By Bob Smith, Associate Director, CBGH
In 2016, an employer-sponsored PPO (preferred provider organization) health plan for an American family of four costs $25,826 on average – an eye-popping three-fold increase over 2001 when it was $8,414.
That is the key finding recently released in the medical index report assembled by Milliman, a global consulting actuary. But it is not the only significant observation Milliman makes. Others include:
Here’s another way to read those findings: Cost increases are stifling economic development and weighing upon corporate competitiveness while they are cannibalizing employee raises and draining families’ discretionary income. Or let’s put it more simply: health care has value-proposition problem.
So to what does the Milliman report attribute the ongoing, disproportionate increases?
“The ongoing increases are driven by a myriad of factors, including the disconnect between healthcare consumption and financing…. In addition, healthcare costs are continually driven upward by the fee-for-service payment mechanisms, by inefficiencies in the delivery systems, and by our efforts to improve longevity and quality of life through new technologies.”
Well, okay. True enough – as far as that goes. But if we’re just going to inventory contributing factors, then why overlook the obesity epidemic, the lack of pricing and quality transparency, the lack of patient compliance, the fact that premium increases benefit insurers, and the world’s highest administrative costs? Each plays a role.
Simply inventorying a smorgasbord of issues is hardly helpful for an employer who actually wants to do something about it. Instead, we would argue that while some of these factors are causes, many others are, more accurately, the results of other, largely unseen causes. For the most part, we would argue, the consistent inefficiency and inconsistent effectiveness that characterizes today’s health care reflect symptoms and not causes and that the best way to understand the cause is to conduct a root cause analysis.
In part two of a three-part blog, we’ll apply a root cause analysis to health care’s value problem. Only by doing so can we then consider, in part three, what employers – who finance virtually all commercially provided care – can do.