Viewing entries tagged with 'Costs'
MUST WATCH TV: Health Plans Talk About What is Driving Premiums Higher -- Underlying Costs
Posted by The Campaign on February 23, 2010 at 9:53 AM
Yesterday, AHIP's Karen Ignagni released this statement outlining the real reasons why premiums are going higher -- underlying medical costs; setting the record straight on profits; and talking about ways in which health care reform could truly contain costs.
AHIP also did several interviews on news shows outlining the same arguments as to why premiums are increasing and setting the record straight on various attacks on the health plan industry. Watch the segments below:
AHIP's Karen Ignagni on the Nightly Business Report:
AHIP's Robert Zirkelbach on BBC America:
AHIP's Mike Tuffin on CNBC:
AHIP Statement on the Status of Health Care Reform
Posted by Campaign on February 22, 2010 at 12:29 PM
AHIP Statement on the Status of Health Care Reform
Washington, D.C. – America’s Health Insurance Plans (AHIP) President and CEO Karen Ignagni this afternoon made the following remarks as prepared for delivery on the status of health care reform:
“There is an enormous amount of attention being paid right now to premium increases for people who obtain coverage in the individual insurance market – which represents about seven percent of those with private coverage today. This concern is understandable, especially at a time when people across the country are struggling to make ends meet and having to make tough choices in their personal budgets.
“The central policy question that should be asked is: what is driving these increases and whether the measures being proposed will work? Families are counting on policymakers to step up and address the problem so that costs are brought under control and all Americans have health security. Our members want that too.
“But there is a heavy dose of politics at work here. There has been a strenuous effort to focus on health plans because very few policymakers want to take on the real issue of why costs are rising. But they must take on these issues to assure American families and small businesses that health care reform will be affordable and sustainable.
“In addition, a weak economy is causing younger, healthier individuals to drop their insurance. As healthy people forego health insurance, the rates for those Americans who need coverage increases. That is why going into 2009 we advocated for robust insurance market reforms, including guaranteed coverage with no pre-existing condition exclusions or health status rating paired with an effective personal coverage requirement to get everyone covered.
“To suggest that cost containment can be achieved by singling out health plans ignores the very inconvenient truth that premium increases reflect increases in the underlying cost of medical services.
“Regulating premiums won’t do anything to reduce the soaring costs of medical care. This would be like capping the prices auto makers can charge consumers, but letting the steel, rubber, and technology manufacturers charge the auto makers whatever they want.
“There is also a lot of attention on health plans’ profits. The track record shows that this is an efficient, low-margin industry whose margins are consistently lower than other sectors in health care. According to Yahoo! Finance’s latest analysis of quarterly financial data, the net profit margin for the entire health care sector is 11%, while health plans’ net profit margin is 3.4%.
“In fact, out of every dollar the nation spends on health care, less than one penny goes to health plan profits. It is time to ask: what are we doing about the other 99 cents?
“We need to ask this question because new health spending projections released by CMS recently found that health care’s share of the economy grew 1.1 percentage points in 2009 – the largest one-year increase in health care’s share of the GDP since the federal government began keeping track in 1960. The report notes that the ‘two primary drivers of growth…are medical prices and utilization.’
“The Council of Economic Advisors last year modeled out the impact of reducing the rate of growth in health care costs by 1.5% per year for a decade. That is the kind of goal around which the nation should rally. But we won’t even achieve a small fraction of that goal by exclusively looking at health plan administrative costs and profits.
“Examples of unsustainable cost increases abound:
· A preliminary report by the Massachusetts Attorney General finds that some Massachusetts hospitals and doctors are paid twice as much as others for essentially the same patient care. The report points to the market clout of the best-paid providers as a main driver of the state’s spiraling health care costs.
· Forbes magazine just released the list of its most expensive drugs, including one drug that cost $409,500 for a year’s supply – meaning it costs more than $1,000 per day, every day, all year. And three more that each cost more than $350,000 for one year. The article notes that ‘biotech companies can charge pretty much whatever they want.’
