Advances in Medical Technology Identified as a Primary Driver of Increased Costs

• Author: Health Informer
• Filed under: Health News, Health Technology
• Date: May 28,2009

Institute releases report on health care costs

A report issued today by the WellPoint Institute of Health Care Knowledge revealed some startling facts about health care costs in America. The report identified the primary drivers of increased health care services and health insurance premiums, dispelling the notion that insurer profits are the primary drivers spiking costs.

The May 2009 Institute report, titled “What’s Really Driving the Increase in Health Care Premiums?,” compiles research from sources such as PricewaterhouseCoopers, the Robert Wood Johnson Foundation, the Kaiser Family Foundation, the Bureau of Labor Statistics and the Congressional Budget Office.

“The current rate of increase of health care costs is unsustainable,” said John Martie, President, Anthem Blue Cross and Blue Shield. “In Colorado, health insurance for an employee of a small business costs an average of $4,150 per year, or $346 per month. The cost for a one night hospital stay in Colorado now averages $6,000. We have to address the key drivers of health care costs to be able to lower premiums and increase access to health care for all members of the communities we serve,” Martie added.

According to the report the “key drivers” of spiraling U.S. health care costs are:

• Advances in medical technology and subsequent increases in utilization.
• Price inflation for medical services that exceeds inflation in other sectors of the economy.
• Cost-shifting from people who are uninsured and those receiving Medicare and Medicaid to the private sector.
• High cost of regulatory compliance.
• Patient lifestyles, such as physical inactivity and increases in obesity.

Citing research from PricewaterhouseCoopers’ December 2008 report, The Factors Fueling Rising Health Care Costs, the report also debunks a commonly held belief about the profitability of health insurance companies. Contrary to public opinion, which puts health insurers’ profitability at somewhere between twenty-five and forty percent, PricewaterhouseCoopers confirms that it in truth only three cents of every health care premium dollar is spent on health insurer profit. This is less than the 2008 profit of 4.9 percent reported to Reuters by auto and truck manufacturers, the 4.8 percent reported by health care facilities, or the 4.7 percent reported by utility companies.

According to the Institute’s report, newer medical technologies tend to increase prices because they are generally more expensive than the older technologies they replace. While the availability of more advanced, superior technologies can yield better results for some patients, these technologies and diagnostic tests can be used inappropriately in some situations where existing, older technologies are more effective and accurate.

“We have learned over time that newer technologies do not always produce better health outcomes,” Martie continued. “We need to focus on outcomes and delivering better quality care and apply the breathtaking advances in technology and treatment when they produce better patient care. The wise application of these expensive new therapies will result in more affordable health care for all Americans.”

The WellPoint Institute of Health Care Knowledge was established with the belief that intimately understanding the factors impacting consumers’ experiences with their health plan and which factors most impact their satisfaction are central to efficiently addressing consumer needs. For more information and a copy of the full report, please visit WellPoint Institute of Health Care Knowledge at www.wellpoint.com/institute

Anthem Blue Cross and Blue Shield is the trade name of Rocky Mountain Hospital and Medical Service, Inc., an independent licensee of the Blue Cross Blue Shield Association. (R) ANTHEM is a registered trademark of Anthem Insurance Companies, Inc. The Blue Cross and Blue Shield names and symbols are registered marks of the Blue Cross and Blue Shield Association. Additional information about Anthem Blue Cross and Blue Shield in Colorado is available at www.anthem.com.