,000 in 1999. In response, employers are increasing cost-sharing among employees, forcing them to pay higher deductibles and co-pays. A few businesses, such as Polaroid, are even "eliminating health subsidies." U.S. News outlines six reasons for the health inflation:- The aging of the baby boomer generation, a "demographic bulge of 76 million Americans," has led to an increase in the average age of workers, with larger medical care bills as a result. In 1980, 50% of all workers were over age 35, compared to 62% today.
- "Political interference into health care, while protecting patients, has also added to costs."
- Providers have "figured out" how to win higher reimbursements from insurers, who then pass on the costs to consumers.
- Managed care companies, initially more concerned about market share than making money, are "finally trying to earn steady profits."
- The rise of "blockbuster" drugs has increased spending on medications as a percentage of total health costs. Insurers will spend an estimated $118 billion on prescription drugs this year, up from $40 billion in 1996.
- Finally, "[t]echnological innovation is driving up costs, while often -- though not always -- improving health."
Will Employers Look Toward Greater Restrictions?
Meanwhile, a survey by the actuarial consultants Milliman USA released last week found that managed care companies are increasing their premiums by 16% next year, up from 12% this year, the Baltimore Sun reports. These figures are in line with an employer survey released by Watson Wyatt Worldwide last month, which found that premiums and costs for self-insured plans will jump 13.6% next year. "Heavily managed care was a victim of its own success," Jon Gabel, vice president of the American Hospital Association's Health Research and Education Trust, said, noting that MCOs have eased restrictions in recent years due to consumer pressure. He added, "Managed care doesn't want to get between the physician and the patient any more, because of the backlash. ... Maybe after a couple of years of double-digit inflation and thousand-dollar deductibles, people will be more willing to accept a tightly managed HMO, but not yet." The Sun reports, however, that some health professionals believe that if costs continue to rise at this pace, employers may look to re-introduce tighter restrictions. "The pendulum will start to swing back," Jeff Emerson, mid-Atlantic region president for CIGNA HealthCare, said, adding, "As we enter a tighter economy, employers may be more tolerant about introducing plans that have more Draconian elements" (Salganik, Baltimore Sun, 11/11).
Other News Coverage on Costs
Two other papers this weekend tackled the subject of rising health costs:
- The Atlanta Journal-Constitution reports that "[w]orkers who haven't opened their latest health insurance enrollment packets may need to brace for something their employers are already dealing with: sticker shock" (Grantham, Atlanta Journal-Constitution, 11/10).
- The New York Post reports that the "added burden" on hospitals in the New York area due to fallout from the Sept. 11 attack on the World Trade Center "will compound already skyrocketing health care costs that rose 11% from last year and are expected to jump as much as 17% in 2002" (Learmonth, New York Post, 11/11).
