Apr 8, 2019

Employers' health care crisis will only get worse

Data: CMS; Chart: Harry Stevens/Axios

Employers are keeping quiet in the political debate over health care costs, but the cost crisis looming in front of them is bigger than many people may realize.

Why it matters: Washington isn’t known for being proactive, but in some ways it’s better prepared than the private sector to grapple with the ever-climbing cost of care. And some experts warn that these costs will eventually have a chilling effect on the economy.

Between the lines: Health care costs will keep rising throughout the system — everything gets more expensive over time, hospitals are continuing to consolidate, and the next wave of drugs will be wildly expensive. But private insurance may feel the biggest squeeze.

  • Hospitals get paid more from private insurance than they do from Medicare and Medicaid. They say government programs don’t pay them enough to stay in business, and that they make up the difference by charging higher prices for private plans.
  • As Baby Boomers continue to retire, shifting out of their employer plans and into Medicare, more of hospitals’ work will be reimbursed at lower Medicare rates — creating more pressure to make up more revenue through more price increases on private coverage.
  • “Will employers be the place of last resort over and over and over again, and is that sustainable?” Democratic health care consultant Chris Jennings said.

Critics say hospitals are misrepresenting how far their Medicare payments go, but either way, it's the prevailing logic in how prices are set.

What they’re saying: Jennings is among the policy experts arguing that employers have a strong incentive to get more proactive about cost control now. In recent years, they’ve responded to rising costs mainly by shifting more of the overall burden onto employees.

  • But that hasn’t done much to control the underlying price of care, which just keeps rising.
  • “This trend line continues, and we may be getting to this inflection point here that’s just unsustainable: ‘I can’t be the [only] entity that’s paying these rates,’” Jennings said.

The bottom line: Businesses don't have the same cost control leverage that government payers do, meaning that becoming engaged in politics will be their primary route to reprieve.

  • If they don't, the consequences could be dire, experts warn.
  • “I do not think it’s sustainable, not if [employers] continue to have expectations of meaningful return on investment for their shareholders and having access to capital based on their capacity to produce earnings to grow their companies," said John Bardis, a former Trump administration health official.
  • “I think it’s the most serious financial problem facing the country during the next 20 years," Bardis added.

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