Blog | Managed Care

Analysis: Employers have a healthcare cost growth problem

Blog | Managed Care

Analysis: Employers have a healthcare cost growth problem

  • High-cost specialty drugs and increases in care costs will spark a 6.5% hike in employer-sponsored health benefits costs in 2020, according to a Modern Healthcare article
  • In 2020, medical cost inflation will surpass general inflation by 3.8%, according to Aon as reported by  Modern Healthcare.
  • Although 3.8 percentage points faster than inflation may be commendable, it isn’t sustainable because it eventually eats into your margin.

Modern Healthcare is reporting, “High-cost specialty drugs and increases in care costs will spark a 6.5% hike in employer-sponsored health benefits costs in 2020, according to a new report [Sept. 12].

Ultimately, Aon expects that medical cost inflation will surpass general inflation by 3.8%, according to Modern Healthcare.

"Employers, insurance carriers and the medical industry have done a commendable job of moderating cost increases in recent years, considering the headwinds of an aging population, high drug prices and rising chronic conditions," said Will Sneden, Aon's U.S. Health Solutions practice leader in the Modern Healthcare piece.

"Many of the risk factors lead to chronic conditions with long-term medical costs that make them difficult to treat and result in long-term medical cost increases," said Tim Nimmer, Aon's global chief actuary for health solutions. "As a large portion of our waking hours are spent on the job, the workplace is a logical place to create a healthier culture and change behaviors."

Takeaway

Although 3.8 percentage points faster than inflation may be commendable, it isn’t sustainable. Eventually, it eats into your margin to the point you have to do something about it. Of course, I’ve been saying that for years now, and so far, most employers have been content to complain loudly and shift costs to their employees.

However, leading-edge employers, like Walmart Inc., are doing something about this. The question is: When will the rank and file employers start making differentiated purchasing decisions? Until they do, it’s folly to expect providers to change their behavior.

Industry participants (physicians, hospitals, health plans, PAC providers, pharma, device manufactures and technology suppliers) would be wise to meet employers wherever they are in their efforts to develop equitable value-based payment methodologies. Otherwise the options, which span from capping rates to moving to “Medicare for All,” are undesirable from a provider perspective. 

About the Authors

Chad Mulvany, FHFMA

is director, healthcare finance policy, strategy and development, HFMA’s Washington, D.C., office.

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