I’ve said many times that U.S. health care would immediately get fixed if health insurance took a year vacation. Why? Because hospitals, pharmaceuticals and all health care providers would have to deal directly with consumers to get paid! Their pricing would then have to be 100% transparent, they’d have to look us in the eye and ask us to pay – how much?!
In fits and starts we’re starting to see rays of light in cracks of transparency here and there, like hospitals now being required to post their pricing online. As anticipated, analysts have begun their work with this and other data and in a recent study have found that hospital prices are the main driver of U.S. healthcare spending inflation.
This particular study, which looked at the Health Care Cost Institute’s claims data for people with employer-sponsored insurance from Aetna, Humana and Unitedhealthcare Group, found that for inpatient care hospital prices grew 42% from 2007 to 2014 while physician prices rose 18%. Similarly, for outpatient care, hospital prices increased 25% while physician prices grew 6%.
Can you imagine increasing your prices 42%, or 25% or even 18%? Can you imagine explaining this to your customers? Well, healthcare hasn’t had to because these price increases have been hiding behind health insurance! Health insurance companies and, to some degree, employers have been well aware of these unsustainable price increases – but the general public? No.
Insurance now costs a family of four about $19,000 a year. The reason costs vary so much across the country, as can now be seen in hospitals’ online posted prices – even if they are, as hospitals argue, the equivalent of hotel rack rates and “not the final price” – is because of the price of hospital care, which is the largest single component of healthcare costs in the U.S., said Zack Cooper, study co-author and an associate professor of health policy at Yale University.
“What is most worrying to me is that there has been fairly profound consolidation among hospitals and when they gain market power they have the ability to raise prices,” he said. “They have the ability to gain more favorable contractual terms, which allows them to raise prices and resist the new, more sensible payment reforms.”
U.S. healthcare spending grew 3.9% to $3.5 trillion in 2017, consuming nearly 18% of the country’s gross domestic product, according to CMS data.
About 33% of total healthcare spending is directed toward hospital care, translating to about 6% of total GDP, according to CMS data.
“If you look over the last 20 to 30 years, total employee compensation has gone up, but the amount each worker gets paid has been incredibly flat,” Cooper said. “The gains they would’ve gotten in income have gone toward paying their insurance and the largest chunk of that goes toward paying their local hospital.” Of course, as employers, this is something you already know, and know well.
We’re at a dangerous precipice with policymakers considering regulating hospital and physician prices instead of turning these cracks of transparency into doors pushed wide open to enable consumers to see healthcare pricing in the full light of day – which is what we need.
While we’re grateful to academics like Cooper for their research, I’m befuddled why they then tend to recommend yet more regulation and don’t seem to see how consumer-driven health care with full transparency and accountability is what will drive us to affordability.
Once again, please let your representatives in D.C. know we need consumer-driven health care – if health insurance cannot go on a year vacation, at least let’s shine some flood lights on unsustainable healthcare pricing, and then as consumers – say “no!”
Source: Kacik, Alex. (2/4/19) “Hospital Price Growth Driving Health Care Spending,” Modern Healthcare, Retrieved on 2/4/19 from: https://www.modernhealthcare.com/article/20190204/NEWS/190209984/hospital-price-growth-driving-healthcare-spending
Rylan Klaseen & Associates
Rylan Klaseen & Associates
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