New York Times Looks at Factors Behind Health Care Cost Increases
The health care industry is "thriving" as health care costs "spira[l] into another year of double-digit increases," the New York Times reports. The "big winners" at this time are the largest managed care companies; hospitals, especially those with "networks that dominate local markets"; medical device manufacturers; and nurses, whose services are in great demand in the face of a national shortage, according to the Times. Insurers are generating profits by passing on costs to employers and "dropping money-losing customers," the Times reports. Although employers say they are "fed up" with the cost increases, the Times notes their response to date has been to pass off more of the costs to their employees through higher deductibles and copayments rather than to demand lower prices. The Times also notes that more than half of health care cost increases are attributable to hospital services, with outpatient costs as the "fastest-growing health care category," according to a Health Affairs study published last month. But although the outlook for big hospital groups is positive in the near term, the Times reports that "[h]ospitals may be the next target for protests by patient advocates" as their prices continue to rise. Meanwhile, pharmaceuticals are "no longer a growth industry" as consumers seek out less-expensive generic forms of popular drugs, according to Richard Evans, a Bernstein Research analyst. Evans said that pharmaceutical companies appear unable to increase prices and reduce production and sales costs "enough to keep profits rising during fallow periods when important new drugs are scarce," according to the Times.
Another "big engine of rising costs" is technology, as health care consumers "rarely say no to a hot new product ... that can extend or improve the quality of patients' lives," the Times reports. But technological advances can carry a large price tag (Freudenheim, New York Times, 10/23). A Blue Cross Blue Shield Association study released today finds that new technologies have been a major factor behind cost increases in recent years, USA Today reports. Researchers found that inpatient hospital care expenditures increased 11.8% from 1998 to 2000, according to data based on actual claims filed by one insurer with three million enrollees throughout the United States. Of that increase, 19% was linked to the use of new technology, while 18% was attributed to hospital mergers and "industry consolidation that reduced competition." Carmela Coyle of the American Hospital Association said, "We certainly know that health care is using more technology. It allows us to do more for people." She added, "The important question to ask: Is more spending [on technology] good or bad?" (Appleby, USA Today, 10/23).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.