Most everyone knows that health insurance costs are high. Health care spending is expected to double between 2007 and 2019, constituting about 20 percent of the entire U.S. economy, according to an Anthem, Inc. report on rising premiums. And while spending continues to rise, the year-over-year rate of spending on health care costs has slowed over the last five years, down to 3.8 percent in 2014. For the better part of a decade, insurance companies and health care providers have been actively trying to reduce health care costs, and the slow down to just 3.8 percent reflects much of that effort. So what are the drivers of those health care costs?
What Are the Primary Drivers?
The primary drivers of the rise in health care costs include "technology, administrative expenses, hospital costs, lifestyle choice and chronic disease conditions," according to a Forbes report with contributions from The Physicians Foundation. In particular, the frequent use of expensive, unproven technology is a massive problem. The nonprofit Robert Wood Johnson Foundation (RWJF) recently published a study explaining how technology can raise costs because of "few requirements that effectiveness be demonstrated before technologies are used broadly and concern that their application tends to go beyond those patients likely to benefit the most from them." In short, health providers are using expensive machines on patients who won't necessarily benefit from the treatments.
The Impact of Prescription Drugs
Prescription drug costs are a major threat to the overall affordability of health insurance. As CNN reports, drug price negotiating is a serious driver when it comes to transparency and Medicare laws.
The high costs of prescription drugs are being passed to the end consumer in the form of higher copays, yielding unfortunate results. Specifically, drug prices for chronic illnesses, such as asthma, high blood pressure and diabetes, rose more than 10 percent in 2014. At this point, some patients are skipping medications to pay for necessities such as rent and groceries. Untreated chronic illnesses and their long-term effects then drive up the overall cost of health care.
According to a 2014 study published in Risk Management and Healthcare Policy, education nonadherence is also a major contributor to overall health care costs. Billions of dollars are lost when patients stray from their prescribed medication regimes. With improved medication adherence, patients would improve their recovery rates and decrease the chances of costly complications, and with better patient adherence, conditions such as cardiovascular disease, chronic obstructive pulmonary disease (COPD) and asthma wouldn't place such a heavy burden on the health care system.
Lifestyle and Wellness Trends
Other investigations into the major drivers of rising health care spending, such as those conducted by the Robert Wood Johnson Foundation, generally reveal that obesity is a major problem. Population simulations show that obesity is the main reason for health care cost increases until patients reach their mid-50s — then smoking becomes the predominant personal health issue. When you combine obesity with smoking, the costs for patient care become unsustainable. As The Guardian reports, smoking is such a drain on the public health system in the U.K. that the state is considering a permanent ban on smoking for anyone who is currently a minor, meaning those who can legally smoke now can still do so, but the habit will be illegal for anyone who has never smoked.
Pushing for Collective Improvements
No single group is at fault, meaning the answer is a collective move toward better and more efficient health care choices.
This article is part of a collaboration between Anthem and ADP. Visit Anthem's The Benefits Guide for guidance on managing your company's health care costs.
SIGN UP FOR THE THRIVE NEWSLETTER