'Surprising' conclusion to fixing U.S. health care.

Author:Nelson, Greg
Position:Members speak out - Survey

When my company began its annual renewal of our employee health-care plan, my mindset shifted from bottom-line-oriented chief financial officer to frustrated American, and I readied myself for the annual "dance."

This involves months of meetings and phone calls with human resources and our brokers--reviewing current-year claims, speculating about how they'll affect renewal costs, receiving an increased proposal from our carrier, considering proposals from other insurers or self-insuring.

We'd discuss how much to increase employee deductibles, contributions and co-pays and decrease the richness of the plan to make it work. The CEO would help make decisions and we'd plan how to tell employees the "bad news" of higher costs.

I know many CFOs who feel--as I do--that there's a sense of hopelessness and frustration as health-care costs continue spiraling out of control. So, I decided to research the facts. My findings surprised me--especially the conclusion I reached.

Aggregated cost increases in the healthcare system have been about 54 percent since 2000, far exceeding the overall rate of inflation, according to the June 2008 CPI Detailed Report. Employer/employee premiums for employer health plans have increased four times faster than workers' earnings--up 143 percent since 2000, while out-of-pocket costs for higher deductibles and co-pays have risen 115 percent.

A 2005 California Health Foundation study found that U.S. health-care costs comprise 16 percent of gross domestic product and are expected to rise to 20 percent by 2016. The same study found similar spending averaged nearly 11 percent of GDP in Switzerland and Germany and nearly 10 percent in Canada and France. Though U.S. spending includes costs for uninsured millions, many other Western countries provide universal coverage.

Besides uninsureds, a 2004 Hewitt study found we face other significant factors: growth in pharmaceutical expenses; expensive new technologies; aging population; increasing consumer demand; provider consolidation; health-care labor pressures; and less effective, broader managed-care networks.

Also the Department of Health and Human Services found the U.S. spends six times more on a per-capita basis for health-care administration (nonclaims costs paid for health care) than peers in Western European nations.

About 30 percent of each U.S. healthcare dollar is spent on claims administration. In 2007, each $1,000 my firm paid for health-care premiums included $354 in...

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