Strategies to Lower Health Care Costs – 1. Drop insurance completely by forcing employees to seek healthcare coverage in the exchanges. Larger employers can pay the federal penalty each year and pass the remaining health care costs directly to the employee.
This is another version of healthcare cost shifting that many companies have considered. This is exactly what Walmart did with it’s 30,000 part time employees. Others are doing the same. If dropping insurance coverage is too bold, you can do what most employers do, pass the cost increase along to your employees.2.
Change insurance carriers/ negotiate better rates in an attempt to get better pricing. Most carriers will negotiate hard to get your business. It may be possible to shave a few percentage points off the cost during year one, but soon after the honeymoon is over, cost increases continue.
This strategy is usually a dead end.3. Self insuring means employers pay for employee healthcare costs directly. With this approach the risk of high healthcare costs is born by the employer. Stop loss policies help protect against catastrophic medical costs. Once thought to be a strategy of large corporations, there are insurance companies that will self-insure a company with as few as 50 people.
This can help reduce approximately 7% of the cost that is associated with administering a fully insured insurance plan.4. High deductible plans are more popular than ever. They are the ultimate in cost shifting. Some studies have shown that when your employees begin a high deductible healthcare plan, healthcare costs can be reduced by as much as 5-14%.5.
On-site clinics are loved by employees and they may well have a big impact on employee productivity, but it is still unclear if they can actually reduce healthcare costs.6. Disease management includes strategies to manage the chronic conditions of high-risk, high-cost employees. The research says disease management can improve patient care and may improve health outcomes, but fails to save money.7.
Workplace health programs are one of the most effective and well accepted cost reduction strategies. The government and universities have demonstrated that effective workplace health programs don’t eliminate the drivers of healthcare costs, but they do reduce the demand for healthcare services. Workplace health programs will not impact many of the drivers of healthcare costs, but they can impact unhealthy behaviors and this is why reducing health care costs is one of the main benefits of wellness. By helping employees adopt and maintain healthy behaviors, they improve their health and avoid chronic diseases.
Without chronic disease the cost of health care is greatly reduced. Skeptics may doubt this logic, but that is exactly what happens. Worksites who do wellness program correctly will experience lower health care costs. They experience wellness outcomes that demonstrate improved health behaviors, lower health risks, and dramatically lower health care costs.
You can see this evidence here. For example, Johnson & Johnson’s Wellness Program demonstrated a long-term impact on controlling health care costs by addressing high blood pressure and cholesterol risks through policy, environment, and education. During Johnson & Johnson four-year study, they decreased medical costs by approximately $225 per participating employee per year.
How does growth in healthcare costs affect the American family?
By John Reichard, CQ HealthBeat Editor October 3, 2011 – Rising health care costs hit families much harder than many people realize. And the pocketbook impact, when fully understood, underscores how critical it is to control those expenses, according to a new study by Rand Corp.
Despite the rise in household incomes between 1999 and 2009, the average family only had $95 more per month to spend by the end of that period, the study said. One of the biggest reasons for that was the increase in insurance premiums, out-of-pocket costs and taxes related to health care, it added. Rand analysts said the typical family’s monthly before-tax income grew by $1,910.
Rising prices for consumer goods and taxes not related to health care consumed 52 percent of that. Most of the rest went for higher health costs, leaving families with only $95 more per month. “Had health care costs tracked the rise in the Consumer Price Index, rather than outpacing it, an average American family would have had an additional $450 per month—more than $5,000 per year—to spend on other priorities,” Rand researchers said.
- The statistics most often quoted to illustrate rising health costs fail to capture the impact on families, they added.
- For example, U.S.
- Health care spending between 1999 and 2009 nearly doubled, growing from $1.3 trillion to $2.5 trillion.
- Health spending consumed 17.6 percent of the gross domestic product, up from 13.8 percent.
“Although these numbers are striking, they do not easily translate into figures that are meaningful to individual Americans.” Increases in premiums and out-of-pocket spending by families more vividly show the impact—but they are just part of the story.
- Health costs also affect families because they hold down wage hikes and also boost the state and federal taxes families must pay because of the rising costs of Medicare and Medicaid.
- Between 1999 and 2009 the average family’s share of monthly premium costs rose from $85 to $195.
- The part the employer paid rose from $240 to $550 per month.
These extra payments by employers represented forgone wages, the study said. Most economists assume that the growing sums employers pay in premiums would have gone for higher wages had health costs not increased. “Out-of-pocket health care spending also rose sharply, largely because of steeper co-pays and deductibles, as well as higher prices for drugs and medical supplies,” the study said.
According to a Rand estimate, the family’s monthly tax bill for government health care was $345 in 1999 and $440 in 2009. “The latter number would have been far higher if the government had collected enough taxes to cover health care spending,” the study added. “Instead, it added the difference to the federal budget deficit.” Had taxes kept pace with the growth in federal health spending over the 10-year period, “the typical family would have paid out an additional $390 per month in taxes.” So rather than having an added $95 per month to spend after the decade’s growth in household income, they actually would have wound up with a deficit of $295 per month.
Why your healthcare costs so much
“The complex ways in which Americans pay for health care obscure the impact of health care cost growth on the finances of American families,” the study concluded. “These sobering facts provide further evidence that lowering health care costs is one of the most important challenges of our time.” Other recent studies show no change in these trends.
