Welcome to the Tailor Made Benefit Solutions web blog. The purpose of the blog is to keep you abreast of issues related to the world of employee benefits. I will discuss a variety of issues ranging from government run health care to keys for improving employee satisfaction with the benefits that you provide to them. I am hopeful that you will find these updates both timely and relevant.
My first few topics will be related to the proposed legislation on a public health care option. People frequently ask me what my thoughts are on the universal health care proposed legislation. My initial response is, “I am hopeful that he (President Obama) runs out of money before he can get anything done.” This is a tongue-in-cheek response to a very serious issue facing our nation. According to the most recent Mercer survey, the annual per employee cost for health benefits is $8,482 nationally an $10,037 here in Wisconsin (18% higher than the national average). In fact, health care costs continue to rise at about 8% per year. This number would be higher were it not for the fact that employers have been increasing deductibles and copays to keep the costs reasonable.
There are a variety of reasons for this increase and we will spend some time in the first few blogs understanding what drives our health care cost increases. Some of these are pr
evalant throughout the country and others are more specific dynamics related to health care in Wisconsin. So lets get started.
The first two points we will tackle are closely related. They deal with the aging of America and how we currently pay for those who are on Medicare.
- Baby Boomers: According to recent statistics, everyone reading this blog had a birthday in the last 12 months. This is especially true of the baby boomers (those born between 1943 and 1960). Each year, more and more from this group move “through the snake”. The two charts at the right show the distribution of the US population by age and gender as of 2000 (top) and projected for 2025 (below). On each chart, females by age band are shown on the right side, males are on the left. Also, on each chart, the age bands range from youngest on the bottom to oldest on the top. As you can see, the number of people in the older age bands increases significantly in the 2025 projection. This is important to understand because as people age, they consume more health care. And though this will continue to be a significant driver in the increase in health care costs,we have little control over it. The ongoing improvements in technology will continue to extend the age to which people live (and consume health care).
- Medicare: There continues to be a growing population enrolled in Medicare in our country. This will continue well into the future due to the aging Baby Boomer population (see number 1 above). Medicare, a government run health care program for the elderly and disabled mandates the reimbursement levels to health care providers. The approximate reimbursements are between 60% and 80% of “reasonable charges”. This “reasonable charge” is also defined by the government and is quite often less than the providers actual charge. As the Medicare eligible population continues to grow, health care providers are finding that a greater percentage of the services that they provide are being reimbursed at a level much lower than the actual charge needed for the service. This results in a “cost shifting” effect where the provider charges more for the non-Medicare patients to make up for the losses on the Medicare patients. States have varying levels of reimbursement for Medicare with Wisconsin having one of the lowest reimbursement levels in the country. This certainly plays into the higher than average costs of commercial insurance in Wisconsin.
In upcoming blogs, I will discuss other factors that effect the rising cost in health care and review the concept of government run health care. Until then, STAY HEALTHY!!
Bob