As Out-of-Pocket Costs Rise, Insurers Spend Big on Administrative Costs

BIOtech Now
Brian Newell

It seems every week the insurance industry is busy pointing the finger at biopharmaceutical innovators for the rising cost of health care. Of course, this public relations campaign relies on twisting some facts and completely ignoring others. For example, the insurance lobby rarely mentions that:

  • National spending on prescription drugs grew less than 1 percent last year and just 1.3 percent for retail drugs the year before;
  • The average net price for brand-name drugs increased less than 2 percent in 2017, and that’s in part due to billions of dollars in rebates and discounts drugmakers provide every year;
  • Major pharmacy benefits managers — who work on behalf of insurance companies — are reporting remarkable stability in both drug spending and drug prices for many commercial health plans;
  • Prescription medicines can help reduce the need for more costly medical care, helping to save money for insurers, patients and the broader health care system; and
  • Many health plans are shifting greater costs on to patients through higher deductibles and coinsurance requirements, forcing many individuals and families to pay more for less coverage.

These are just some of the facts the insurance industry would prefer the public not know about. But there’s more. A new report provides fresh data on where our nation’s health care dollars are going, and the results are both encouraging and troubling for patients.

According to the nonprofit health research organization Altarum, total national health spending grew by 4.8 percent during the first quarter of 2018 and spending on prescription drugs grew less than 4 percent during that same time. The data indicates that growth in drug spending, while modest, is being driven by greater use of drugs and not drug prices.

That’s the encouraging the news. Now the troubling news: administration and the net cost of insurance grew by roughly 9 percent — or nearly twice as fast as medical inflation — making overhead at insurance companies the fastest growing category of health care spending.

It’s hard to understand how costly bureaucracies within the health insurance industry are good for patients, especially at a time when insurers continue to impose greater out-of-pocket costs on many Americans and restrict access to the care patients need. For example:

People pay for insurance expecting that they will be covered when help is needed, yet it seems that’s increasingly not the case. Perhaps insurers should look for ways to reduce some unnecessary paperwork, limit their overhead, and provide some of the savings back to patients. This would not only help lower health care costs, but just as importantly, it would be the right thing to do.

Full BIOtech Now Article here

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