It is one of the most confusing topics to talk about in business: Controlling the rising cost of health care. Ordinarily in business, the objective is to stop cost increases altogether. But that hasn’t been the case when it comes to health care.
A decade ago, cost increases were in the double digits year-over-year and getting higher. That’s when business starting taking a hard look at how the get the spending under control. They were desperate for any trend that wasn’t doubling every year.
In more recent years, increases in health care spending have slowed down. The good news this month is that it is predicted to remain stable in 2013, even though, compared to other costs, it is still pretty high.
A study by Buck Consultants, its National Health Trend Survey, shows that for the first time since 2001, cost increases in any plan type (HMOs, PPOs, high-deductible plans, etc.) were less than 10 percent. And, based on its research, Buck predicts that trend to hold steady in 2013. As you can imagine, employers are celebrating – not that the increases continue to be close to double digits, but that they remain less than that.
It’s a back-handed compliment, like when your sister tells you your new outfit makes you not look as fat as you usually do. The reality is – although it is worth celebrating – there is still a ton of work to be done to get health care costs under control.
“Despite the lower (cost) trend, health care costs continue to outpace general inflation – creating difficult business decisions for organizations,” said Daniel Levin, a Buck principal and consulting actuary who directed the survey.
One of the biggest contributors to rising costs is prescription drugs. In the Buck survey, prescription drugs costs were up 10.1 percent – a 0.5 percent bigger increase than the year before. A federal study of 2011 drug costs attributes the rise to brand-name and specialty drugs. One way to control prescription costs moving forward is to encourage generic drug use. But prescription drugs aren’t the only factor.
“The stubbornly high costs can be attributed to several trends, ranging from a greater use of diagnostic tests and treatments to mandated coverage of certain benefits,” Levin told Society for Human Resource Management recently.
The medical profession is taking a closer look at whether such tests and treatments really do drive better results. JAMA Internal Medicine recently published a study called “Less is More.” The study documents a series of cases where less health care has actually resulted in better health. Employers will be looking closely at these kinds of results to help them determine health plan designs in the future as they continue looking for ways to curb rising costs. Employers also have to decide how much of the cost increases to shift to employees.
“Or, whether to drop coverage and pay the penalties imposed by the Patient Protection and Affordable Care Act,” said Levin.
Employers have some tough decisions ahead of them, in spite of the “optimistic” trend of health care costs rising at a slower rate.
Michelle Hicks, a senior professional in human resources, is a director in the communication practice of Buck Consultants, a Xerox company.