HEALTH CARE INFLATION 101

There are many different theories out there to explain double-digit health care inflation. We found the following rather interesting.

In an under-reported study, PricewaterhouseCooper revealed an overall premium increase of 13.7% in 2002. Fifteen percent of this inflation was due to government mandates and regulations, 7% to litigation and 5% to fraud and abuse.

Taken together, mandates, litigation and abuse account for 27% of the increase in health care cost in this country, more then any other factor. Other, lesser factors leading to health care inflation include new pharmaceuticals and medical devices (22%), rising hospital expenses (18%), general inflation (18%), and increased consumers demand by a growing senior citizen population (15%).

In 2001, PricewaterhouseCooper revealed how 15% of the $67 billion increase in health spending was directly traced and attributed to laws passed by legislators.

Mandates require health insurance benefits to include everything from pastoral counseling to in-vitro fertilization, and sperm bank deposits to wigs for cancer patients. When combined within procedural mandates like "community rating" (insurers may not base premium cost on risk factors like life-style choices) and "guaranteed issue" (wait until you get sick to buy health insurance), these become the ingredients for an inflationary cocktail.

According to online insurance broker eHealth Insurance, guaranteed issue and community and community rating laws have a dramatic - and negative - effect on insurance premiums. California has neither mandate (with exception to HIPAA eligibles). The average annual premium for a single policyholder in the Golden state is $1,538.00. By contrast, single policyholders in New York pay $3,589.00 - more then twice as much - for their annual insurance premiums. New York imposes both community rating and guaranteed issue on policies sold there.

The consensus of opinion is that in an effort to solve health care problems, we seem too willing to accept the judgment of the politicians as a substitute for the judgment of buyers and sellers in a free marketplace.

The real issue, therefore, isn't that some people don't have a health insurance policy, but rather that millions of folks can't afford the cost of insurance because of the mandate imposed by their representatives in government.

Our thanks to Conrad F. Meier, senior fellow in health policy and managing editor of Health Care News, a publication of the Heartland Institute for combining the PricewaterhouseCoopers' report together with his thoughts in the article that we have condensed above. It surely made us think. How about you?

The material on this site is protected under the copyright laws of the United States of America and international conventions, and is the exclusive property of EPC Associates or any licensee. All rights reserved. © EPC Associates 2000. Site by Webline Designs Webline Designs Logo.