2007 March 20 Tuesday
Aggressive Employers Slowing Health Costs Rise

Some employers are finding better ways to reduce the rate of increase in health care spending.

Employers that have done the best job of managing annual increases in health care costs are pulling out ahead of their peers, according to the findings of the 12th annual National Business Group on Health/Watson Wyatt Survey.

I wonder how much of this huge difference is due to bigger deductibles at some companies.

"If you look at the spread between the poor performers and the best performers, the gap is increasing," said Ted Nussbaum, practicing director of health care consulting North America at Watson Wyatt Worldwide in Stamford, Conn.

The two-year average trend for the best performers in this year’s survey was just 2.5%, compared with 11% for poor performers, while in last year’s survey the differential was 3% for best performers vs. 11% for poor performers and in 2005 it was 5% for best performers vs. 15% for poor performers, Mr. Nussbaum pointed out.

Employers are offering money to do "wellness" things. I've personally seen an employer offer cash for getting screened for blood pressure, cholesterol, and some other indicators. Go to a wellness day appointment and get paid for it.

For example, best performers are 17% more likely to offer compelling financial incentives to encourage employee education and participation and 11% more likely to effectively deliver health care information, according to the survey of 573 large employers.

The aggressive companies are identifying lower cost providers. Sounds like competitive pressures at work in the medical marketplace. Imagine that.

In last year’s survey, best performers found that they could lower health care costs by encouraging employees to seek care from "high-performance networks," defined as a subset of doctors and hospitals in a particular provider network that have proved they provide consistently high quality care on a cost-effective basis.

However, this year, the best performing employers are finding not all providers in a "high-performance network" can produce the same results for all types of procedures. In other words, "quality is procedure-specific," Mr. Nussbaum explained. As a result, many best performing employers are using high-quality, cost-effective providers similar to the way they use Centers of Excellence for transplants, only to treat other conditions, he said.

The average annual cost increase for surveyed companies was 8%.

Annual cost increases for all employers remained at 8 percent for the second year in a row and are expected to stay at this level through 2008.

That's more than double the rate of inflation.

Something has got to give on rising medical costs. Medical spending has surpassed 16% of of US GDP and will consume 20% of the US GDP by 2015 if one projection by Medicare actuaries is to be believed (and it seems plausible). The pressure for cost cutting and automation is going to rise dramatically.

Share |      By Randall Parker at 2007 March 20 09:38 PM  Economics Health


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