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Healthcare Costs Soar Above Overall Inflation

John Commins, for HealthLeaders Media, October 22, 2010

AHIP did a study two years ago estimating that the average family of four paid a "hidden tax" of $1,500 each year to offset underpayments from Medicare/Medicaid.

Given the cost shifting and other pressures on commercial health plans, Zirkelbach says the S&P data do not undermine the claim that commercial plans do a better job containing costs than does the government, despite Medicare's older, sicker population. "I don’t think you can make that judgment. I haven’t seen any evidence to show that," he says. "Keep in mind the government simply dictates the price they pay for services and those costs get shifted on to employers and families in the private sector. It's administered pricing, is how it works."

Maitland said the S&P data reflect an increase in the per capita costs of commercial plans and Medicare, but not necessarily the "total basket" of Medicare costs.

"The total budget may actually be larger but for each person, it is government funded and the government will only allow a certain amount of increases each year. A lot of this simply has to do with government funding and what they will allow in terms of what they will pay," she says. "It's not saying anything about the size of Medicare versus the size of commercial plans. This is per capita."

Maitland said it's also apparent that the commercial plans are also cost shifting their costs to consumers. "If you happen to have commercial health insurance, each of us is paying approximately 9% more than we did for the same services last year," Maitland said. "The cost is not just to the insurance plan, but it's our deductibles and copayments, all of that that is going on. They are passing some of the extra cost on to the consumer directly."

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5 comments on "Healthcare Costs Soar Above Overall Inflation"


John kircher (10/4/2011 at 9:15 AM)
Comparisons of health care inflation with the over-massaged consumer price index just confuses the issue. Any measure of inflation that counts the devaluing of a major asset (such as real estate)as a reduction of the cost of living cannot be used as a realistic basis for a rational comparison. For example, an individual's ability to borrow to cover a large medical bill is critical to any discussion of medical inflation because the [INVALID]native is a possible default with the impact THAT has on the health care provider. Also to the extent that the new health care legislation depresses employment, it stresses the health care system as much as medicare underpayments. Speaking of which, how can we honestly discuss 'healthcare inflation' without carving out the hidden medicare tax burdening the system? If we don't use these factors to discount healthcare inflation, we will never be able to assess it, much less deal with it.

Jerry Scherer (10/22/2010 at 1:32 PM)
It is unfortunate that we have not come to grips with the healthcare cost conundrum that plagues Americans and that to-date "efforts" toward resolution have exacerbated this crisis. It seems that there are numerous opportunities judge and point blame including service access and quality issues; provider and payer greed; fraud and abuse; legal costs; duplication of services; aging population; technology; uninsured individuals; ... and the list goes on. Our culture and healthcare delivery model have been impervious to multiple attempts in the last 40 years to control and manage these factors. The history speaks for itself and current prominent reform initiatives are equally ill advised. Because healthcare costs have risen to a level that threatens the health delivery system and the entire economy, we are forced to consider cultural and delivery model changes ... abdicating these responsibilities to government is no improvement. Culture and delivery model solutions need to be identified by and controlled by consumers and not by special interests that include government, the health industry, and consultants; "experts" driven by their self-interests rather than the consumer's. The healthcare industry creates a significant portion of its own demand by marketing to consumer fears, not managing patient expectations, encouraging dependencies, catering to patient misconceptions, and focusing on healthcare rather than health. Consumers need to engage and acknowledge accountability for their health. Business has started some positive initiative and can provide the lead. Public education is an essential first step.

Donald First (10/22/2010 at 1:29 PM)
Sorry Sir, your conclusion is faulty. This descerpancy between CPI and Health insurance increases is not caused by discounts. It has been going on for Decades. There have been periods of time in the 70;s 80's and 90's when the trends for Medical care were in excess of20%. In fact in 1983 Great West offer no rate guarantee to atract business. It is caused by a number of factors, mostly greed and gaming the system. New technology and too much access has increased the cost!