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Published: April, 2007; Vol 3, Num 11

Same Old Story:

Health Care Costs Continue to  Escalate

No big changes in trends are apparent in the most recent medical cost data examined by the LHSFNA’s national health care consultant and presented at March’s LIUNA’s Tri-Fund Conference.  Health care costs are still rising, faster than workers wages and overall inflation.

According to James E. Conlon, Principal and Consulting Actuary at Milliman, Inc., the biggest new trend is the drive for greater transparency in health care finances. However, “while it’s good to see more clearly what’s going on,” he said, “transparency, in itself, will not change the basic paradigm.”

Another, rising trend is the so-called “consumerism” in health care, embodied in consumer driven health plans (CDHPs).  While there is a lot of talk about CDHPs, “these really haven’t caught on yet,” says Conlon.

On the most basic issue, the cost of health insurance continues to rise, albeit at a somewhat slower rate.  The rate of increase, after peaking at 13.9 percent in 2003, has fallen to 7.7 percent in 2006.  Since 1988, the rate of increase has fallen below five percent only once, in 1996.

As a percentage of the nation’s gross domestic product, health expenditures continue to rise.  In 2006, they stood at 16.5 percent and are expected to top 18 percent by 2010.  “While our expenditures on health care keep going up,” said Conlon, “the quality of American health care is not keeping pace.”  Based on a number of quality measures, including life expectancy and infant mortality, the U.S. ranks 26th out of 30 industrial nations.

Conlon also pointed out the rise in the number of uninsured Americans, up again in 2005 after holding steady for the previous year.  In 2000, 39.6 million non-elderly (younger than age 65) Americans were uninsured; today, that figure is 46.1 million or approximately 16 percent of the U.S. population.  A particularly bad sign, said Conlon, is the 2005 increase in the number of uninsured children, an increase that reversed the small gain of 2004.  When more children are uninsured, the long-term cost of the nation’s health care tends to rise because basic, preventive procedures such as immunizations are not completed and more serious, expensive illnesses develop.

For LIUNA and its signatory employers who provide health care coverage to Laborers through jointly managed health and welfare funds, the rising number of uninsured Americans means higher costs.  This is because hospitals pass the cost of providing care for the uninsured onto patients who have insurance.  Ironically, the union movement, by ensuring health care for its members, ends up paying a portion of the health care costs of the non-union companies that provide little or no coverage.  This is one reason LIUNA supports efforts to find an effective program to provide universal health care in the U.S.

Much of the reason that prices did not rise as fast in 2006 as in previous years was slower growth in prescription drug spending, in part due to increased utilization of generics.  In contrast, hospital spending remained stable due, significantly, to the consolidation of hospitals through mergers and, thus, the strengthened bargaining position of hospitals vis-à-vis health plans.  This stronger position is one reason why hospitals are able to pass the cost of uninsured care onto private payers rather than absorbing the cost from their own profits.

According to Conlon, nothing on the horizon offers hope of a breakthrough on the question of health care cost in the U.S.  As the American population continues to age, the advent of new pharmaceuticals without generic equivalents, the promulgation of new hospital technologies and the strong bargaining position of hospitals and drug manufacturers, is expected to continue to drive prices higher in the years to come.

So long as this trend continues, LIUNA health and welfare funds should continue to be diligent in watching cost and utilization trends.  The quality of care should also be monitored.  Studies show that there is substantial difference among providers in the same geographic area in the treatments, procedures and costs of care provided patients displaying essentially the same symptoms.  It is important to identify providers that consistently overcharge for care.

It is also important for Laborers and their families to take full advantage of the wellness benefits provided by their health and welfare funds.  These include annual physical exams, immunizations, smoking cessation and nutrition counseling, to name a few.  Healthy lifestyles not only mean a better quality of life, they also help contain rising health care costs as well.

[Steve Clark]