Concerning Health Care Costs: It’s Up Up and Away

Many small business owners these days have been smarting from a health care headache as they try to offset the rising cost of care in the midst of a sluggish economy that has eaten away at profit margins and stymied growth. Now, a recent study conducted by PwC Health Research Institute suggests that the headache may be developing into a persistent migraine. According to the study, medical costs are expected to increase 8.5% in 2012, up from a hefty 8% recorded in 2011.

 

The researchers named three factors that are likely to contribute to the trend in medical cost increases:

1. More consolidation in the health care industry means less competition and higher costs. As smaller health care providers are either absorbed into bigger health care entities or are forced out of the market, that means fewer choices for consumers and small business owners alike. With less competition, health care providers have more room to raise prices when and where they want.

2. With more people on Medicare and Medicaid coupled with payment reductions, hospitals and health centers must foot the bill. According to the report, patients who receive care backed by a private insurer compensate hospitals above the actual cost of care (on average 134%), while the Medicare and Medicaid reimbursement is below actual cost (approximately 90% of the total actual cost). As more people join the ranks Medicare and Medicaid patients and their expected contributions to these programs decline (thanks in part to the recently approved health care reform act), hospitals are shouldering more of the cost. This added burden will be passed on the those with private plans.

3. With more stress, more problems… As the number of Americans fighting depression, anxiety, and stress increases in response to the recessionary fallout, stress-related health conditions have been on the rise. This trend is coming at a time when many have put off seeking care in an effort to keep health care costs to a minimum. Both factors will no doubt increase the demand for costly health procedures and claims in general and thus raise the cost of health care across the board as insurance companies and hospitals try to reclaim some of their “loss.”

Aspirin anyone?

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