NCPA - National Center for Policy Analysis

Group Warns Of Renewed Increases In Health Care Costs

March 8, 2001

A decade ago, managed care was viewed as the answer to swiftly rising health-care costs. It did help contain increases for a number of years. But those costs are on the rise again and there is no prospect of a similar innovation to modify cost pressures, according to a report from the Center for Studying Health System Change.

What factors does the group identify as triggering the increases?

  • Doctors, hospitals and insurers are engaged in a welcome but also costly "medical arms race" -- competing to provide the latest procedures and technologies.
  • Managed-care insurers have backed off some cost controls, such as requiring prior approvals for referrals to specialists, in response to public pressure.
  • Lawmakers have mandated coverages -- such as 48-hour hospital stays after childbirth.
  • Many doctors and hospitals have consolidated to increase their clout -- and are winning payment increases at the negotiating table.

In response to the rising costs, the benefits firm of William Mercer reports the proportion of employers expecting to charge workers more for health coverage rose to 58 percent last year from 42 percent the year before.

Some health-industry insiders lauded the report for focusing on the role that regulation, consolidation and consumer demand play in cost hikes -- but said managed care is still a viable tool in containment.

Source: Julie Appleby, "Health Costs Going Out of Control, Report Says," USA Today, March 8, 2001; Cara S. Lesser and Paul B. Ginsburg, "Back To The Future? New Costs and Access Challenges Emerge Initial Findings from HSC's Recent Site Visits," Issue Brief #35, February 2001, Center for Studying Health System Change.

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