Hello everyone. In my last blog, I started to review what the drivers of health care cost increases are. I referenced the aging of America and specifically the Baby Boomers as well as how the low Medicare reimbursements result in cost shifting to the private insurance market.

As an addendum to that blog, I found a few interesting statistics that you may have already heard. In a October 26, 2008 article by Laura Ungar titled “Outlook for Medicare program isn’t very health”, she sites many issues related to Medicare that will continue to drive health care cost increases well into the future. In her article she wrote “When Medicare was signed into law by President Lyndon B. Johnson in 1965, there were about 18 million Americans 65 and older. By last year, that number had doubled to 36.8 million. And by 2030, it’s projected to nearly double again, to 71.5 million.” If this is not of enough concern, she follows with “The number of workers per Medicare recipient is expected to drop from four in 2000 to 3.7 in 2010 and 2.9 in 2020, based on calculations by the Kaiser Family Foundation, a national health policy and research organization.”

The aging of America, and our current method for handling the health care needs of this population, will continue to pose a challenge. These issues, coupled with the others that I will discuss over the next few blogs, are all important considerations when looking to reform our health care system.

This week, we will look at two other drivers of health care cost increases. The effects that copays have had on health care consumption and the cost of technology.

• Copay Camouflage: A copay is a flat amount that a participant pays directly to the doctor when services are received. Copays became popular during the rise of HMO’s. Aside from the copay, the participant saw no additional out of pocket costs. I call it the “copay camouflage” because, for many Americans, this was the cost of health care. In the early days, copays ranged from $5 – $15 per office visit and $2 – $10 for prescription drugs. They perceived the copay as the cost of health care and with such low cost, why would they need to prudent in the utilization of their health care. Today, copays have increased and more and more plans have additional cost sharing features (deductibles and coinsurance). For this reason, the copay camouflage is not as much of a factor as it was in the past. However, many Americans are still insulated from the true cost of health care. That is why greater transparency in costs will become more important in the years to come. We will discuss transparency more in future blogs.
• Improved Technology: Although some may debate, Americans have access to some of the finest technology in the world when it comes to health care. However, this technology does not come without a cost. Improved treatment for cancer, robotic surgery, cyberknife technology and advancements in prescription drugs continue to reduce recovery times, improve the quality of life and allow us to live longer more productive lives. However, in the bigger picture, technology has not had as much impact as price inflation and increased utilization. I think that most of us would agree that the advances in technology have dramatically reduced the invasiveness and recovery times of health care services and improved the overall quality of care.

In future blogs we will discuss further contributors to health care cost increases. We will also discuss possible concerns with some of the legislation being proposed. As the landscape of health care reform is continuing to change, we will discuss options put forth at that time.

Have a great day!