More Evidence of Continuing Cost Increases

Aon Consulting has surveyed private health insurers about their expectations for cost increases in 2010.  The insurers are expecting over a ten percent increase.  (Aon Release) Depending on what you believe economic growth will look like in 2010, health care costs are likely to exceed that growth by 5-8%.  Health care cost growth is also far in excess of general inflation.  Aon’s estimates are consistent with those from other organizations.

Aon does not break out the influence of unit price and utilization increases on overall cost growth, but other evidence suggests that unit price increases accounts for much of the growth.  Hospitals in particular appear to have been able to push through significant price increases.  Hospitals defend this in part as a result of slow or no growth in government plan reimbursements and bad debt resulting from uninsured patients or those with high self-pay requirements.

Private insurers appear to be the only reliable source of revenue increases for health care providers and are bearing the brunt of ongoing health care cost rises.  How long this will be tolerated is unclear and it certainly will raise the pressure to make some system-side changes in who pays what for health care.