Insight, analysis & opinion from Joe Paduda

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May
7

Insurance saves lives and costs money – and we’re surprised?

That’s the finding of a massive study of the impact of health reform on mortality rates in Massachusetts.  The death rate declined by 3 percent after universal coverage went into effect in 2006, and the carefully-constructed study found that the decline was mostly among the poor.

By any measure, that’s a huge win.

For the green-eyeshade folks, a decline in death rates means more productive years for more people leading to more economic production, altho they’d balance that against the costs of caring for those folks. For those of us who are a bit more “human”, it is even better – longer lives for more people means more time with our loved ones.

Juxtaposed against that finding is the increasing evidence that health care costs are going up.  That’s no surprise; a lot more people have coverage and they are using health care services.  The early indicator comes from pharmacy utilization; giant PBM Express Scripts reports there are more scripts going out these days and some of this MAY be due to more coverage, altho this is expected coming out of a recession as well. There appear to be more hospital admissions as well (again not surprising; people who didn’t have insurance couldn’t get knee/hip replacements and now that they have insurance they’re lining up to get those things fixed).

Notably, utilization, not prices, is by far the biggest inflation driver.

In total the VERY EARLY data suggests consumer purchases of health services was up almost 10 percent in Q1 2014.

That said, it would be hard to find anyone  – at least anyone who gets math – who didn’t think health care costs would go up as more folks are covered.  In fact, projections way back in 2009 called for just such a bump.

So there you have it.  People who get insurance who didn’t have it use a lot of health care services.  Longer lives are associated with higher health care costs.

At least for now.

I’d hazard a guess that health plans are working their collective fannies off to hold down costs and thereby remain competitive in the battle for members.  A safe guess, as all the news I’ve seen indicates this is precisely what’s happening.

What does this mean for you?

The free market – a well- and intelligently-regulated one – will deliver better outcomes at lower cost.  And that’s exactly what PPACA is supposed to do.

 

 


One thought on “Insurance saves lives and costs money – and we’re surprised?”

  1. Thank you that is great insight and useful information for providers to hear. Many providers are not ready or planning for this impact on their business. The other side if this impact is they have insurance but with high deductibles and co-insurance. They may utilize the new services but how is impacting the bottom line of the healthcare providers who carry those balances on their books. That goes back the fee for service days where providers robbed Peter to pay Paul.

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Joe Paduda is the principal of Health Strategy Associates

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