Why Health Care Costs are Rising

By Scott Culver
Communications Specialist
WEA Trust

May 2005

Public school employees have come under increased criticism from conservative talk show hosts and others over the past several months on the issue of their health insurance. The commentary focuses almost exclusively on the cost of school district plans and often fails to mention the financial sacrifice public employees have made to maintain their quality coverage.

This nation faces a serious health care cost crisis. Mindlessly blasting away at public school employees and other public sector workers does nothing to solve the problem.

The fact is that unless our nation’s leaders begin to tackle the real issues behind the health care cost crisis, the nation’s economy will falter.

The real causes behind the ever-spiraling cost of health care
Health care costs are increasing for everyone, not just public school employees. Over the past 40 years, the nation’s spending on health care has increased by an average annual rate of more than 9%. As a result, health care spending has doubled every eight years despite all of the efforts to contain it.

Technological advances and our aging population help to fuel health care cost increases, but so too do administrative waste, poor quality, and our lifestyle choices.

Technology used wisely is certainly a part of the solution to runaway health costs. However, misused technology is a major contributor to the problem.

Consider two examples for a moment, medical imaging and prescription drugs. Medical imaging can be a very powerful analytic tool. However, when doctors use advanced medical imaging when simple X-rays would suffice, a lot of money gets wasted.

Similarly, prescription drugs when properly prescribed can be very effective in helping people live longer and often better lives. But when doctors prescribe brand-name drugs when a generic equivalent is available or costly new drugs when they are no more effective than an older and much less costly drug, health care costs are driven up.

Lifestyle choices also play a major role in the cost of health care. Today, an estimated 40% to 60% of health care costs can be attributed to lifestyle choices. Diet, nutrition, lack of moderate exercise, smoking, and lack of seatbelt use are just a few lifestyle factors that contribute to the health care cost crisis.

What is being done - The need for real reform
The WEA Trust, the not-for-profit insurance company created by WEAC that insures many of Wisconsin’s public school employees, has continually promoted innovative health care solutions since its inception in 1970. Most recently, WEA Trust Executive Director Al Jacobs introduced four separate reform measures to address the health care cost crisis. This blueprint for change is called “The New Wisconsin Idea.”

The measures include the following:

• The creation of a statewide, evidence-based prescription drug purchasing cooperative in which volume purchasing will help lower drug costs.
  
  
• Centralized transaction processing of documents. The creation of a central data hub, when operational, will reduce claims and other transaction costs by hundreds of millions of dollars for the state’s providers, insurers, and employees. This one-stop data collection system will help address the current slow, costly, and wasteful process seen in health care.
  
  
• Transparency of health care costs. Like Medicare and Medicaid, there would be a published schedule upon which all providers must base their charges. Providers would also be required to charge every patient the same amount.
  
  
• Health care accessibility. The state would cover preventive care such as immunizations, prenatal and postnatal care, physical exams, and maintenance medications. The state would also cover catastrophic care such as transplants, neonatal care, advanced cardiac and cancer care, and other high-cost care through a Centers of Excellence program. Centers of Excellence would be medical entities selected based on their expertise and experience in certain procedures.

If these four system reforms came to fruition, Wisconsin consumers would know in advance what their health insurance will cover and what they will owe. Wisconsin would have properly credentialed doctors, and medicines they prescribe would always be the most appropriate and cost-effective in the marketplace. The state’s providers and payers would communicate efficiently through a centralized data hub. This hub would be crucial in the development of evidence-based medicine to help ensure the public’s health. In financial terms, such a system would save millions of dollars.

Posted May 11, 2005