· The New York Times reported last summer on the mystery of out-of-network charges. Our survey of out-of-network fees found that a patient in Colorado was charged $26,000 for gall bladder surgery when Medicare’s fee was only $681. A patient in California was charged $15,870 for cataract surgery when Medicare only pays $638.
· According to the International Federation of Health Plans, on a unit-cost basis the American people pay 50 to 60 percent more than every other industrialized nation for medicines, technology, and professional services. In other words, we are paying more – far more – for every doctor visit, every procedure, and every diagnostic test than our global competitors.
“The nation needs a systematic, comprehensive process to ensure that health care costs are brought under control and that coverage becomes and remains affordable for all Americans. That means looking closely and continually at all of the areas that make our health care system unaffordable:
- Sky-high unit-costs for medical services;
- Lack of transparency – which leaves patients and their physicians in the dark about which treatments are safest, best and most cost effective;
- Payment systems that reward volume rather than value;
- System-wide administrative costs;
- Inadequate support for prevention, wellness and chronic care management; and
- Out-of-control medical liability system.
“The refusal to fundamentally address underlying medical costs leaves policymakers with two financing options: cutting Medicare and raising taxes. The American people are understandably very concerned about that approach. They want—and our country needs—health care reform that reduces the rate of growth of health care costs.”
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America’s Health Insurance Plans – Providing Health Benefits to More Than 200 Million Americans
ICYMI: AHIP Statement on Premium Increases
Posted by Campaign on February 18, 2010 at 8:08 AM
AHIP Statement on Premium Increases
Ignagni: “It’s time to stop the politics of vilification.”
Washington, D.C. – America’s Health Insurance Plans (AHIP) President and CEO Karen Ignagni today released the following statement regarding premium increases:
“It’s time to stop the politics of vilification and focus on what Americans need most: real health care reform that addresses the serious and urgent problems facing our nation.
“Increases in the cost of coverage in the individual market shine a spotlight on the urgent need to reduce the growth of underlying medical costs and to bring everyone into the system. If reform doesn’t address these pieces, it will not solve the serious problems that individuals, families, and employers face. That is why health plans have proposed fundamental reform of health insurance markets and a long-term strategy to reduce rising health care costs.
“Health insurance premiums are increasing in the individual market because of soaring medical costs and because younger and healthier people are dropping their coverage due to the economy. In 2009, according to a report from the Department of Health and Human Services’ Centers for Medicare and Medicaid Services released on January 5th, rising costs for hospitals, physicians, and prescription drugs led to the largest growth in health care spending as a share of GDP since the government started keeping track 50 years ago. At the same time, the portion of premiums that went towards health plans’ administrative costs and profits declined for the second year in a row.”
Facts about rising health insurance premiums
- In every state, health plans have to provide actuarial justification for any premium increases.
- Federal government data confirms that rising health care costs are driven by increased spending on hospital care, physician services, and prescription drugs.
- AHIP recently sent a letter to Capitol Hill to highlight the key factors contributing to increases in health insurance premiums. These factors include:
o sharp increases in provider rates;
o increased cost-shifting as providers seek to offset the costs of treating more Medicaid patients;
o an increase in uncompensated care costs;
o consolidation among hospitals and other health care providers;
o a wide range of new state laws, including benefit mandates, regulations, and premium taxes; and
o economic factors that have caused some people to drop coverage resulting in a risk pool that is more heavily weighted with older, less healthy persons.
- According to National Health Expenditure Accounts, health plan administrative costs have fallen over the past two years from 12.8% in 2006 to 12.5% in 2007 to 11.7% in 2008. (See Table 12)
Facts about health plan profits
- Fortune 500 puts the health plan industry profits at 2.2%, 35th on its list of profits by industry sector. This is below other sectors of the health care industry.
- According to Yahoo! Finance’s latest analysis of quarterly financial data, the net profit margin for the entire health care sector is 11%. Using the same index, health plans have a 3.4% net profit margin.
ICYMI: Politico digs into the unintended consequences of repealing McCarran-Ferguson
Posted by Campaign on February 16, 2010 at 8:50 AM
Politico reports that some policymakers are beginning to understand some of the unintended consequences that repealing McCarran-Ferguson will have. A few excerpts are below:
· “But Democrats look like they’ll scale back the legislation to protect insurance companies that offer malpractice coverage to doctors and other health care providers.”
