I told you so. Rising health costs. HRC benefitting
from increased pricing power.
From USA Today Op-Ed
Rising health costs signal ominous emerging trend
usatoday.com
If California is the nation's trendsetter, then every worker in the country should be deeply troubled by last week's news from the Golden State. California's giant public employee benefits program, called Calpers, said it is facing an incredible 25% increase in health-insurance premiums next year.
That's despite the fact that Calpers has served in the past as a model for how to hold the line on health costs. Its 1.2 million members give Calpers tremendous buying clout. It lets employees choose from competing health plans, which should drive down costs. And it relies heavily on cost-conscious HMOs to deliver care.
Factors for hikes vary
Even the huge Federal Employee Health Benefit
Program, which covers more than 9 million
federal and postal workers and retirees, has
seen premiums jump 13% this year. (Premiums
would have climbed higher if not for changes
in benefits.)
Contributing to the rise:
• Drug costs
• Utilization, new technology, medical
inflation
• Aging population
• Reserve requirements
Source: U.S. Office of Personnel Management
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If an organization with that much market muscle can't keep its health-insurance tab in check, then companies — particularly smaller ones — have little chance of doing so. And if they, too, face jumbo-sized premium hikes, as now predicted, the unpleasant consequence will likely be a big spike in the number of uninsured, as employers drop coverage, or insurance costs move out of reach for lower-income families. Employees who keep insurance, meanwhile, are nearly certain to confront higher costs, reduced care and increased vulnerability.
Yet while this cost crisis moves quickly toward the boiling point, the federal government, ideologically paralyzed and newly beset by budget deficits, shows no inclination to take on such a costly and difficult problem. Both parties seem content to settle for window dressing, though with different flourishes.
Earlier this month, the Bush administration announced a health-care-reform plan that would tinker around the edges of the existing system, offering tax credits for low-income families who buy their own health insurance and expanding Medical Savings Accounts, which let workers put money aside tax-free to pay for out-of-pocket medical costs in exchange for buying high-deductible insurance policies.
Congress, meanwhile, is focused almost exclusively on giving senior citizens, already covered by Medicare, a brand new drug benefit. In spite of its merits, the proposal is costly — a modest House plan would cost $350 billion over 10 years — and would help mainly those who already have relatively generous federally guaranteed coverage. Even if Congress and the administration could agree on a way to stem the pending health-cost crisis, they don't have the money to implement a program. Rather than focus on the resources that would be required to reform the health-care system, bring costs under control and expand coverage to everyone, lawmakers have frittered away the budget surplus on aimless tax cuts and spending increases with far less urgency.
That once again leaves the problem to businesses. The last time costs spiraled out of control, in the late 1980s, Washington dozed while companies turned wholesale to managed care.
At the time, it looked like the smart move. Managed care promised employers paying the bulk of the health-care tab that it could rein in costs by squeezing out fat in the system, imposing practice guidelines on doctors and hospitals and keeping patients healthier through preventive care. It worked, for a time. But the clarion call sounded by Calpers' rising insurance costs shows that managed care was little more than a one-shot wonder.
Now as before, businesses aren't going to wait for health-care reformers to emerge from their slumbers. Given the failure of managed care, many are already moving to protect their bottom lines. In the short term, that means insured workers are facing higher health-care premiums, co-payments and deductibles. Down the road, employers are expected to embrace some form of "defined payment plan." Like 401(k) retirement plans, these would give workers a fixed amount of money, in this case toward health insurance, letting workers decide what coverage they want.
Giving individuals a greater role in health care makes sense to a point. If the system is to have any hope of restraining excessive spending, patients will have to be far more sensitive to the cost of their health-care decisions than they are now. But shifting to a consumer-driven health-care system creates a host of new risks that will demand the immediate attention of lawmakers. For instance, how will the system protect sick workers from super-high premiums? What about lower-income families that are more likely to save money by forgoing high-quality care? What information will patients have to help them shop around? What happens if employers' contributions don't keep pace with health costs?
Calpers' massive premium hike is a clanging wake-up alarm. This time around, the public can't afford to have lawmakers hit the snooze button. |
