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Home / News & IndustryManaged Care Insight and Analysis
Updated: October 13, 2009
Who’s Driving Up Healthcare Costs?

Don’t blame the health insurers for higher and higher healthcare expenses, a new report says.

"What’s Really Driving the Increase in Health Care Premiums?" was produced by the WellPoint Institute of Health Care Knowledge and seeks to debunk the popular notion that insurer profits are fueling ever-growing costs.

The report was developed based on research compiled from such sources as PricewaterhouseCoopers, the Robert Wood Johnson Foundation, the Kaiser Family Foundation, the Bureau of Labor Statistics and the Congressional Budget Office, the WellPoint Institute report points the finger at other "key drivers" of rising healthcare costs and health insurance premiums. They include:

  • Advances in medical technology and subsequent increases in utilization.
  • Price inflation for medical services that exceeds inflation in other sectors of the economy.
  • Cost-shifting from people who are uninsured and those receiving Medicare and Medicaid to the private sector.
  • High cost of regulatory compliance.
  • Patient lifestyles, such as physical inactivity and increases in obesity.

"As the healthcare reform debate heats up, the results of this report provide important insights into the drivers of healthcare costs in this country," said Dr. Sam Nussbaum, executive vice president and chief medical officer of WellPoint. "The bottom line is that those items typically blamed for rising healthcare costs – insurer profits, the aging of America and the high cost of medical malpractice – in fact have little impact on healthcare premiums."

Citing research from PricewaterhouseCoopers’ December 2008 report, "The Factors Fueling Rising Health Care Costs," the Wellpoint Institute report attempts to deflate the commonly held belief that health insurers rack up profits of between 25 and 40 percent. The truth, according to PricewaterhouseCoopers, is that only three cents of every healthcare premium dollar is attributable to health insurer profit. That’s less than the 2008 profit of 4.9 percent reported to Reuters by auto andtruck manufacturers, the 4.8 percent reported by healthcare facilities, and the 4.7 percent reported by utility companies.

"We are all working toward the common goal of meaningful and responsible healthcare reform," Nussbaum said. "For this to occur and be sustainable, we should focus on the main drivers of healthcare costs. Independent of funding, we need to institute reforms that improve healthcare quality and outcomes, increase preventive care and reduce those common illnesses, including cardiac disease and diabetes and chronic lung disease, that result from smoking, lifestyle and obesity."

According to the Wellpoint Institute’s report, newer medical technologies tend to increase prices because they are generally more expensive than the older ones they replace. While more advanced and superior technologies can yield better results for some patients, they can be used inappropriately in some situations where existing technologies and diagnostic tests would be more effective and accurate.

For more information and a copy of the full report, visit WellPoint Institute of Health Care Knowledge at

  This article was taken from:
The Executive Report on Managed Care

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