Rising Healthcare Premiums: What Can be Done?

Published June 6, 2017

According to the Kaiser Family Foundation (KFF), healthcare premiums rose substantially since the implementation of the Affordable Care Act, aka Obamacare, in 2011. The rate of increase has decreased over the last five years, but even this is not necessarily good news: KFF’s research concludes that the slowing of the rise was probably due to the fact that more employees were choosing low-premium, high-deductible plans tied to health savings accounts. Unfortunately, incomes have not been rising as quickly as deductibles.

The ACA is not necessarily to blame for the rise in premiums. Annual premiums were already rising prior to Obamacare, driven by an aging population, new medical technologies, and a rapid increase in the rate of chronic illness.

Help is Not on the Way

According to some healthcare economists, the American Health Care Act (AHCA) passed by the House of Representatives in May 2017, is unlikely to slow the annual rise in premiums. The fate of the AHCA remains uncertain. Meanwhile, relatively older and sicker Americans continue to sign up for coverage, suggesting that premiums will continue to rise for the foreseeable future.

If no help is forthcoming in the current political climate, what can we do to stem the tide of rising health insurance premiums?

Reducing Total Healthcare Expenditures

Healthcare is expensive for many reasons, not all of them fixable. For example, the American population is aging, and older people spend more on healthcare. The reasons we live longer have to do with our overall prosperity, and, it should be added, the success of our healthcare system. New medical technologies, also a boon given to us by our prosperity, nevertheless cost us more money. Where can cost savings be found?

One way to make a dent in healthcare spending is to reduce fraud, waste and abuse, that eats up billions of dollars per year. Some of that money is lost “honestly”, in a healthcare delivery system that is fragmented due to lack of rational coordination.

According to the Government Finance Officers Association, hospitalization in acute-care facilities is a major driver of the rise in total healthcare expenditures. Reducing length of stay in acute care facilities may substantially reduce total spending.

Move Care from Hospital to Home

Hospital stays are often extended because patients need services such as intravenous therapy or skilled nursing. The development of home infusion technology combined with skilled nursing can substantially reduce hospital stays and generate cost savings, while not compromising patient safety or treatment efficacy.

The problem of post-acute care fragmentation is being tackled by the Improving Medicare Post-Acute Care Transformation Act (IMPACT) of 2014. IMPACT seeks to smooth the process of care coordination between hospitals and home care agencies, rehabilitation facilities, and skilled nursing facilities. The aim is to get patients home, where they want to be, as quickly and as safely as possible.

The Promise of 21st Century Cures

Long-term sustained reductions in total healthcare expenditures are difficult to achieve. With Congressional action, incremental steps are being made that may slow the rise in premium costs substantially over time. The 21st Century Cures Act, passed by Congress late last year (but currently awaiting funding) calls for increased funding for home-based services in such a way that the financial barriers to care at home may be significantly reduced.

Health insurance premiums will remain high as long as healthcare remains expensive. The rate of rise in premiums, however, can be slowed or stopped by a concerted effort to reduce costs. Momentum in the direction of moving healthcare delivery away from acute care hospitals may prove to be the most powerful downward driver of healthcare costs that we have seen in a long time.