What’s Driving Rising Healthcare Costs?

January 25, 2024

Here’s a hint … it’s not your doctor.

Every day a news story discusses the rising costs of healthcare, and often that is assigned to growing costs from care providers and healthcare facilities.  Yes, healthcare professionals and the places they work are increasingly more costly, but they don’t represent the main driver of rising costs.

Here’s what driving rising costs in healthcare.  The cost of private insurance and the administration of healthcare services.  That’s right.  Private insurance spending is growing TWICE as fast as the spending associated with care providers and facilities.  According to data from Centers for Medicare and Medicaid Services (CMS), here’s a quick breakdown of US National Healthcare Expenditures:

Through 2022:

  • Physician and clinical services expenditures – grew 2.7%
  • Hospital expenditures – grew 2.2%
  • Private health insurance expenditures – grew 5.9%
  • Prescription drug spending – grew 8.4%

(Source:  Centers for Medicare and Medicaid Services:  NHE Fact Sheet)

Wow.  A bit startling.  So how is “private health insurance” defined?  According to CMS:

Includes premiums paid to traditional managed care, self-insured health plans and indemnity plans. This category also includes the net cost of private health insurance which is the difference between health premiums earned and benefits incurred. The net cost consists of insurers’ costs of paying bills, advertising, sales commissions, and other administrative costs; net additions to reserves; rate credits and dividends; premium taxes; and profits or losses.

There you have it.  Advertising, sales commissions, and “other” costs, plus the profits (or losses).  Those are normal and expected “costs of doing business” regardless of industry.  And it’s not unreasonable that costs will continue to grow.  Salaries, compensation, and other costs will always trend upward.  But the cost of the “administration” of healthcare is outpacing the cost of those delivering care.  And who’s paying that bill?  In many cases, it’s businesses who provide private health insurance plans for their employees.  And that’s especially true if those businesses have traditional plans from traditional insurance providers – where the only review of those plans is once a year with an accelerated timeframe to “renew” for the next year.

A business or an individual likely can’t influence the cost of their care providers or the cost of the hospitals they use.  But they can change the cost of the administration of their healthcare.  Some businesses are making the change to modern, innovative plans that still provide the same (or better) level of benefits and high-quality care – with lower administrative costs.

That can be your business too.  Get Healthcare that Works.  Contact us today to learn more.

 

Mitigate Partners

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MITIGATE PARTNERSAbout Us
We protect your money like it’s our own, serving as the fiduciary and steward of your health plan dollars.

OUR LOCATIONSWhere to find us?
We have 29 locations across the United States.

GET IN TOUCHMitigate Partners Social
Follow our social media for news, updates, and events.