Health insurance costs far outpace wages/inflation over the past decade – approaching a “fork in the road”?

October 29, 2019

An article in UPI discusses health insurance cost data based on a survey by the Kaiser Family Foundation.  The survey found a 54 percent hike in family premiums (total cost now $20,500) and a 71% increase in employee share (to over $6,000) over the past 10 years.  This compares to an increase in wages and inflation of 26 and 20 percent respectively. To make matters worse for employees, the average deductible doubled over that time period, from $800 to $1,600.  The percentage of Americans who have deductibles is now 83% as opposed to 63% in 2009. In businesses with under 200 employees, almost half face deductibles over $2,000 representing a 400% increase over a decade. 

Kaiser Family Foundation President and CEO, Drew Altman was quoted in the article as saying “The single biggest issue in health care for most Americans is that their health costs are growing much faster than their wages are.”  Mr. Altman also opined that “Costs are prohibitive when workers making $25,000 a year have to shell out $7,000 a year just for their share of family premiums.” 

EHC NOTE: We certainly feel the pain of rising health care costs along with everyone else.  However, the two most concerning data points in the article are the huge increase in deductibles for small businesses and the example brought up by Mr. Altman of the hypothetical worker earning a low wage potentially being asked to pay over 25% of salary for health insurance. 

Ultimately there comes a tipping point when the cost of an item outstrips the ability of the market to pay for it.  It seems we are at or certainly near there with health insurance costs. Increases in premiums, employee share and deductibles which far outpace wages and inflation are unsustainable.  With surgical care comprising a significant component of health spending, those of us involved in delivering perioperative care should take this opportunity to move the needle in the right direction.  As we discussed in the Review in September, if the surgical market is to function like a true free market, we must begin with transparency… “As an industry we need to be able to offer an accurate price quote for an easily definable, uncomplicated procedure.”  

But transparent and high/rising prices won’t do the trick alone.  All stakeholders in the perioperative environment, including payers must look for opportunities to standardize care, deliver care in the most cost-effective setting and apply analytics to determine the most cost-effective treatment plan for individual patients.  Rational resource allocation is also a laudable goal. As we have discussed elsewhere in this Review, Multiple hospitals in the same market do not need to provide every complex, resource intensive service line.  

At the same time, we should all strive for efficiency.  While it is an example from India, we encourage readers to revisit the astounding efficiency we described back in April where Narayana Hospital achieves high outcomes at incredibly low prices.  How was this achieved? By thinking outside of the box, by rethinking the role each perioperative contributor can fulfill and by relentless improvement.  While we don’t think a $2,000 CABG will be coming to the US any time soon, downward pressure on prices would be a necessary step in the right direction.  

It seems as if we are at a fork in the road.  Down what we believe is the lighter, brighter, more promising fork we can attempt to bend the cost curve for consumers and businesses in order to pull back from the approaching tipping point.  Down the other fork – which to us is darker and scarier – we can anticipate all the wisdom of dealing with the government – since we enjoy the DMV and IRS so much, let’s let CMS run our OR’s! 

We think most of us would prefer the lighter, brighter, more promising fork.  But the dark and scary data on health insurance costs seems to be nudging ever closer to the dark and scary fork.  We as perioperative leaders and clinicians should do all we can to nudge back to the fork with the light.