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Why Health Care Coverage Is So Expensive

June 04, 2012

Columbia, S.C. – Three trends are the culprits for the escalating cost of health insurance: increased pharmacy and technology, waste and fraud, and unhealthy lifestyles. While there is no quick fix, BlueCross BlueShield of South Carolina is collaborating with the medical community to better manage the costs.

In an article in the May/June issue of South Carolina Business, the magazine of the South Carolina Chamber of Commerce, BlueCross commercial business president Jim Deyling explains the situation. 

In the past decade, he notes, annual spending on prescription drugs more than doubled to $234.1 billion. Pharmaceutical companies now are focusing research on biologic drugs, which often must be administered in clinical settings and are even more expensive. New technologies for diagnosing illnesses and broader treatments may account for as much as two-thirds of the projected increase in health care spending. Outpatient diagnostic imaging is the fastest-growing category of medical spending

Health care waste – spending that could be eliminated without reducing the quality of care – is estimated at $700 billion to $850 billion annually. As much as 30 percent of total health care spending is for procedures, tests and hospital stays that do nothing to improve health. The FBI estimates that fraudulent billing to Medicare, Medicaid and health insurers averages 3-10 percent of total health spending.
Medical experts link a wide range of serious illness — including diabetes, heart disease, depression and some cancers — to lifestyle decisions. Common behaviors such as lack of exercise, overeating, alcohol and other substance abuse, and tobacco use contribute $150 billion to $200 billion annually in avoidable costs. Avoiding routine preventive care factors in as well.
Rising health care costs pose complex problems for American businesses, individual insurance purchasers and health insurance companies as well as the medical community. BlueCross has programs in place to detect fraud. It also offers health plans with incentives that motivate members to pursue healthy lifestyles. But finding broader solutions remains challenging.
“There is no one right answer, no quick fix. But through a wide variety of targeted approaches, we are working toward solutions,” Deyling writes. He cites as examples the move toward more integrated delivery systems, payment incentives shifting to support and reward quality outcomes for patients, a growing emphasis on primary care and coordination of services from the primary care setting.
In collaboration with health care providers, BlueCross is the only insurance company in the state supporting pay for coordination of care and improved health outcomes. In several pilot programs around the state, this new model has resulted in improved health for BlueCross members as well as better-managed costs.
“Our challenge is to continue the momentum toward positive change. We must continue the dialogue, consider the impact of our lifestyles and be innovative in our thinking. We must identify — and act on — more opportunities for cost savings while improving the quality of health care,” Deyling writes.
Headquartered in Columbia, S.C., and operating in South Carolina for more than 65 years, BlueCross BlueShield of South Carolina is an independent licensee of the Blue Cross and Blue Shield Association. The only South Carolina-owned and operated health insurance carrier, BlueCross BlueShield of South Carolina comprises 47 companies involved in health insurance services, U.S. DoD health program and Medicare contracts, other insurance and employee benefits services, and a philanthropic foundation that funds programs to improve health care and access to health care for South Carolinians.

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