Squeezing the cost balloon

Health care costs in Massachusetts have been rising rapidly for years. There’s more pressure to do something about it now, though because of the state’s commitment to providing health insurance with affordable premiums to nearly everyone. Right now the state is unhappy with the fact that health insurers want to raise premiums for the subsidized plans by something like 14 percent. See Bay State pulls back on health contracts. If the government is tough enough insurers may back down and settle for smaller increases.

That won’t solve the problem, however.

As I posted before, my own company’s premium with Blue Cross Blue Shield of Massachusetts went up 26.3 percent this year. No one’s been able to give me a good answer as to why our premium went up so much –especially since this is supposed to be a community rated state, and nothing really changed from our side in terms of location or staff– but my suspicion is that at least part of the increase is a result of health plans and providers shifting the cost even further onto those of us who can still afford to pay. If the state forces the subsidized plans to keep premium increases down, the same insurers will raise premiums on other business if they can. If they don’t have that flexibility, they may try to put the squeeze on providers. When that happens the providers go to the big commercial plans (Blue Cross, Harvard Pilgrim, Tufts, Fallon) and tell them they have to make it up to them. So they raise reimbursement rates and then take it out on companies like ours.

It would have been nice if the expansion of health insurance in Massachusetts could have been self-funding –if high-cost ER visits had been replaced by more efficient and effective primary care visits. But that’s not what’s happening. Newly insured people are actually using their health insurance. Imagine that! They’re using the system more, just like other people who are insured. That’s driving total costs up, not down.

There are ways to reduce health care costs, but it will take some fundamental changes in the way medicine is practiced to make it happen. One of the most promising paths is to improve processes to reduce errors and improve patient safety. In industry, we call this reducing rework. It can reduce costs dramatically and improve quality. Live long enough and we’ll see it transform health care delivery.

February 29, 2008

5 thoughts on “Squeezing the cost balloon”

  1. Controlling costs
    Your article is spot on and illustrates one of the main reasons companies are struggling to make a profit. What you mentioned is the continuing cost shift to employees. Consider this: since 2000, workers are paying 143% more for health coverage while their out of pocket cost through copays and deductibles rose over 115% during that same period. Want it all to go away? Get off this runwaay train, buy the book that will make you face the truth at
    Your next performance review/bonus could riding on the quality of your employee benefits broker.
    How’s that working for you?

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