POLICY/INDUSTRY: Costs — The rate of increase decreases, but not enough to spoil everyone’s party, with UPDATE

There’s a confusing little piece in the WSJ about how health spending continues to rise at (a) worrying pace. It’s based on a HSC report and an EBRI report about the first half of this year, which suggest that last year’s trends are continuing. Incidentally neither of those reports seem to appear on those organizations’ websites for us mere mortals. The report is now up on HSC’s site,(although perhaps the SEC should be investigating how the WSJ got it early?) However, last year’s trends were a slowing to a mere 7.5% increase, which is only a little over double GDP growth. Anyway this is pretty much in line with CMS’ projection of a 7.8% rise in costs for 2003. A more nuanced observer might notice that it’s during recessions when we have double digit health care cost growth (e.g. 1990-2 and 2001-2) that the healthcare as a share of GDP number really takes off. The rest of the time it just continues a slow snake-like growth upwards. But this isn’t stopping the WSJ from panicking:

The finding suggests that health costs may continue to increase at unmanageable levels for employers and consumers. That outlook is distressing, because until recently the rise in health-care costs had appeared to be decelerating. The flattening of health-cost increases suggests health-insurance premiums will continue to rise at a similar pace.

But of course if you look in the other part of the WSJ you might notice that yesterday was a pretty good day for one part of the health sector–the insurers. Part of that was more irrational exuberance about the finalization of the Wellpoint/Anthem deal. But part of that increase was a big bump in the numbers and forecasts for Humana and Cigna and even bigger jumps in their stock prices. (Incidentally, can anyone else remember a merger going from final government approval one day to immediate ticker symbol transfer and final merger the next? I can’t but that’s what happened and Wednesday WLP stopped trading and handed its symbol over to ATH, which–now called WLP–went up another 7%!).

So if you were concerned about where all those extra premiums are going, don’t be. The health plans are looking after them very well indeed!

UPDATE: And if you needed proof of the frugality of health plans, Bill McGuire, CEO of United, is cashing in $114m in stock options, barely more than the $94m in total comp he had to scrape by on last year. Do you ever wonder if the tough captains of American industry ever stop to think that the more they are asked to pay for health care, the richer the health plans seem to get? Is that how generously they treat the rest of their suppliers?

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