Presentation on theme: "Eighth Annual Wall Street Comes to Washington Conference June 18, 2003 Joy M. Grossman, Ph.D."— Presentation transcript:
Eighth Annual Wall Street Comes to Washington Conference June 18, 2003 Joy M. Grossman, Ph.D.
Recent HSC Studies Strunk and Ginsburg, "Tracking Health Care Costs: Trends Stabilize but Remain High in 2002", Health Affairs,Web-exclusive, June 11, 2003 and Data Bulletin No. 25, June 2003 Lesser and Ginsburg, “Health Care Cost and Access Problems Intensify: Initial Findings From HSC's Recent Site Visits”, Issue Brief No. 63, May 2003 Devers, Brewster, and Ginsburg “Specialty Hospitals: Focused Factories or Cream Skimmers?”, Issue Brief No. 62, April 2003
Rapid Spending Growth Threatens Affordability of Health Insurance Health care cost trend declined slightly in 2002, but insurance premium trend continued to accelerate in 2003 Increased consumer cost sharing but few other strategies to control costs Provider strategies exacerbating cost growth Consumer financial burden and uninsurance rates likely to increase
Overall Cost Trend Declined Slightly But Remained Very High Sources: Health care services: Milliman USA Health Cost Index ($0 deductible); U.S. economy: Gross Domestic Product (GDP)
Components of Cost Trend Hospital care the most important contributor –Use trend has moderated –Price trend continues to accelerate Prescription drug trend has slowed but still high
Key Health Care Cost Drivers Short term –Retreat from tightly managed care –Growing provider leverage –Labor shortages –New drugs and advertising Key long term driver is new technology
Premium Increases Grow Even As Employees Face More Cost Sharing Insurance premiums in 2003 higher than in 2002 –15 percent net increase vs. 13 percent –Underwriting cycle has not yet turned Benefit buy down also grew between 2002 and 2003 –3 percent vs. 2.5 percent –PPO deductible, drug copays
Employers Aggressively Shift Costs Employee cost sharing more widespread and affecting more services than two years ago Unionized firms and public sector employers adopting premium sharing For those with premium-sharing already, increasing copays and deductibles and moving to coinsurance
Some Indications of Eroding Coverage Some reports of small firms dropping coverage Incentives for employees to drop dependent coverage or switch to spouse’s plan
Managed Care: Improved Profitability But Few Strategies for Cost Control Plans’ financial performance has improved Few traditional cost-control strategies remain viable Experimentation with product design but limited take up –Tiered provider networks –Consumer-directed health plans
Provider Strategies Contributing to Cost Pressures Hospitals maintain leverage in contract negotiations Competition for profitable specialty and ancillary services heats up
Outlook Unclear if cost trend will continue to slow appreciably Turn in insurance underwriting cycle would slow premium trend Consumers likely to continue to face increasing financial burden and loss of coverage
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