Health Care Costs: The perfect storm?

When it comes to health care costs, double-digit increases have become the norm.

Annual costs increases are likely to outpace inflation for years to come. Not surprisingly, employers of all sizes regularly list the cost of employee health care as a major obstacle to their continued growth. While many factors have contributed to this difficult situation, employers, consumers, health care providers and health plans (both insurer-owned and independent plans) must each take action to help slow the rise of health care costs. Tight management of health care costs and creativity are the only practical solution.

The Perfect Storm

The cause of today’s health care environment is the result of a perfect storm. First, medical providers and health plans deserve some blame. In the United States, there are too many unnecessary procedures conducted every year. In fact, a recent study found that nearly one-third of all medical services in the United States are not necessary. And, hospital investment in extravagant technologies and broader services fuels questionable demand. Most health plans reacted to the backlash against managed care by easing up on medical oversight. Most plans are latecomers to linking reimbursement to good outcomes (e.g., pay-for-performance).

Second, consumers themselves contributed to the rise in health care costs because of poor lifestyles and uninformed health decisions. In fact, two-thirds of the U.S. population is overweight or obese, causing more than $75 billion in health care expenditures annually. And, 40 percent of all deaths are caused by modifiable behavior-related factors such as smoking, alcohol, poor diet and reckless driving. And, that’s just the start.

Employers deserve some of the blame for their reluctance to put in place the changes needed to address health care costs.

Safe Harbor

So, as the storm continues to build, each contributor has a duty to take action. For their parts, employers and consumers must collaborate to bring about more prudent health care buying decisions. The availability of consumer-driven plans – with higher cost sharing that forces consumers to make more prudent buying decisions – is a step in the right direction. Many employers have begun to promote initiatives, such as disease management for chronic illness and health promotion to improve poor lifestyles. Both combine data analytics, health coaching and financial incentives that reward healthy behavior.

The health care industry can contribute to cost management by improving the quality of care and using proven methods to avoid medical errors. For example, the adoption of electronic medical records and computerized prescription ordering could reduce costly medical mistakes. Health plans can recommit to meaningful medical treatment oversight to eliminate unnecessary inpatient and outpatient care.

Rising health care costs in the United States will not go away any time soon. However, if employers, consumers, health care providers and health plans all take progressive action, rising health care costs will inevitably moderate to the benefit of all society.

Extensis Benefit

By leveraging our healthcare partnerships, Extensis assists our clients manage rising health care costs. Our years of experience solving this complex problem of Health Care Strategy, Employee Communications and Plan flexibility make Extensis a valuable business partner for businesses looking to solve this pressing business problem.

For more information on how we can help your company, contact Extensis Human Resources at (888)473-6398, or email us by clicking here.