THCB welcomes first time contributor Jeff Goldsmith of Health Futures. Jeff will be blogging for us on a periodic basis, so expect more insightful commentary from him in the near future. Among those in the know, Jeff has long been considered a leading futurist. From 1982 to 1994, Jeff served as National Advisor for Healthcare at Ernst & Young. From 1980 to 1990 he was a lecturer at the Graduate School of Business at the University of Chicago. He currently serves on the editorial board of Health Affairs.
Last week, the Kaiser Family
Foundation released its annual Employer Health Benefits Survey, which
revealed that premiums for employer sponsored health insurance rose
only 6.1% for 2007, compared with almost a 14% increase in 2003.
One would not have known that this is actually good news from KFF President
Drew Altman’s comments, however: “No-one in the real world is celebrating
because it doesn’t feel like moderation”. He went on to say
that “we’ve seen these periods of moderation before, and they never
last.” The Report also showed that the percentage of employers
offering coverage remained stable for the third year in a row, as did
the percentage contribution workers had to make for individual and family
plans.
Altman is certainly right that
health cost growth will eventually resume- he’s the author of a famous
Grand Teton-like exhibit which shows the cyclical flare-ups in employer
costs over the last 45 years. But it is not clear what “real
world” Dr. Altman is thinking about. For people who actually
meet payrolls every week (my definition of the “real world”), a
56% reduction in the growth rate of one of their most explosive costs
of doing business in four years time is nothing short of phenomenal
good news.
The difference between the
2003 and 2007 premium increase on a roughly $800 billion health premium
base is $62 billion in new corporate cash flow, money that can
be used to increase wages, invest in R+D or new plant, or hire
additional workers. (And sure enough, in Kaiser Foundation’s
own data, wage increases grew from about 2% on 2004 to almost 4% in
2007).
What has produced this cost
moderation is still not clear. My theory is that increased
cost sharing has, over a number of years, compelled families to be more
careful about their use of health services. That is not inherently
a bad thing. Despite these increases, out-of-pocket share of health
costs continued to fall through 2005, according to CMS’ Office
of the Actuary.
