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June 6, 2005 Continued Discussion on the Rising Tide of Healthcare Costs In my continued discussion with my Food guys, which is daily, the topic brought up time and time again is health care costs. Like fuel costs most employers feel that the cost of Healthcare is beyond their control. In this issue we will continue that discussion and hopefully add some more ideas. Lets examine an article that just crossed my desk, “Questions Still Out Number Answers” by Joe Nowlan of “Manufacturing Magazine”. The article quotes Linda Ruth, a senior healthcare strategist for Hewitt Associates in suburban Chicago. She reiterates the employer’s concern of “cost, cost, cost, how can I compete”. One of the ways we discussed was shifting more cost to the employee but that’s been covered already. Another popular method is to raise the deductibles and co-pays. This can reduce your health care costs dramatically. Also as Linda points out when an employee has to pay more out of pocket they won’t use the insurance as much for every little thing but use it more intelligently. Informed decisions can further reduce your costs by the track record of more judicious use will further reduce your costs. Another very large area of informed decisions is the prescription plan. Higher co-pays for branded drugs will help shift to the requests for generics. Generics are not less quality than the brand just duplications of the formula that is not patent protected anymore. These are methods being used more and more to reduce health costs. The Medicare Reform Act in early 2004 introduced a potentially long term savings approach to Health Care called Health Savings Accounts. This new law allows for pre-tax reduction in qualified plans for health care coverage. Mainly designed to protect for catastrophic health events these plans allow for tax-free appreciation of accounts. Also when the employee leaves his or her job the account goes with them. In a way they are conceptually a 401K for Healthcare. Ruth has seen a “wait and see” attitude toward these accounts and the major carriers have not utilized them in any of their offerings. Downstream, this could potentially bring a significant restructuring of the costs of Healthcare. Patient versus Consumer- Most Healthcare experts agree that as information about Healthcare costs finally gets disseminated properly at the employee (consumer) level, consumers of Healthcare will be able to make choices about their Healthcare options with the proper data. Just as the appliance industry has done with the cost of operation tags required by law on most major appliances or the nutritional labeling required on all food products. When the patient has enough data to become a consumer of Healthcare intelligent decisions can be made to stop the tidal wave of Healthcare costs. EDUCATION AND INFORMATION = COST SAVING
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