Looking upstream to see how inflation may affect health care… | MOBE

Looking upstream to see how inflation may affect health care costs.

By: Mike Ott, CEO, MOBE

Published in Employee Benefit News, September 2022

From groceries to gas, we know that consumers have felt the pinch of inflation as prices rise across goods and services. While several relief efforts are underway to tackle rising costs, it’s important for employers and payers to consider the effect of inflation on the healthcare industry, as increased costs are on their way.

A recently released report from the Kaiser Family Foundation revealed a broader picture of medical care inflation, up a whopping 109% since 2000. And while year-over-year medical care inflation as measured by the Consumer Price Index saw a modest 3.2% increase, compared to 8.3% for goods and services, employers and payers need to prepare for the impact of wage increases, materials, etc. to hit the healthcare sector soon.

Perhaps another inflation indicator is the proposed increase of 3.2% for Medicare inpatient hospital payment rates by the Centers for Medicare and Medicaid Services. The agency estimates the increase will result in a $1.6 billion payment to hospitals, but the American Hospital Association doesn’t think the increase is sufficient, given overall inflation. And in a letter to House and Senate leaders, Premier, a hospital and health system alliance, said the rate increase doesn’t make up for the 6.5 percent increase in hospital labor rates.

As an industry, healthcare has seen incredible advancements to improve outcomes and quality, that in my opinion haven’t been matched by cost containment strategies. Before I joined MOBE as CEO, much of my background was in finance and banking. And while it was the way MOBE Guides and Pharmacists improve peoples’ health outcomes that first drew me in, I was also encouraged by the company’s commitment to reducing healthcare costs. I firmly believe that those of us in healthcare have much more work to do to reduce the cost of care and that an exercise in inflation preparation is the perfect time to dig deeper.

As employers and health plans review their health benefit programs, it’s no longer good enough to use a wellness program focused on peoples’ current health conditions or single measures of health. To better prepare for cost increases, it’s crucial that programs use predictive analytics to curb future health claims spending, and for programs to address whole-person health. Together, these strategies can help forecast future health issues to intervene earlier, resulting in healthier employees and lower costs.

While inflation may feel like a looming cloud, there are steps we can each take to more accurately predict and prepare for increased costs while also helping people achieve better health outcomes.