HEALTH PLANS: Is medical cost trend headed down again?

Aetna seems to think so. Last week Aetna shares rose after comments on medical costs. Of course this could be a blip given that last quarter the stock fell on a higher than expected medical loss ratio. But assuming that it’s not, given that overall premium increases are a little lower this year, this means either that Aetna has gotten a-hold of its spending a little better than expected, or that it’s done a better job underwriting and getting rid of its poorer risks. Given its history in this regard, I wonder which?

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  1. Health care has been insulated from free market forces.A huge increase in supply and international open markets for drugs will reduse costs. The AMA by chance or design has restrained trade. By setting sensible testing that would facilitate foreign doctors entry into the US and by providing full federal scholarships for any person qualified for medical school would boost supply. Present medical school tactics which seek to fail rather than encourage succes need to be reexaminded.
    The self serving implication that any foreign drug is de-facto suspicious or dangerous is resposible for many millons in over priced drugs.

  2. I think Barry hit the two key points:
    1. medical cost trends are moderating, leveling out at around 7.5%.
    2. This is about twice as high as the general rate of inflation.
    To which I would add:
    3. This is more than twice as high as the growth in median wages.
    Matthew, Businessweek has a big story on how all the job growth that the Bush administration can take credit for is in the healthcare industry (1.7 million vs. a net 0 for the rest of the economy). That sounds like an excellent topic for you to riff on.

  3. The concensus among large insurers is that medical cost growth seems to be stabilizing, at least for now. At the start of the year, most expected medical cost increases for 2006 of 7.5% give or take 50 basis points. It appears to be tracking toward the lower end of that range with prescription drug cost growth below that level, in part, because of the spike in the availability of new generics. The bottom line, however, is that costs are still growing significantly faster than general inflation which is not sustainable over the long term.

  4. When asked whether they believe that all Americans should have access to health care, most people in the audiences to whom I have spoken would raise their hand. That same audience, however, when asked whether they would be willing to rely on their government to take care of us, will not move a muscle. Some might even snarl at the presenter, so strong is the sentiment.
    The problems seems to be that people think the only way to find a solution to the American health care dilemma is to rely on government for some form of socialized medicine and for most Americans this is untenable.
    Another impediment to meaningful health care reform is our fixation on the idea that the solution will come from incremental changes in the existing health care delivery system. The reality, however, is that the existing system, which has evolved over the last 100 years, was never intended to provide universal health care and no amount of tinkering is going to change its fundamental character.
    The premise of my book Radical Surgery: Reconstructing the American Health Care System (1stBooksLibrary, 2002) is that the solution to our health care challenge will not come through modifications of health insurance, managed care, Medicare, or Medicaid; it will come only through a systems-thinking approach in which the system is evaluated as an integral whole. What we will learn from this systems-thinking process is that we can provide all Americans with access to comprehensive health care and prescription drugs without sacrificing the great strengths of the American health care system. We just have to use a little imagination.
    In Radical Surgery, I show how we can provide:
    -comprehensive health care and prescription drugs to all Americans for about what we spend today, possibly less,
    -how we can return control of the practice of medicine to our physicians,
    -how we can provide a choice of family doctors to all Americans,
    -how we can eliminate health insurance, managed care, Medicare and Medicaid,
    -how we can limit the role of government to the very few things governments do well,
    -how se can rely on free market forces to improve the quality of care we receive and to insure accountability,
    -how we can transform our health care system from the transaction-driven system we know today to one that is relationship driven, with the focus on the physician-patient relationship.
    I invite the reader to visit my website, http://www.reconstructhealthcare.com and also my new Blog at http://www.Melhawkins.typepad.com/reconstructhealthcare/
    And, to Matthew Holt, thanks for the great Blog. It provides a wonderful forum.