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Healthcare spending on the rise: What’s to blame?

Rich Coleman
by Rich Coleman
September 27, 2012
  • Benefits
2 minute read
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Brace yourself. Here are some numbers that are going to make you sick.

Healthcare spending is on the rise for people younger than 65 and privately insured, reversing the downward trend, according to the Health Care Cost Institute’s (HCCI) 2011 Health Care Cost and Utilization Report.

From 2009 to 2010, healthcare spending dropped from 5.8% to 3.8%. But from 2010 to 2011 it rose to 4.6%. This is especially alarming because general inflation has only risen 3.2%.

So, keep that inflation number in mind when you read these additional stats from the report. Costs for:

  • Professional procedures increased 3.3%
  • Prescriptions increased 1.2%
  • Outpatient services rose 4.6%
  • Outpatient visits rose 5%, and
  • Inpatient admissions rose 5.5%.

Except for prescriptions — more people are using generics, and generic prices dropped 7.2% while name brand drugs increased 17.7% — spending for these services rose more than the general inflation rate.

Which begs the question: Did your paycheck go up 4.7% last year?

What’s to blame?

Since Obama took office in 2008, the idea of affordable healthcare for more citizens certainly stayed in the spotlight. And with the passing of the Affordable Care Act in 2010 — popularly dubbed “Obamacare” — one could certainly draw some parallels.

Though not all of the policies have taken effect yet, the main idea behind the act was to get more people insured, including those with low-income and/or pre-exisiting conditions. Probably the most controversial aspect of the law is the mandate you’re already grappling with: businesses must offer health-insurance to employees working 30 hours or more or face a tax.

This report shows that the healthcare industry may be responding to that mandate and the other provisions by boosting their prices. One could make the argument that healthcare spending may have continued on its downward trend had the ACA not passed in March of 2010.

If that’s the case, then Obama’s healthcare reform may have had the opposite effect on the middle class: instead of making things easier, healthcare is just costing more.

Are companies bracing for change?

Turns out that not all employers are confident that Romney will win the election, which would all but guarantee repealing Obamacare.

The 2012 Employer Survey on Purchasing Value in Health Care by Towers Watson and the National Business Group on Health shows:

  • 40% of employers plan on developing a culture where employees are more accountable for their health conditions
  • 25% will review their mix of benefits, perhaps making cuts
  • 13% plan on adding a spousal surcharge
  • 24% already have a spousal surcharge
  • 11% plan on offering a consumer-driven health plan starting in 2013

Click the image below for the HCCI press release and access to the report:

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