· “‘Certainly, [the bill’s provision] should be narrowed,’ said Ben McKay, a senior vice president of federal government relations for the Property Casualty Insurers Association of America. ‘It’s overly broad. There are consequences that reach far beyond just the health care industry into the property-casualty industry. This will have an impact on auto and home insurance.’”
· “‘Health insurance is one of the most regulated industries in America at both the federal and the state level,’ said Robert Zirkelbach, a spokesman for America’s Health Insurance Plans. ‘The McCarran-Ferguson Act is extremely limited in scope and has nothing to do with competition within the health insurance industry. The focus should be on addressing the underlying cost of medical care, which is the key driver of rising health care costs.’”
· “Last October, the Congressional Budget Office said, ‘State laws already prohibit issuers of health insurance and medical malpractice insurance from engaging in practices such as price fixing, bid rigging and market allocations.’”
· “And earlier this year, the Congressional Research Service predicted that a repeal of McCarran-Ferguson would result in more lawsuits and might force smaller companies that rely on pooled data ‘to leave the market.’”
“In the CRS report, researchers noted that ‘further consolidation in the insurance industry as small insurers merge in order to gain the competitive advantage of additional information is a likely, albeit an ironic, possibility.’”
For the full story, click here.
FACT CHECK redux: The Facts About Health Plan Profits
Posted by The Campaign on February 11, 2010 at 7:05 AM
Health plan profits continue to be a source of debate in the larger conversation about health care reform. While there has been focus on the levels of profits, many independent experts continue to note that health plan profits are not a key driver of increasing health care costs. Below are some key points on health plan profits and fact checks setting the record straight:
Fortune 500 puts the health plan industry profits at 2.2%, 35th on the list. This is below other sectors of the health care industry. Click here for the full list.
For every dollar our nation spends on health care, less than one penny goes towards health plan profits. A sincere cost-containment discussion would focus on the other 99 cents. Check out this document which sets-the-record-straight about health plan profits.
ABC News reports on the attempt of some to vilify health plans by focusing on health plan profits, but as this article points out profits are neither as high as some claim nor are they the main driver of health care costs.
- “…the companies' profits still represent a miniscule percentage of the $2.5 trillion Americans spend every year on health care.”
- “‘Insurance company profits in the large picture have very little to do with the overall rising cost of health care,’ said health care expert Henry Aaron, a senior fellow at the Brookings Institution.”
The AP does a quick fact check on the claims about health plans’ profits. The article notes that many of the claims being used in the debate are misleading and in some cases wrong. - “Quick quiz: What do these enterprises have in common? Farm and construction machinery, Tupperware, the railroads, Hershey sweets, Yum food brands and Yahoo? Answer: They're all more profitable than the health insurance industry.”
- “Health insurance profit margins typically run about 6 percent, give or take a point or two. That's anemic compared with other forms of insurance and a broad array of industries, even some beleaguered ones.”
- “…in pillorying insurers over profits, the critics are on shaky ground.”
According to Ezra Klein, a blogger for the Washington Post:
- "The insurance industry is not a particularly profitable industry."
- Health plans are "...the 86th most profitable industry as measured by profit margins, with an average margin of 3.3 percent."
- "...it's hard to see how [health plan profit margins of 3.3%] are a primary driver of health-care spending, much less the growth in health-care spending."
Fact check: What causes premiums to increase?
Posted by The Campaign on February 10, 2010 at 5:50 AM
Premiums increase when the cost of medical services go up. Government data show that in 2009 rising costs for hospitals, physicians, and prescription drugs led to the largest growth in health care spending as a share of GDP since the government started keeping track 50 years ago. Unless steps are taken to address the underlying cost of medical care, health care costs will continue to grow at an unsustainable rate, making it even more difficult for families and small businesses to maintain health care coverage.
