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Published on: 8/15/2008
Last Visited: 8/25/2008
James Reed, regional president of Excellus, delivered the presentation at a seminar on the rising cost of health care held Aug. 5 at Justin's Grill at 6400 Yorktown Circle in DeWitt.
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The typical law of economics would say the demand for a product would drive the supply, Reed said during his presentation, adding that it's actually the other way around in health care.
For example, Reed said in areas where there are more magnetic resonance imaging (MRI) machines available, the per-member per-month cost of health insurance is higher and the utilization is higher, so the supply would be driving the demand.
"We have in this country an overabundance of supply of health-care services," said Reed.
The presentation cites studies conducted by Dartmouth Medical School that have found a direct correlation between the availability of health-care resources in a community and that community's level of health-care spending.
And Reed says as a result of the excess supply, health-care spending has been roughly twice the rate of inflation, since 1970.
It's difficult to reach consensus on cost-containment because one person's expense is another person's revenue, said Reed, noting that increases in medical costs for an employer is revenue to a doctor, hospital, or pharmacy.
"So, as we look to find ways to help stem the increase in cost associated with medical benefits, we have to realize that's money coming out of revenue for a provider of care," said Reed, adding that health-care spending actually helps support the economy.
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The data on the premium dollars was taken from 2006 financial filings with the New York State Insurance Department, said Reed, noting the numbers represent an average of more than 20 insurers across upstate New York.
A second graph illustrated a breakdown of how premium dollars are spent on health-care services, including 35 percent to 37 percent to doctors, 21 percent to 23 percent to inpatient care, 17 percent to 19 percent on outpatient and ambulatory care, and 17 to 19 percent on prescription drugs.
After examining the so-called inconvenient truths, Reed then focused on what are considered major cost drivers for health care in upstate New York, including an aging population.
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"That's a pretty startling statistic," said Reed.
Personal behaviors are another major driver, with the Excellus presentation indicating 35 percent of all direct health-care spending is attributable to five conditions, including heart disease, cancer, trauma, mental disorders, and pulmonary conditions.
"The economic cost estimate to Central New York for smoking is $763 million," said Reed.
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All of these cost drivers and pressures are leading to an "unsustainable trend," said Reed.As costs for the privately insured have increased, employment-based health-insurance coverage across upstate New York has been declining - from 74.5 percent in 2001-02 to 70.5 percent in 2005-06.
But can anything be done to drive costs down?Yes, Excellus says.
"Individuals and society - we can act on what we see in the mirror," said Reed, adding that personal choices on exercise, eating, drinking, and smoking can have an impact on our health and resulting costs.
Excellus also recommends that consumers ask about generic drugs as opposed to the more expensive brand name drugs.Increasing the generic fill rate - the portion of prescriptions that are filled with a generic - by just 3.8 percent in 2007 saved upstate New York $224 million and Central New York $50.5 million, according to Reed.
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Reed also showed a slide indicating the trend of monthly costs for individual and families for health-care premiums into 2016.
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