Why Health Insurance Premiums Will Continue to Increase Despite Recent Legislation Changes

There is a consensus going on right now that healthcare will be better in terms of access because of recent legislation that will go into effect in 2014, I have been in the health insurance business for many years and now more than ever; I just don’t buy it. In this article I explain the trends in healthcare cost just to give consumers a look at the bigger picture.

Here is what I think on health care cost:

Rising health care cost are a global phenomenon, constituting a major problem in both social insurance and voluntary employer-provided health plans, especially in developed countries. Many governments are exploring the possibility of shifting more medical expense cost to employers and individuals. In contrast to the United States, most other developed countries have some broad national health insurance scheme for individuals of all ages. In these countries, employers commonly offer supplemental medical expense plans to provide employees with higher quality medical care that available from the normal health insurance providers.

Medical Care Cost Trends

In the United States, the rate of increase in health care expenditures throughout the past two decades was significantly higher than the rate of inflation, population growth, and overall increase in Gross Domestic Product (GDP). During much of this period, increases in health care cost were at rates two times that of inflation. Health care cost accounted for about 14 percent of U.S. GDP. Other countries, even those with universal health care systems, spend less on health care than the United States. Although all indications point to demand and cost continuing to increase in the future, employees, employers, providers, and politicians have all become concerned with doing something about controlling cost. Despite all the recent efforts to control cost, there is mounting evidence; however that health care inflation will continue to grow.

Causes of Health Care Inflation.

As individuals live longer, they consume more and more medical services. Across all demographic groups, demand has increased for quality health care and state-of-the-art treatment. The U.S. population age 75 and older is projected to increase four times faster than that of persons under age 65. Many of the elderly have chronic, disabling illnesses. Institutional care is anticipated to increase, and hospital and nursing home care is expected to consume an even larger share of personal health care spending. As discussed earlier, the rapid advances in sophisticated, expensive diagnostic and therapeutic technology have helped fuel the growth in health care expenditures. Also, dramatic increases in the price per episode of inpatient care, despite a continuing reduction in the amount of inpatient care, have contributed to medical inflation. As overall hospital utilization continues to decline, fewer patients must carry the load of a greater portion of each hospitals total overhead. Both the utilization and the cost of ambulatory care (hospital outpatient and physicians office) are increasing at a rapid pace. In the United States, most surgery that should be done on an ambulatory basis is done that way. The number of visits to physician’s offices and of test taken with expensive equipment has risen dramatically.

The shift to outpatient surgery has been accompanied by an increase in the volume of these procedures. More individuals are having outpatient operations than was the case when such operations were available on an inpatient basis only. Another source of the cost increase stems from the nature of supply and demand for medical services. As mentioned earlier, the demand for services is frequently controlled by the provider. Research indicates typically abused procedures in the United States include C-sections, hysterectomies, heart bypass surgery, and imaging diagnostic procedures. Cost shifting, another component of increased cost in employer-sponsored health plans is the result of other payers not reimbursing providers at levels sufficient to recover cost and make profit. Medicare, the federal insurance program, limits the amount it will pay to hospitals and other providers for the elderly, for the disabled, and for patients with end-stage-renal disease. Hospitals and physicians tend to make up for the lost revenue by increasing fees to others. Any person or organization that is actually paying charges ends up with a higher bill. Bad debts, indigent care, inadequate Medicaid reimbursement, and discounted rates for contracting health maintenance organizations (HMO’s) and preferred provider organizations (PPO’s) also add to the cost shifts of the noncontracting plans. As a result, there have been rate increases to non-negotiated hospital rates. This is why some plans experience 20 percent inflation whereas others experience single digit increases. Other factors increasing cost include excess hospital capacity, varying medical practice standards, overuse of specialist physicians, a focus on acute care versus preventive care, and fraud.

If you cannot afford major medical coverage and are in need of healthcare we can help. There are many alternatives out there in the market place such as mini medical insurance policies and medical discount plans that can work out for you, if these products are properly explained.