A study of 371 large employers by the consulting firm Aon Hewitt found that premiums will rise 7 percent in 2012. The average total health care premium per employee will reach $10,475 in 2012, up from $9,792 in 2010. Employees next year will pay $2,306 toward that, compared to $2,084 in 2011. Aon Hewitt added that “average employee out-of-pocket costs, such as co-payments, coinsurance and deductibles, are expected to be $2,275 in 2012, compared to $2,007 in 2011 and $1,691 in 2010.” Last week a joint study by the Kaiser Family Foundation and the Health Research and Educational Trust reported that premiums jumped 9 percent this year for employer-sponsored family coverage.
The average tab: $15,073 this year, with workers paying $4,129 and employers $10,944. The study also assessed some of the impact of the health care law (PL 111-148, PL 111-152). It found that employers added 2.3 million young adults to their policies because of the health care law.
Fifty-six percent of covered workers were in “grandfathered” plans exempt from some of the requirements of the law, such as covering preventive benefits with no cost sharing and having an independent board outside the company to which one could appeal denied claims. The Kaiser-HRET study also found that 31 percent of covered workers are now in high-deductible health plans.
That means they pay deductibles of at least $1,000 for single coverage. Higher deductibles are more prevalent among smaller employers. Thus half of covered workers who work for firms with 3 to 199 workers pay at least $1,000 as their deductibles. The growth in high deductible health plan enrollment in part reflects growing use of health savings accounts or “health reimbursement arrangements.” These are savings plans for health care expenses that provide tax breaks are and are sold in conjunction with high-deductible health plans.
Rand study (pdf) Aon Hewitt study (pdf)
Who uses healthcare the most?
TABLE 2-4 – Diversity Among the U.S. Resident Population Ages 40+, 2006. Additionally, the educational attainment of older adults is increasing. Better-educated older adults tend to have lower levels of disability, and they may be more likely to make beneficial changes in their lifestyles, to have better access to care, and to comply with physicians’ instructions (Freedman and Martin, 1998).
However, this may not fully reflect the capacity of older adults to navigate today’s complex health care system. Age itself also plays an important role. The oldest older adults (ages 85 and older) have the highest per capita utilization of health services, and that population is expected to increase from 5 million to 9 million between 2005 and 2030.
Other demographic characteristics, such as net worth, family structure, and geographic distribution, may similarly affect health status and the utilization of services. Demographic trends also have implications for the sites where care is needed. A growing percentage of older adults prefer to receive long-term care services in home and community-based settings, increasing the demand for care in these alternative settings.
The delivery of long-term care will become especially complex as varying options for housing for older adults develop leading to demands for services in multiple sites. In addition, sites of care for special populations will be affected by the aging trend. For example, in 2006, 3.7 percent of inmates in state and federal prisons and local jails were over age 55.
By 2030 one-third of prisoners will be over the age of 55 (Enders et al., 2005). Also, in the next decade the number of veterans over the age of 85 enrolled in the VHA is expected to increase by 700 percent, and the utilization of long-term care services is expected to increase by 20 to 25 percent, with special need for community-based services (Kinosian et al., 2007).
As Persian Gulf War-era veterans and veterans currently returning from Iraq and Afghanistan get older, their mental and physical impairments may persist, increasing the need for the care of older adults within the VHA system. The VHA has a remarkable history regarding the availability of a variety of geriatric care programs, including nursing home care, home care, palliative care, and acute care services for older adults; however, an influx of older veterans will surely strain this well-developed system.
Finally, members of the future older adult population may bring a different stock of health capital to their older years than the current cohort of older adults has done. Disability rates among older adults have been declining in recent decades (Freedman et al., 2002; Manton et al., 1997, 2006), in part due to the educational gains among older adults discussed previously (Freedman and Martin, 1999).
- Educational gains are expected to continue, although at a slower rate.
- On the other hand, the recent trend of increases in disability at younger ages, although small and starting from a very low level, may have negative implications for the future elderly population (Lakdawalla et al., 2004).
- Some studies suggest that the gains in mortality from reductions in smoking and better control of blood pressure might be reversed in the coming years by high rates of obesity (Cutler et al., 2007; Olshansky et al., 2005).
Another study found that baby boomers on the verge of retirement are in poorer health than pre-retirees 12 years ago (Soldo et al., 2006). Trends in illness and disability will influence the need for health services among the future older adult population, though the direction and magnitude of their effects are not entirely clear.
How does rising cost of healthcare affect the US economy?
The increase in health care costs might also prompt governments to raise taxes, increase borrowing or reduce investments in other critical sectors such as education and infrastructure, suppressing economic growth and affecting both businesses and households.
How much do American families spend on healthcare?
How Much Does the United States Spend on Healthcare? – The United States has one of the highest costs of healthcare in the world. In 2021, U.S. healthcare spending reached $4.3 trillion, which averages to about $12,900 per person. By comparison, the average cost of healthcare per person in other wealthy countries is only about half as much. TWEET THIS
What factors are affecting health care costs in the United States?
Key Takeaways –
Healthcare costs in the United States have been rising for decades and are expected to keep increasing.The United States spent more than $3.8 trillion on healthcare in 2019 and exceeded $4.1 trillion in 2020, according to a study by the Peterson and Kaiser organizations.A Journal of the American Medical Association ( JAMA ) study found five factors that affect the cost of healthcare: a growing population, aging seniors, disease prevalence or incidence, medical service utilization, and service price and intensity.In the long term, the financial impact of COVID-19-related healthcare spending is not expected to significantly affect healthcare spending in general.The No Surprises Act—and other legislation included in the Consolidated Appropriations Act, 2021—offer some help when it comes to unexpected healthcare billing and costs.