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Skyocketing Health-Care Costs Could Double Premiums for Many Americans

Report says waste, inefficiencies need to be cut out of system in coming years

WEDNESDAY, Jan. 28 (HealthDay News) -- Unless health-care reform becomes a reality, most Americans can expect to pay health insurance premiums that will double by 2016, a new report claims.

Left unchecked, the costs of employer-paid health insurance will jump from $11,381 to $24,291 in the next seven years, according to the report, which was released Wednesday by the Public Interest Research Group (PIRG).

And wasteful spending and inefficiencies are what is fueling the trend, the report contends.

"As costs rise, one out of three American's health-care dollars are going to waste and inefficiency," said report co-author Larry C. McNeely II, a U.S. PIRG Health Care Advocate.

Wasted dollars include inappropriate and unnecessary care, inflated drug prices and administrative bureaucracy, McNeely said. The total cost in waste in 2007 for insurance bureaucracies, drug companies, medical device manufacturers and providers was $730 billion, according to the Congressional Budget Office.

The models for efficient care are out there, McNeely noted. These include the Mayo Clinic and Utah's Intermountain Health System. Using a coordinated approach to care, these systems improved quality and reduce per-patient costs by 43 percent, he noted.

"If hospitals in America reached the benchmark set by the Intermountain Health System, we would be spending $299 billion less every year on hospital care and getting better outcomes," McNeely said.

Moreover, doctor's pay should be based on the quality of care they provide rather than the number of tests and procedures they order, McNeely noted.

In terms of administrative bureaucracy, the private insurance industries' "red tape" needs to be controlled, McNeely said. Insurers waste billions each year on paperwork that has nothing to do with patient care. One suggestion is to limit the amount of premium dollars that can be spent on administrative costs, he said.

In addition, drug prices need to come down, McNeely said. "You can sever the link between physicians' prescription practices and the incredible amount of marketing dollars that the pharmaceutical industry is pouring into influencing physicians' decisions," he said.

In 2005, pharmaceutical companies spent $11.5 billion in advertising their most expensive drugs, and total drug advertising dollars increased 250 percent from 1997 to 2007, according to the report.

Drug company marketing increases the total number of prescriptions written and increases prescriptions for newer, more expensive drugs over older, less expensive drugs that are just as good, the report said.

Cutting costs has to be part of any overall health care reform program, McNeely said. PIRG supports a private-public partnership that provides high-quality, affordable heath care to all.

Health care policy expert Dr. Steffie Woolhandler, an associate professor of medicine at Harvard Medical School, thinks the only solution to the growing costs of health care is to change the system to a government-run system that reduces costs as it provides universal care.

"Profiteering by the drug, medical device and insurance companies is pushing costs into the stratosphere," Woolhandler said. "Uniquely among developed nations, the U.S. views health care as a business."

"Other affluent nations such as Canada, France and other European countries treat health care as a public good; they have nonprofit, national health insurance," Woolhandler added. "People in those countries live longer than Americans and spend only about half as much for health care."

Greg Scandlen, founder of Consumers for Health Care Choices, said the report correctly identifies the problem areas in health-care costs. However, he thinks the solution is to make consumers pay for their own health care through health savings accounts (HSAs) or other consumer-driven health-care plans.

"It is a lot more efficient to pay cash at the time of service then to process it through some insurance mechanism," Scandlen said. "You can get a dollar's worth of care for a dollar by paying at the time of service."

Scandlen thinks that giving people control over their health-care dollars helps consumers make better choices with medications and procedures, particularly when the money is coming out of their own pocket.

More information

For more on health-care costs, visit the U.S. PIRG.

SOURCES: Larry C. McNeely II, Health Care Advocate, U.S. Public Interest Research Group (PIRG), Washington, D.C.; Greg Scandlen, founder, Consumers for Health Care Choices, Hagerstown, Md.; Steffie Woolhandler, M.D., M.P.H., associate professor, medicine, Harvard Medical School, Boston; Jan. 28, 2009, report, Health Care in Crisis: How Special Interests Could Double Health Costs and How We Can Stop It

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