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Health care costs continue annual climb

As I See It

It’s not news to anyone that the cost of health care has been steadily escalating the last few years. If that is not bad enough, the future looks as bad — if not worse — than the past. Certainly not a comforting message, but things are the way they are.

A national survey of employers conducted last spring by the Menlo Park, Calif.-based Kaiser Family Foundation found that companies with fewer than 200 employees faced average health insurance premium increases of 12.5%. Larger firms face premium increases of about 10%, while employers with less than 10 workers got whacked for 16.5% increases. With this sort of cost escalation continuing indefinitely into the future, what will employers and workers do?

Before deciding what to do, it seems prudent to see what’s causing the problem. A recent Newsweek story outlined six forces that are driving the increasing cost of health care in America.

• The Baby Boom. Seventy-six million Americans are moving into the age which requires increasing health care.

• Political interference in the health care industry. Strengthening patient’s rights creates more bureaucracy and higher costs.

• Health care providers have learned how to squeeze more out of insurance companies. Strategies for increasing per-patient revenue are similar to restaurant strategies for increasing per-customer charges.

• Health insurance companies are struggling to earn a profit after years of absorbing losses as costs increased faster than premiums. Fewer competitors in the market gives each company more muscle.

• The boom in new drugs. Americans are jumping on the bandwagon for every new “blockbuster” drug that comes on the market. Insurance companies are now paying $118 billion for drugs whereas the tab was only $40 billion in 1996.

• Technological innovations that improve health also up the tab for health care. Heart attack patients pay more today and live longer than they did in past years.

The sluggish economy is causing the increasing health care cost to be more troubling than it already was. Now, in many instances, companies are unable to raise their prices to cover the cost of higher employee health care premiums. This situation magnifies the problem and has left business searching for a solution that is acceptable to all.

There is no such solution.

Ever rising health care costs are a fact of life and will be a part of the business landscape for the foreseeable future. There are no good choices for dealing with the situation.

Indeed, there are few choices period.

Either the employer swallows the pill and attempts to recoup the higher cost through product price increases or the cost is passed on to the employee. If the cost is passed on to the employee fewer low- to moderate-income workers will have health insurance for their families.

One variation on the above options is to change the health insurance coverage through higher annual deductibles and lower reimbursement percentages. This really is a variation on passing through the increasing cost to the employee since the end result is the same.

Given that everyone wants great health care and health care providers want to earn a decent living, there does not seem to be any quick fix to the problem. Socialized medicine is a nightmare that we don’t want. So working within the system is the only way to go.

Encouraging employees to live a healthy lifestyle will help some. The dividends paid by employer-sponsored wellness programs are both financial and aesthetic. Healthy employees perform better on the job and their health care is cheaper.

Other than monitoring the company health insurance program to be sure that it is competitive and encouraging healthy employee lifestyles, I don’t see much else companies can do. Those who absolutely cannot absorb the additional costs have no choice but to pass it along to the employee. The good news is that we have an excellent health care delivery system in our country; the bad news is that it is expensive.

Under all circumstances, we should vigorously oppose additional governmental meddling in the health care system. Employers are not legally required to furnish employees with health insurance. It is wrong for the government to try and control how a voluntary benefit is provided. They need to concentrate on defending the beaches and carrying the mail.

Thought for the Moment — Do not forget to entertain strangers, for by so doing some people have entertained angels without knowing it.

— Hebrews 13:2

Joe D. Jones, CPA, is publisher of the Mississippi Business Journal. Contact him at cpajones@msbusiness.com.


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