08 Jun 2012

What makes healthcare so expensive?

08 Jun 2012

Last week the nonprofit Health Care Cost Institute (HCCI) unveiled a database of 5 billion health insurance claims. The data was voluntarily supplied by Aetna, Humana, UnitedHealth, and Kaiser Permanente. It covers 33 million Americans with employer-sponsored health insurance. Now that all the data is in one place, researchers can start tackling questions like: What makes health care so expensive?

One of HCCI’s first reports released last week reveals “Higher spending was mostly due to price increases, rather than changes in the use of health care services: Prices for hospital admissions, outpatient care, and prescription drugs all grew at a much faster rate than general inflation in 2010.”  The National Health Expenditures report and Medicare data, reveal similar trends, both showing people using less health care as the economy slowed. The startling fact is that while we were using less and less of healthcare, we were paying more for the care we were receiving.

In light of these results, HCCI Chairman Martin Gaynor said, “we may need to think about where we’re directing our policies” to control costs. That’s because health care reform initiatives like mandating that care organizations, networks of hospitals, and doctors work together to coordinate patient care and cut out unnecessary services will not remedy the problem if we’re still being charged more for services.

What do we do now in light of these new findings? Gaynor suggested  price regulation, an initiative currently gaining support here in California. But I still wonder, as I did when I first got wind of Senator Feinstein’s proposed legislation: how does restricting the amount that providers can raise prices address the fact that prices are too high to begin with?

Maybe it’s too late to address the present landscape of high healthcare prices. Maybe we just need for inflation to catch up. Senator Feinstein seems to thinks so. Instead of pursuing legislation to help lower current costs, we’re gathering signatures to put a measure on the ballot to regulate future costs. Don’t get me wrong, I’m not completely averse to the Senator’s proposal. It’s a start and the measure has its merits. I just wish the legislation included provisions to help lower current costs.

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