The rising cost of health care is
often branded as a crisis and
draws the attention of many.
Everyone from special interest groups
that lobby to protect their constituents
to buying groups interested in spreading risk over larger numbers, from
politicians who hope their “solution”
will get them elected to office, and, of
course, to the average American worker who finds it more difficult each year
to pay his or her portion of the premium
and faces increased co-payments and
other out-of-pocket expenses.
The United States spent $1.6 trillion,
or nearly 15 percent of gross domestic
product, on health expenditures in
2002. Medicare, the government’s single payer model for seniors, spent
$267 billion.
Analysts project national health care
expenditures to reach $3.1 trillion by
2012 — nearly twice the amount spent
in 2002. The dramatic numbers have a
tendency to overstate the obvious —
for many, the cost of insurance can be
as much as, if not more than, rent or a
mortgage.
Until the administration places its
focus on the rising cost of health care,
those costs will continue to escalate far
exceeding the rates of earnings.
Whether you subscribe to a higher
monthly premium charged by a health
maintenance organization or a payroll
tax collected by the government, someone has to pay the bill. Shifting the burden from a premium bill to a tax bill is
not acceptable.
Smart Business spoke with Dave
Chiappino, sales executive with JRG
Advisors, the management company for
ChamberChoice, to learn more about
health care premiums.
What are the reasons health care premiums
continue to rise?
One culprit is known as ‘trend,’ which
can be described simply as a prediction
of how much health care utilization and
corresponding cost will increase during
the next policy year. Trend includes:
- Inflation — the increase in unit cost
of services, including provider overhead, etc. - Utilization — the increase in the
number of services consumed. - Cost shifting — As certain payers,
such as the government and the uninsured, pay less for services, the
providers are forced to charge more to
make up the difference. - New technology — Having the latest
and greatest equipment is one way that
doctors and hospitals compete for
patients. - Prescription drugs — The cost to
develop new drugs is staggering. Direct-to-consumer advertising has created an
expanding market for these drugs.
Why can’t we gain more control over trend?
During the last 10 years, economic
inflation has averaged a manageable
3 percent per year. But health care cost
trend has averaged 12 percent per year.
One reason for the double-digit inflation of health care cost is that when
purchasing medical services, consumers do so without the same discern
as for all other purchases of goods and
services. While we may receive health
care services that cost hundreds or
even thousands of dollars, we may pay
nothing or a small co-pay or deductible
for these services. The consumer literally has no idea of the actual health care
cost. There is little incentive for consumers to care what services cost or to
consider an alternative service that may
be less expensive or even have a better
outcome.
How can employers solve rising trends?
Although no single employer is going
to lower trend for an insurance company, there are still several things that
employers can do to support an overall
longer-term solution and, at the same
time, lower premiums for themselves.
One, affiliate with an association,
insurance company and broker that
strongly encourages and supports wellness, and then get your employees
involved. Two, consider offering high-deductible health plans so employees
and their providers consider cost when
looking at treatment alternatives. And,
three, provide employees with access to
data that is currently available regarding
cost and quality so that they can make
informed decisions.
If more employers can get their
employees and their covered dependents to be discerning and educated consumers, then we have a better opportunity to positively impact some of the
factors that contribute to trend and rising health care costs.
DAVE CHIAPPINO is a sales executive with JRG Advisors, the management company for ChamberChoice. Reach him at (412) 456-7015 or [email protected].