Bending the Health Care Cost Curve (Part II)
By Stephen Savage
Sunday’s Washington Post Business Page ran a story by staff writer Ezra Klein with the headline “You Have No Idea What Health Costs” and a subheading, which read, “If You Did, You Might Just Want Real Reform”. This article follows a provocative piece by David Goldhill in the September issue of The Atlantic Magazine, entitled: “How American Health Care Killed My Father”.
Both Klein and Goldhill make the point that people really don’t have a sense of the cost of health care. Goldhill provides a dramatic financial setting for his views with the following analysis:
“Let’s say you’re a 22-year-old single employee at my company today, starting out at a $30,000 annual salary. Let’s assume you’ll get married in six years, support two children for 20 years, retire at 65, and die at 80. Now let’s make a crazy assumption: insurance premiums, Medicare taxes and premiums, and out-of-pocket costs will grow no faster than your earnings—say, 3 percent a year. By the end of your working days, your annual salary will be up to $107,000. And over your lifetime, you and your employer together will have paid $1.77 million for your family’s health care. $1.77 million! And that’s only after assuming the taming of costs! In recent years, health-care costs have actually grown 2 to 3 percent faster than the economy. If that continues, your 22-year-old self is looking at an additional $2 million or so in expenses over your lifetime—roughly $4 million in total.”
The lifetime health cost numbers are stunning. Most people would likely be surprised to see them or to even see how much money is dedicated to their own healthcare over a shorter period of time. While I am confident that both authors are correct in their analysis, I do think the current health reform debate coupled with our bad economy has made most people far more aware of the existence of a problem surrounding the cost of health care.
While the health reform dialogue rages a lot of things seem to be going on outside of the debate in today’s health care “marketplace.” More people have to understand how to use a Health Savings Account (HSA) to their advantage. Many Medicare beneficiaries have had to deal with the “doughnut hole” in which they are exposed to the full cost of prescription drugs. Small health clinics are popping up in many regions of the country that specialize in less expensive alternatives for treating specified ailments. In many instances, those clinics post an online schedule of prices for the procedures they perform.
It is hard to imagine how health care buying can ever look exactly like most consumer purchases. However, the cost pain is real and growing and the effect of that pain is showing up in a variety of ways. Whatever the result of the policy discussions, there will be opportunities to help people make good decisions on how to manage health care costs while maintaining the opportunity to achieve the best health outcome possible at the lowest financial cost.
There is no question that HSAs are under-utilized. With increased tax-incentives and education, HSAs could save millions of dollars every month.