In keeping with one of this week’s themes on cost-effective health care…I can’t help but point out recent reports on the Affordable Care Act. Just like anything else, sometimes these government interventions have unintended consequences. And it seems that overhauling health insurance may actually be contributing to higher costs.
That is…depending on whom you listen to…
The report on higher costs comes from the Health Care Cost Institute (HCCI) in Washington, DC. The HHCI was created last year to analyze claims data from major health insurers.
And according to the HCCI, health care insurance costs for 40 million workers covered by UnitedHealth, Aetna, and Humana (three of the four largest U.S. health insurers) increased by an average $218 from 2010 to 2011.
The Affordable Care Act tries to limit insurers’ administrative expenses and profits by requiring companies to spend at least 80 percent of their premium revenue on medical services. In theory, this means that health insurance companies have to spend more of their money on providing actual health care services. But to meet that threshold, they may actually be letting prices rise.
The HCCI found that charges for hospital emergency rooms rose nearly 10 percent in 2011, after adjusting for an actual reduction in the intensity of care they delivered. That is, emergency rooms are providing more routine and less urgent care. Which essentially means they did less for more money. Yet another drain on the healthcare system (see “Deadly hazards of ‘urgent care’”).
The law also has encouraged consolidation among hospitals and doctors. This is according to David Holtz-Eakin, a well-informed and sensible analyst who once ran the the nonpartisan Congressional Budget Office after leaving the Bush administration in 2003. This means less competition and more pricing power among larger medical providers which drives costs up.
But of course, as with anything having to do with government and politics, there are many sides to the story. The U.S. Health and Human Services Department says that growth of actual health insurance premiums has slowed since the Affordable Care Act.
In the decade before the law’s passage, premiums increased about 8.7 percent a year, on average, according to data from the Kaiser Family Foundation. While premiums rose just 4.5 percent in 2012. The U.S. Health and Human Services Department says the health law’s limits on insurer profits and administrative costs have saved consumers about $2 billion and families will save an average of $2,000 a year on health plans bought from new government-run marketplaces the law creates in 2014.
So are the rising costs in 2011 just a one-time phenomenon? The Altarum Institute’s Center for Sustainable Health Spending in Ann Arbor, Michigan calculates that spending for the health system increased 5.2 percent in 2011. And they say this year it will rise about 4 percent. This is similar to the rates in 2010 and 2009. A spokesman said, “I might be dismayed if the data for 2012 showed it was going up even faster still.” Indeed.
Yet another report from the Atlanta-based Centers for Disease Control showed the number of people with no health insurance at all rose to 47.3 million in the first quarter, from 46.5 million a year earlier. This finding contrasts with a September 12 Census Bureau report that said the number of uninsured Americans declined by more than 1 million in 2011 from 2010.
Just recently a major sit-down restaurant chain (Darden—Red Lobster, Olive Garden, etc.) announced they are converting most of their tens of thousands of employees to part-time to avoid the additional costs imposed on employers by the Affordable Care Act. Meaning they will no longer have employer-sponsored health insurance (just as predicted by critics of this Act). All the while planning to open 500 more restaurants and hire tens of thousands more (but part-time) employees in the next 5 years. More jobs…but without health care or “full-time benefits.”
So here we have the usual double-talk from too many government agencies and institutes involved in issues where they never really belonged. And businesses are acting sensibly from an economic standpoint resulting in fewer employees insured due to the heavy hand of government.
Are health care costs going up or going down due to the Affordable Care Act? Are more people insured or are fewer insured?
It seems we can’t count on government guesses and predictions—or even “independent institutions” to agree on the facts—but will have to wait to see for ourselves. And at the very least, I would bet, without true health care reform, we’ll continue to see the ever-increasing trend of paying more for less…
“The Health Care Cost and Utilization Report: 2011.” From the Health Care Cost Institute, Washington, DC.