Everyone likes to talk about the “new economy” and all the new advantages that come with it: easier access to travel accommodations, transportation and even personal income are all great examples that people are becoming more familiar with. But the truth is, there are some downsides to the new economy as well, one of them being higher medical costs. In fact, the costs of actual medical care seem to be growing more quickly than the cost of insurance; according to many experts, this indicates that inflation will affect healthcare costs even more in the coming years.
Speaking of experts, how do they calculate the rising costs of healthcare? It appears that three factors are involved. To gauge whether healthcare costs will increase, economists and healthcare statisticians measure:
- Increases in total healthcare spending
- The cost of providing health insurance
- The rise in prices charged for actual medical care
Adding substance to the claim that healthcare costs will accelerate even more with time, a new U.S. Commerce Department report shows that medical spending grew 100% more quickly than the American economy itself in the second quarter of 2015. Plus, the data showed that healthcare spending rose by 4.9 percent compared to the same quarter in 2014. The Affordable Care Act is partially to blame, sure – but it’s not the only factor.
Another player is rising prescription drug costs, as new drugs for hepatitis C, cancer and multiple sclerosis have all entered the market recently. Of course, these aren’t just new drugs; they’re also expensive. Couple that with the rise of America’s aging population (according to The New York Times, 40 cents of every dollar spent on healthcare will go to beneficiaries of Medicare and Medicaid), and you have a formula for higher healthcare costs in America.
What can be gleaned from this? Americans need to find new ways to save money on healthcare, and that starts with employers. Because employers are the primary purchasers of healthcare plans, it is incumbent on them to explore untapped health plan options. One of them is direct contracting, which can save employers money by contracting directly with providers – not insurance company middlemen. If you are tasked with finding an innovative, money-saving healthcare option for your company, contact GM&A to inquire. We will be happy to explain direct contracting to you.