New Health Spending Projections
New health spending projections released by CMS last week found that health care’s share of the economy grew 1.1 percentage points in 2009 – the largest one-year increase in GDP share since the federal government began keeping track in 1960. The report, published in Health Affairs, notes that the “two primary drivers of growth…are medical prices and utilization”, which saw a projected increase in spending by 3.2 percent and 1.5 percent in 2009, respectively. Other key findings include:
* “Hospital spending growth is projected to have accelerated from 4.5 percent in 2008 to 5.9 percent in 2009, as spending reached $760.6 billion.”
* “Spending growth for physician and clinical services is expected to have accelerated to 6.3 percent in 2009, up from 5.0 percent in 2008, with expenditures having reached $527.6 billion.”
* “Prescription drug spending is expected to have grown 5.2 percent in 2009, an acceleration of 2.0 percentage points from 2008, and to have reached $246.3 billion.”
AHIP Letter on Factors Contributing to Premium Increases
AHIP recently sent a letter to Capitol Hill to highlight the key factors contributing to increases in health insurance premiums. Here are a few highlights:
* These data show that increases in premiums are driven by the growth in the cost of health care services and that plan administrative costs are rising at far lower rates than the cost of care.
* With respect to specific cost factors, our health plans project that the underlying trends in health care service costs will continue into the future and adversely affect 2010 premium levels. Specifically, our plans are reporting:
* sharp increases in hospital and physician rate requests,
* increases in outpatient surgery costs,
* increased billing for more services provided per emergency room visit,
* increases in the use and cost of specialty drugs, and
* increased cost-shifting as providers seek to offset the costs of treating more Medicaid patients during this economic downturn.
* As the number of uninsured Americans increases, health plans also report seeing an increase in uncompensated care associated with emergency room visits by persons who have no coverage and are unable to pay for the services they receive.
* In a number of markets, consolidation among hospitals and other health care providers also is increasing costs and health plans are reporting higher rate increases from provider systems or hospitals and medical groups with dominant positions. Indeed, approximately 82% of metropolitan areas in the United States have “highly concentrated” hospital markets under guidelines used by the Department of Justice and the Federal Trade Commission.
* A wide range of new state laws – including benefit mandates, regulations, and premium taxes – are contributing to higher health care costs for small employers.
* The current economic downturn is another issue that is playing a role in small employer health care costs. At a time when many small businesses are financially strained, our plans are observing that some companies with young, healthy workforces have stopped offering coverage. Another related trend is that as it becomes more difficult for small employers to continue offering coverage, some are forced to reduce the portion of the premium they cover and increase employee cost-sharing. In response to these decisions, more employees – usually those with below average health costs – are declining to participate. Similarly, few employers are hiring young, less experienced workers because of the weak economy, while others have been forced to lay off workers hired within the past several years. The net impact of these developments is that the remaining risk pool is more heavily weighted with older, less healthy persons, resulting in higher average costs per enrollee for those who maintain coverage.
In Case You Missed It: Los Angeles Times looks at the need to rein in rising health care costs
Posted by The Campaign on February 09, 2010 at 7:17 AM
The Los Angeles Times editorial page takes a hard look at the need for health care reform to seriously address ways to control health care costs. A few excerpts:
· Lawmakers are expected to pass a bill this week that would repeal the federal antitrust exemption that insurance companies have enjoyed since 1945 -- a move that makes for little more than a good sound bite.
· Removing the exemption won't do much to boost competition or spark a price war among insurers, however.
· (The Congressional Budget Office said that a similar proposal in the House's comprehensive healthcare bill would have no significant effect on premiums because state regulators already require insurers to price their coverage competitively.)
· The unfortunate reality in healthcare reform is that there is no quick fix to reducing premiums or even bringing their growth into line with inflation. The ever-increasing cost of insurance reflects the incessant growth in healthcare spending. And the solution is to reduce the supply of money for healthcare, lower the demand for medical services, or do both.
· Most Americans already have insurance, and they're less concerned about the growing ranks of the uninsured than they are about the climbing cost of their own policies. According to the Congressional Budget Office, the bills won't make much of a difference on that front. For example, it estimated that the Senate bill would bring about a slight decrease in group premiums in five years but a 10% to 13% increase in individual policy premiums, mainly because the latter would provide more comprehensive coverage than such policies offer today.
