Why Current Health Care Cost Control Strategies Don't Work

As you've watched health care costs eat away at your company's profits, you've no doubt wondered if there's anything you can do about it. You understand that the health care system is complex, and there are many factors that contribute to the problem ¯ factors that may seem beyond your control.

THE SCOPE OF THE PROBLEM

Health care costs are out of control. According to a study done by the Kaiser Family Foundation, health care premiums rose by more than 500% between 1988 and 2006. Meanwhile, the rate of inflation for other goods and services during that time period was around 80%.

Clearly, there is a major problem, and you have to deal with it every day because it has a crippling effect on your bottom line. So what can you do about it? Employers and insurance providers have tried a number of strategies, such as shifting costs to employees, limiting access to care and reducing benefits. But costs keep right on going up.

Managed care gatekeeper-style plan designs were once hailed as a significant advance. But costs continue to rise despite tightly controlled provider networks. Evidently, managed care is not a long-term solution.

THE PROBLEM IS GOING TO GET WORSE

Unfortunately, the problem of rising health care costs is not going to go away. In fact, it's about to get much worse for a number of reasons, including the demographic shift of the workforce as the Baby Boomer generation reaches retirement age. The population is aging, and medical advances are extending longevity - at a steep price.

Family health care coverage that cost about $8,000 a year in 2002 is projected to cost approximately $18,000 in 2012. And most employers have no idea how to address the looming crisis.