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WellPoint Institute of Health Care Knowledge Releases Report on Health Care Costs
Date:5/27/2009

Advances in medical technology identified as primary driver of increased costs

INDIANAPOLIS, May 27 /PRNewswire/ -- The WellPoint Institute of Health Care Knowledge today released a report detailing the primary drivers of increased health care services and health insurance premiums, dispelling the notion that insurer profits are fueling spiking costs. The May 2009 Institute report, titled "What's Really Driving the Increase in Health Care Premiums?," compiles research from sources such as PricewaterhouseCoopers, the Robert Wood Johnson Foundation, the Kaiser Family Foundation, the Bureau of Labor Statistics and the Congressional Budget Office.

"As the health care reform debate heats up, the results of this report provide important insights into the drivers of health care costs in this country," said Sam Nussbaum, M.D., executive vice president and chief medical officer of WellPoint, Inc. "The bottom line is that those items typically blamed for rising health care costs -- insurer profits, the aging of America and the high cost of medical malpractice -- in fact have little impact on health care premiums."

According to the report the "key drivers" of spiraling U.S. health care costs are:

  • Advances in medical technology and subsequent increases in utilization.
  • Price inflation for medical services that exceeds inflation in other sectors of the economy.
  • Cost-shifting from people who are uninsured and those receiving Medicare and Medicaid to the private sector.
  • High cost of regulatory compliance.
  • Patient lifestyles, such as physical inactivity and increases in obesity.

Citing research from PricewaterhouseCoopers' December 2008 report, The Factors Fueling Rising Health Care Costs, the report also debunks a commonly held belief about the profitability of health insurance companies. Contrary to public opinion, which puts health insurers' profitability at somewhere between twenty-five and forty percent, PricewaterhouseCoopers confirms that in truth is only three cents of every health care premium dollar is spent on health insurer profit. This is less than the 2008 profit of 4.9 percent reported to Reuters by auto and truck manufacturers, the 4.8 percent reported by health care facilities, or the 4.7 percent reported by utility companies.

"We are all working toward the common goal of meaningful and responsible health care reform," Nussbaum said. "For this to occur and be sustainable, we should focus on the main drivers of health care costs. Independent of funding, we need to institute reforms that improve health care quality and outcomes, increase preventive care and reduce those common illnesses, including cardiac disease and diabetes and chronic lung disease, that result from smoking, lifestyle and obesity."

According to the Institute's report, newer medical technologies tend to increase prices because they are generally more expensive than the older technologies they replace. While the availability of more advanced, superior technologies can yield better results for some patients, these technologies and diagnostic tests can be used inappropriately in some situations where existing, older technologies are more effective and accurate.

"We have learned over time that newer technologies do not always produce better health outcomes," Nussbaum continued. "We need to focus on outcomes and delivering better quality care and apply the breathtaking advances in technology and treatment when they produce better patient care. The wise application of these expensive new therapies will result in more affordable health care for all Americans."

The WellPoint Institute of Health Care Knowledge was established with the belief that intimately understanding the factors impacting consumers' experiences with their health plan and which factors most impact their satisfaction are central to efficiently addressing consumer needs. For more information and a copy of the full report, please visit WellPoint Institute of Health Care Knowledge at www.wellpoint.com/institute.

About WellPoint:

WellPoint works to simplify the connection between Health, Care and Value. We help to improve the health of our communities, deliver better care to members, and provide greater value to our customers and shareholders. WellPoint is the nation's largest health benefits company, with approximately 35 million members in its affiliated health plans. As an independent licensee of the Blue Cross and Blue Shield Association, WellPoint serves members as the Blue Cross licensee for California; the Blue Cross and Blue Shield licensee for Colorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Missouri (excluding 30 counties in the Kansas City area), Nevada, New Hampshire, New York (as the Blue Cross Blue Shield licensee in 10 New York City metropolitan and surrounding counties and as the Blue Cross or Blue Cross Blue Shield licensee in selected upstate counties only), Ohio, Virginia (excluding the Northern Virginia suburbs of Washington, D.C.), Wisconsin; and through UniCare. Additional information about WellPoint is available at www.wellpoint.com.


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SOURCE WellPoint, Inc.
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