Why Health Insurance Premiums Will Keep Rising Despite Recent Legislative Changes

There is a consensus right now that health care will be better in terms of access due to the recent legislation that will go into effect in 2014, I have been in the health insurance business for many years and now more than ever; I just don’t buy it. In this article, I explain health care cost trends just to give consumers a bigger picture.

This is what I think about the cost of health care:

Rising health care costs is a global phenomenon, a major problem in both social insurance and voluntary employer-provided health plans, especially in developed countries. Many governments are exploring the possibility of transferring more medical expense costs to employers and individuals. Unlike the United States, most other developed countries have some comprehensive national health insurance plan for people of all ages. In these countries, employers often offer supplemental medical spending plans to provide employees with higher quality medical care than that offered by regular health insurance providers.

Health care cost trends

In the United States, the rate of increase in health care spending over the past two decades was significantly higher than the rate of inflation, population growth, and the overall increase in Gross Domestic Product (GDP). For much of this period, increases in the cost of health care were at rates twice as high as inflation. The cost of health care accounted for about 14 percent of US GDP Other countries, even those with universal health care systems, spend less on health care than the United States. Although all indications are that demand and costs will continue to rise in the future, employees, employers, suppliers and politicians have been concerned about doing something to control costs. Despite all recent efforts to control costs, there is growing evidence; however, health care inflation will continue to grow.

Causes of Health Care Inflation.

As people live longer, they consume more and more medical services. Across all demographics, the demand for quality healthcare and state-of-the-art treatment has increased. The US population aged 75 and over is projected to grow four times faster than that of people under 65. Many of the elderly suffer from chronic and disabling diseases. Institutional care is anticipated to increase, with nursing home and hospital care expected to consume an even larger share of personal health care spending. As discussed above, rapid advances in sophisticated and expensive diagnostic and therapeutic technology have helped drive growth in healthcare spending. Furthermore, dramatic increases in the price per episode of hospital care, despite a continued reduction in the amount of hospital care, have contributed to medical inflation. As overall hospital utilization continues to decline, fewer patients must bear the burden of a larger share of each hospital’s total overhead. Both the utilization and the cost of outpatient care (hospital outpatient and doctor’s office) are increasing at a rapid rate. In the United States, most surgeries that must be performed on an outpatient basis are performed that way. The number of visits to doctors’ offices and tests performed with expensive equipment has increased dramatically.

The shift to outpatient surgery has been accompanied by an increase in the volume of these procedures. More people undergo outpatient operations than when such operations were only available to inpatients. Another source of increased costs comes from the nature of supply and demand for medical services. As mentioned above, the demand for services is frequently controlled by the provider. Research indicates that procedures typically abused in the United States include caesarean sections, hysterectomies, heart bypass surgery, and diagnostic imaging procedures. Cost shifting, another component of increased costs in employer-sponsored health plans, is the result of other payers not reimbursing providers at levels sufficient to recoup costs and make a profit. Medicare, the federal insurance program, limits the amount it will pay to hospitals and other providers for the elderly, disabled, and patients with end-stage renal disease. Hospitals and doctors tend to compensate for lost income by raising fees to others. Any person or organization that is actually paying fees will end up with a higher bill. Bad debt, indigent care, inadequate Medicaid reimbursement, and discounted rates for contracted health maintenance organizations (HMOs) and preferred provider organizations (PPOs) also add to cost changes for plans without hiring. As a result, there have been rate increases in non-negotiated hospital rates. That’s why some plans experience 20 percent inflation, while others experience single-digit increases. Other factors that increase cost include hospital overcapacity, different standards of medical practice, overuse of specialist physicians, a focus on acute care versus preventive care, and fraud.

If you can’t afford important health coverage and need medical care, we can help. There are many alternatives on the market, such as mini health insurance policies and medical discount plans that can work for you, if these products are properly explained.

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