Posted on 06/14/2005 7:27:00 AM PDT by Dr. Free Market
The Bureau of Labor Statistics reports that health-care costs rose 7.5 percent in 2004, well under the 11.4-percent rise in 2002. The BLS also reports that employers’ costs for health insurance per employee per hour worked has slowed even more. From March 2001 to March 2002, it rose 11 percent; from March 2002 to March 2004, it rose 9 percent each year. But from March 2004 to December 2004, it rose only 3 percent.
Something is going on out there. Politicians and political commentators always assume that government must do something new and different if healthcare costs are to be held down to bearable increases. But the evidence is that health-care costs are being held down, by the workings of the marketplace, partly in response to health-care legislation passed in the last four years.
(Excerpt) Read more at dispatch.com ...
This is the future of the U.S. health care system.
This article doesn't seem to be readable without a $4.95 subscription. Is this newspaper group on the excerpt-only list?
Sorry. Here' the whole thing.
Market forces are cooling down the crisis in U.S. health-care costs
Tuesday, June 14, 2005
MICHAEL BARONE
How many times have you heard that health-care costs are rising at record rates? Well, they aren’t anymore.
The Bureau of Labor Statistics reports that health-care costs rose 7.5 percent in 2004, well under the 11.4-percent rise in 2002. The BLS also reports that employers’ costs for health insurance per employee per hour worked has slowed even more. From March 2001 to March 2002, it rose 11 percent; from March 2002 to March 2004, it rose 9 percent each year. But from March 2004 to December 2004, it rose only 3 percent.
Something is going on out there. Politicians and political commentators always assume that government must do something new and different if healthcare costs are to be held down to bearable increases. But the evidence is that health-care costs are being held down, by the workings of the marketplace, partly in response to health-care legislation passed in the last four years.
One thing that is going on is that employers are offering and employees are choosing health-care savings accounts and high-deductible health insurance in greater numbers. The savings accounts were given a big boost in the Medicare prescription-drug bill passed in November 2003; indeed, that was the reason that most Republicans voted for a bill that also included the biggest new entitlement program since Medicare was passed in 1965.
The savings accounts seem to be gaining in popularity. A survey by Watson Wyatt and the National Business Group on Health found that 8 percent of employers are offering the accounts in 2005, and 18 percent plan to offer them in 2006. Large majorities of employers believe that the accounts will help lower overall health-care costs and that they will expand options for employees.
The number of people covered by the accounts and high-deductible insurance policies increased from 438,000 in September 2004 to 1,031,000 in March 2005. Nearly half of these are people over 40, though some predicted that such policies would not be attractive to them.
One thing that the savings accounts and high-deductible health insurance help do is to make employees more cost-conscious when it comes to health-care decisions. The accounts allow employees to keep money they don’t spend on health care this year and to roll it over to next year, and on and on. Therefore, there is an incentive not to fritter it away. High-deductible health insurance operates the same way high-deductible auto insurance does: It does not pay for the equivalent of your oil change but does pay you when your car is totaled.
For many years, the World War II decision to make health-insurance coverage tax-deductible for employers and nontaxable to employees has driven health insurance to a different model, one that pays for virtually every procedure but in a surprising number of cases does not cover catastrophic costs. But increasingly that makes no sense.
As Wall Street Journal columnist Holman Jenkins points out, the tax subsidy to employees, while worth a lot to high-income earners, is worth very little to those whose income tax liability is low or, as in the case of Earned Income Tax Credit recipients, nonexistent. To them, it is hardly worthwhile to pay an insurance company to process their claims for predictable items like annual checkups and routine pediatric care, yet to be left with a policy that, to hold down employers’ costs, doesn’t provide catastrophic coverage.
The other interesting development is the emergence of health insurance policies that encourage healthy behavior. Health-care experts note that the increasing incidence of diabetes and other obesity-related diseases threatens to hugely increase health-care costs in future years.
Old-style health-insurance policies provide no incentive to behaviors that tend to reduce the incidence of such disease. In a previous column, I looked at one company that provides such policies, including health club membership for employees. These policies may provide a long-term answer to problems that health-care analysts of all political stripes are concerned about.
The overriding assumption in much commentary on health-care finance is that individuals and companies are helpless automatons waiting for government action before anything can be done anything about health-care costs. But recent developments suggest that, in fact, employers and employees are active players, and that provisions of recent legislation that were not much noticed by the commentariat have enabled them to take action that reduces costs and provides increased benefits and incentives for healthier behavior.
We have problems, yes, but we are not helpless.
So, in simplistic terms, employers passed more of the cost increase on to employees.
I agree with this approach, except to move to Medical Savings Accounts where the unused amount can be rolled over each year.
Wow, imagine how much we could "reduce" health care costs if we passed 90% to employees! And the price of goods will go way down when we stop paying them salaries, too!
That's true.
If companies would fire the homo's and drug users and expell them from their insurance programs, the cost of health care would drop in half over night.
And I suppose the fact that there are a lot less employees that have health care benefits due to the outsourcing orgy probably doesn't factor in to this author's analyses either.
""So, in simplistic terms, employers passed more of the cost increase on to employees."
Right! Which caused a slowing in the rate of increase as predicted by the theory."
Passing on the cost without increasing the employees salary, or wages! Hmmmmm! And the theory predicts.......?
Even lower costs.
= deflation?
If companies would fire the homo's and drug users and expell them from their insurance programs, the cost of health care would drop in half over night.
Smokers account for a big chunk. I have never seen any figures, but I imagine overweight people do too.
I heard that Costco is getting into the healthcare biz.Market Forces at Work!!Works EVERY time it's tried!!!!!!!!!!
Passing on the cost without increasing the employees salary, or wages! Hmmmmm! And the theory predicts.......?
I have okay benefits and haven't had to use them much at all luckily. My salary (take-home) has declined a good amount because of the increased costs, but it still is better than most so for now I'm not complaining.
Not so. What the employees got was more control over how their medical care money would be spent. Many people would prefer to save their medical care money for serious problems rather than go to the doctor for every case of flu.
Of course, people who still want to go to the doctor often, can do so, and people who have a serious problem are still covered by the catastrophic care policy.
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