What's Really Driving the Increase in Health Care Premiums?
06/15/2009
By the WellPoint Institute of Health Care Knowledge
Although the rate of increase has slowed in recent years, the cost of health care services and premiums continues to rise and is a major concern to individuals, employers and the government. The escalation of costs accounts for the overwhelming impetus behind calls for health care reform. Yet most people don’t understand what drives health care premiums. For meaningful health care reform to occur, policymakers will need a clear and accurate understanding of the real (vs. perceived) factors that are actually driving the cost increases.
Despite the common belief that costs increase due to excess insurer profits, the aging of America and the high cost of medical malpractice, these factors have little if any impact on health care premiums. The key drivers of health care premium increases are advances in medical technology and subsequent increases in utilization, excess price inflation for medical services, cost-shifting, the high cost of regulatory compliance and patient lifestyles (e.g., physical inactivity and increases in obesity). Though still a factor, prescription drugs contribute less significantly to rising health care costs due to the increased use of generic medications.
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