Health-care costs rising in United States

March 20, 2001

Free Market Foundation

A decade ago, managed care was viewed as the answer to swiftly
rising health-care costs. It did help contain increases for a
number of years. But those costs are on the rise again in the U.S. and there
is no prospect of a similar innovation to modify cost pressures,
according to a report from the Centre for Studying Health System
Change.

What factors does the group identify as triggering the increases?

Doctors, hospitals and insurers are engaged in a welcome but also costly “medical arms race” competing to provide the latest procedures and technologies.

Managed-care insurers have backed off some cost controls, such as requiring prior approvals for referrals to specialists, in response to public pressure.

Lawmakers have made some services compulsory such as 48-hour hospital stays after childbirth.

Many doctors and hospitals have consolidated to increase their clout and are winning payment increases at the negotiating table.

In response to the rising costs, the benefits firm of William Mercer reports the proportion of employers expecting to charge workers more for health coverage rose to 58 percent last year from 42 percent the year before.

Some health-industry insiders lauded the report for focusing on the role that regulation, consolidation and consumer demand play in cost hikes but said managed care is still a viable tool in cost containment.

Source: Julie Appleby, Health Costs Going Out of Control, Report Says, USA Today, March 8, 2001; Cara S. Lesser and Paul B. Ginsburg, Back To The Future? New Costs and Access Challenges Emerge Initial Findings from HSC’s Recent Site Visits, Issue Brief #35 February 2001, Center for Studying Health System Change.

For summary http://www.hschange.org/CONTENT/295/

For text http://usatoday.com/usatonline/20010308/3120833s.htm

For more on Managed Care Economics and Cost http://www.ncpa.org/pi/health/hedex2a.html