Healthcare Costs Resume Their Upward Climb

Although it was nice while it lasted, a multi-year slowdown in the growth of healthcare costs came to an end in 2015 with overall costs increasing 5.8% and spending by private insurers increasing 7.2 %.  A December 2nd report by U.S.News, in addition to citing the above, points out that these are the largest increases in the last 8 years and probably signal that the downturn in healthcare costs was temporary.


Employers should probably not be surprised.  Despite its promising name, the “Affordable Care Act,” while decidedly effective at increasing coverage and, in fact, making coverage more affordable for a segment of the population, did little to address the underlying drivers – on both the demand and supply side of the ledger – of healthcare inflation.  And although incentives for primary care physicians to improve outcomes and reduce costs under provisions of the “MACRA” legislation to go into effect in January hold promise, employers are not likely to see the benefits of those changes anytime soon.


Three Things Employers Must Do


While we think there are specific steps employers should be taking to both control costs and improve outcomes, looking to the Federal government would not be among them.  Specifically, employers can and should be acting to achieve three goals:

  1. Measure and manage the risks and costs of chronic disease. This is the single most important thing employers can do.  Chronic diseases drive up to 70% of your costs and actually generate another $0.51 in expense for every dollar you spend on healthcare due to lost productivity and replacement costs.  Unfortunately, for virtually every CBGH employer member we’ve studied, the incidence of employees with a chronic condition has increased over the past several years.
  2. Promote consumerism for routine procedures.  The cost of routine screening tests and routine procedures varies in the Denver market from 250% to 1,100% depending upon the service.  Provide your employees with the tools and incentives to shop for common medical procedures.  And, just as importantly, teach them the “Five Questions to Ask Your Doctor.”  (Download the free poster and use it widely.)
  3. Make sure employees use high quality hospital services.  Note that we do not say “use high quality hospitals.”  Hospital quality can best be judged on a service by service basis.  While a hospital may very well score, for instance, in the top 10% of all hospitals nationally when performing joint replacements, that same hospital may score in the bottom 10% when it comes to cardiac or cancer care.  Overall, in healthcare, high quality usually ends up costing less, not more.

For more information on how to achieve these goals at your organization, give us a call.  We’d be happy to talk about how to help you tailor these three strategies.