· …they should adopt a “fail-safe” mechanism along the lines that the National Coalition on Health Care has proposed, with a specific goal for healthcare savings and a means to push providers, insurers and drug companies to achieve it. That's not a call for price controls; it's a mandate for the industry to stay focused on the problem of rising costs.
For the full editorial, click here.
ICYMI: The Buffalo News: Need is for cost control first, not just coverage expansion
Posted by The Campaign on February 09, 2010 at 7:15 AM
At a time when health care costs are crushing the economy and gobbling up a larger portion of the GDP each year, the Buffalo News explores why the nation needs a long-term strategy to address the rising costs of health care. A few excerpts:
“But most Americans, as polls and the recent Senate election of a Republican in the most liberal state of the union have shown, do understand that the current proposals do little to curb the pain they feel from rising health care costs and spend more taxpayer money at a time of mushrooming deficits and economic recession. There’s not just a need to pass health care reform; there’s a vital need to get it right.”
“The issue is affordability. The Democrats’ health care reform package involves about $1 trillion in additional spending. The plan theoretically offsets that with $500 billion in increased taxes and $500 billion in Medicare and Medicaid spending cuts. Both have problems.”
“Health care reform is important. Expanding health coverage to all Americans is a good and moral goal. But health care spending now accounts for 17.3 percent of the American economy and nearly a quarter of all federal outlays, and the president is among those who have described the continuing escalation of health care costs as unsustainable. The imperative is to control costs first, and then add new costs by expanding coverage.”
“The need is for a supportable health care reform bill, one that realistically addresses the problems of cost.”
To read the full article, click here.
ICYMI: AHIP Statement on New Health Spending Projections
Posted by The Campaign on February 04, 2010 at 12:14 PM
AHIP Statement on New Health Spending Projections
Washington, DC – Karen Ignagni, President and CEO of America's Health Insurance Plans (AHIP), released the following statement today in response to new health spending projections released by CMS which found that health care’s share of the economy grew 1.1 percentage points in 2009 – the largest one-year increase in GDP share since the federal government began keeping track in 1960:
“Rising health care costs are crushing our economy and adding a burden on working families and employers across the country. The new CMS data confirm that rising health care costs are driven by increases in underlying medical costs, not health plan administrative costs. In fact, the proportion of health insurance premiums that go towards administrative costs is declining as overall health care costs continue to soar. Without a national, long-term strategy to address the rapid growth in underlying medical costs, health care spending will continue to grow far faster than the economy as a whole, crowding out other important domestic priorities, such as education, energy, and deficit reduction."
The report, published today in Health Affairs, notes that the “two primary drivers of growth…are medical prices and utilization”, which saw a projected increase in spending by 3.2 percent and 1.5 percent in 2009, respectively. Other key findings include:
• “Hospital spending growth is projected to have accelerated from 4.5 percent in 2008 to 5.9 percent in 2009, as spending reached $760.6 billion.”
• “Spending growth for physician and clinical services is expected to have accelerated to 6.3 percent in 2009, up from 5.0 percent in 2008, with expenditures having reached $527.6 billion.”
• “Prescription drug spending is expected to have grown 5.2 percent in 2009, an acceleration of 2.0 percentage points from 2008, and to have reached $246.3 billion.”
This is consistent with national data and information received from health plans showing that health care costs are expected to increase even further due to the underlying growth in the cost of health care services.
To read the full report in Health Affairs, please click here.
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Providing Health Benefits for Over 200 Million Americans.
FACT CHECK: Small Businesses and Health Care Costs
Posted by The Campaign on February 03, 2010 at 5:57 PM
In December, AHIP sent a letter to Capitol Hill discussing the cause for rising health care costs particularly for small businesses. Below are some key highlights from this letter:
Data from NHE "...show that increases in premiums are driven by the growth in the cost of health care services and that plan administrative costs are rising at far lower rates than the cost of care."
"...all 50 states and the District of Columbia impose restrictions on the premiums that may be charged for health insurance coverage and require certification that premium increases be consistent with actuarial standards with respect to cost trends and benefits provided."
For more click here for the full letter.
