Why do costs keep increasing?
- We use more health care services. As the population gets older, there are increased demands on the health care system. A population of 25-year-olds requires fewer hip and knee replacements, angioplasties and blood-pressure medications than a population of 70-year-olds. The U.S. Department of Health and Human Services recently published data showing that over the past decade, the number of MRIs and CT and PET scans tripled, hip replacements are up by a third, knee replacement surgeries shot up 70 percent, kidney and liver transplantation rates are up by between 31 and 42 percent, and statin usage is up nearly tenfold.
- Our poor lifestyle choices are making us sicker. Chronic disease and lifestyle-related health problems drive demand. Reports show that, based on current trends, obesity will contribute to more than a fifth of the nation’s health care costs by the end of the decade. If obesity levels can be held at their current rates, we could save almost $200 billion — $820 for every adult in the country.
- Medical services cost more. The inflation rate for medical services has consistently run higher than the overall cost of living for other goods and services. The implementation of higher-priced technologies and cost shifting from Medicaid has also affected costs. Many providers charge higher prices to make up for reimbursements from Medicaid, which don’t fully cover their costs to treat these patients or the uninsured. New buildings, programs and services provided by hospitals in any given market are also a factor.
- Providers practice defensive medicine. The threat of malpractice litigation has changed the way caregivers practice medicine. Doctors may use defensive medicine, such as ordering extra tests and procedures to protect themselves from potential malpractice claims.
In addition, some aspects of health care reform are encouraging closer alignment of physicians and hospitals. While provider consolidation may eventually offer economy of scale, in the short term, we expect to see more negotiating power and higher prices from larger physician groups who are working in tandem with hospital systems.
What can businesses do to control costs?
Controlling the cost of care is everyone’s responsibility. Employers should look to their health insurance companies to educate employees about health and wellness, enroll members with chronic conditions in care management programs and support information technology to control the cost.
Through a better understanding of how and where consumers spend health care dollars, your carrier can work with your company to address rising costs and create informed consumers.
Employers can help employees make informed decisions by educating them on the cost of health care and teaching them how to make wise health care choices. Providing information about their pharmacy program is one example. Consumers need to know why a certain drug has a higher co-pay than another drug that treats the same symptoms.
Second, employers should promote healthier lifestyles. The best and least expensive way to treat a problem is to prevent it. Encourage employees to make healthier lifestyle choices through worksite wellness programs or by providing financial incentives for healthy behavior.
Finally, support and be heard on issues that will help to control costs. Support evidence-based medicine that bases medical decisions on treatments that have been shown to work. Get behind the move toward transitioning provider compensation from a process-based, fee-for-service model to a more results- or outcomes-based paradigm.
Mary Louise Osborne is chief operating officer for HealthAmerica and oversees statewide operations for HealthAmerica’s Medicare, Medicaid and individual lines of business. Reach her at [email protected].