Health care spending almost doubled from $717 billion in 1990 to $1.9 trillion in 2003. After a nearly 15-year climb in health care costs,
the percentage of increase from one year to the next is finally starting to slow down.
“The good news is that the cost increases are abating in 2006 and 2007,” says Bob Dawson, president and CEO of HealthAmerica and
HealthAssurance. “The bad news is that the costs are still high.”
Smart Business talked to Dawson about the reasons for high health care costs and some of the factors that are bringing them down.
How high did premiums get?
Looking at the national data, premiums for employer-sponsored health coverage rose an average of 7.7 percent in 2006. That’s less than
the 9.2 percent in 2005 and a recent peak of 13.9 percent in 2003. It’s still a significant expenditure that’s projected to reach $3.6 trillion
in 2014 nationally. And even though we’ve experienced the slowest rate of premium growth since 2000, premiums still increased more
than twice as fast as workers’ wages and overall inflation during the past year.
What are some of the cost drivers?
Health insurance premium increases are directly affected by health care cost increases, and these have been driven by unit cost increases, new technologies and increased utilization.
For example, new equipment, drugs or treatment plans can cost a thousand times more than the standard treatment. In addition,
Americans are receiving more services. The average number of prescriptions per person rose from 7.8 in 1993 to 11.8 in 2003. In
Pennsylvania, that increase is driven in part by our aging population, which uses more services.
Does the increase in costs explain the shift in financial responsibility from the employer to the employee?
That’s part of the reason. Some employers are shifting more costs to the employee through payroll deduction while others are shifted
to the employee through higher deductibles and co-pays. Giving employees more of a stake in the cost of health care helps them and
their dependents become better health care consumers.
Are employees better consumers now that they have more at stake?
I wouldn’t say that we’re all good consumers yet.
HealthAmerica and HealthAssurance are doing a number of things to help individuals be better health care consumers through our consumer-directed programs. At their core, these programs provide financial incentives to individuals to focus on their health care purchasing needs. You achieve that through a combination of a high-deductible health plan and a personal health account. A personal health
account is a set amount of money that members use to pay for any qualifying health care expenses. When it is used up, members pay for
the services out of their pocket. In the event of a serious illness, the high-deductible health plan provides coverage.
One study found that participants enrolled in consumer-directed programs are much more engaged in the health care process than
those in traditional health plans. Members of consumer-directed programs were 50 percent more likely to ask doctors about costs, 33
percent more likely to identify treatment alternatives or at least ask about them, 25 percent more likely to engage in healthy behavior
and 200 percent more likely to shop for lower costs at the pharmacy.
Consumer-directed programs give individuals an incentive to at least think about cost and effectiveness. Should I take a medicine that
is heavily advertised on television or can I take something that’s just as effective, would cost significantly less and save money for myself,
my employer, and the entire health care system? A great example is Nexium. Nexium might be right for a very small percentage of people, but the vast majority can take Prilosec — purchased right over the counter — and achieve the same results.
We are also trying to promote healthier lifestyles, which have a direct influence on both the quality of life and the associated costs of
health care. And our education efforts need to include employers and communities. Do we really need another heart transplant program
in the community? Duplication in our health care services usually means increased costs.
Are wellness plans helping to lower costs?
The early results are very hopeful. Research in wellness programs shows that they can trim employer health costs. DuPont found that
its program saved $1.42 for every dollar invested, and a municipality in California that offered classes in fitness training in an effort to
reduce back problems lowered the number of workers’ compensation claims that were filed. Also, a communications company in
Virginia mandated health screenings and saw a 21 percent drop in hospital admissions and a reduction in the length of hospital stays.
BOB DAWSON is president and CEO of HealthAmerica and HealthAssurance. Reach him at (717) 540-6353.