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Are Healthcare Costs Still on the Rise?

April 27, 2012

Robert Marino
Partner & Senior Practice Leader
Ovation Benefits

Are rising healthcare costs still outpacing general inflation? What is really pushing costs upward, and is there an end in sight? What about healthcare reform? Won’t that limit cost increases? For those of us in the industry, these questions are asked almost daily. They reflect the concerns of many employers and employees, along with their families. Depending upon which healthcare cost study you review, the answers are similar.

Yes, healthcare costs have been significantly outpacing inflation. In fact, while inflation was hovering around 3% to 5% based on the U.S. Department of Labor, Bureau of Labor Statistics reports, healthcare costs were increasing at almost twice those figures. The main drivers as generally reported include increased use of new and costly technology in the healthcare delivery system and cost shifting from the public (Medicare) sector to the private (Insured) sector. That means as Medicare reduces its payments to providers and hospitals, those individuals and entities tend to make up the difference by charging more to insured patients.

There is an end in sight to increasing healthcare costs, but only if we take control of our own health. As a population, U.S. citizens are utilizing healthcare services to a greater extent than citizens in other countries.  Some of that increase in utilization is through the influx of prescription drugs that have come to market along with the associated advertising, but generally the health of our population in the U.S. has not been very good. In fact, statistics show that almost 50% of healthcare claims are driven by lifestyle-related conditions. Couple that with the fact that approximately 30% of employees have, or are at risk of developing chronic disease, and the staggering utilization figures are understandable.

There is no doubt that chronic disease is increasing in the United States.  The potential to controlthe rate of increase and the subsequent healthcare costs may lie with us. By modifying our diets, eliminating tobacco and making exercise a priority, we can impact the frequency and severity of these illnesses. As a happy result, we can live longer, healthier lives that no longer require costly treatments which lead to ever-increasing healthcare costs for all of us.  

The fact is that we still don’t know if healthcare reform will help control healthcare costs. Experts say that healthcare reform will increase access to healthcare coverage.  However, there will certainly be an increase in administrative costs at the State, Federal and Employer level to implement the reform requirements. It is unclear as to how the reform-based changes will control or lower costs in the near future.

While this all may seem bleak, we do have the option of working toward keeping ourselves and our family members healthy. Conventional wisdom states that if we can engage in healthy behaviors, our costs will be impacted. As is often the case, the answer to the healthcare cost question may lie directly with us.    

Bob Marino is responsible for overseeing Ovation's Account Management staff. He has developed the practices and procedures essential to delivering the standards of service to all of our clients. Bob spent four years as Director of Sales and Account Management at MedSpan Health Options, a Connecticut HMO. While there, he managed all aspects of Customer Service, Renewals and New Business Sales. During his tenure, MedSpan was recognized as one of America's fastest growing companies by Inc. Magazine as well as the highest rated HMO in Connecticut for overall customer service.


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