Employers: Healthcare Spending Is on an Unsustainable Trajectory

Overall, large employers find healthcare costs excessive and that the healthcare spending burden would become unsustainable in the next five to ten years, according to a recent Kaiser Family Foundation (KFF) survey.

“The COVID pandemic has made even more clear the problems with our current system, including high costs, incomplete coverage, limited access to care, under-investment in public health, and serious racial and ethnic inequities,” the survey results began. “All of this, occurring against a backdrop of ever-rising health care costs, is causing many to re-think their priorities and positions on key health care policy issues.”

Purchaser Business Group on Health (PBGH), formerly Pacific Business Group on Health, and Kaiser Family Foundation conducted a survey of more than 300 large private employers from December 2020 through January 2021.

The results of the survey indicated that, by and large, employers found health benefit costs were excessive, with nearly half responding that they “moderately agreed” and another 34 percent saying that they “considerably” or “strongly” agreed.

“This survey highlights what we’ve understood for some time: The current health care system is on an unsustainable path,” Elizabeth Mitchell, president and chief executive officer of PBGH, said in the press release. “Our large employer members support competition and prefer market solutions. But they have reached their limit; they’re tired of pouring tons of money into a broken health care market that delivers uneven quality at bloated costs.”

The survey presented four factors that might bolster healthcare spending and asked which ones employers viewed as contributors to high healthcare costs. The factors were drug prices,  hospital and health care provider market consolidations, unhealthy patient behaviors, and fee-for-service payment models.

Respondents, however, did not hold any single factor more responsible for high healthcare costs. They saw employers as having a lot of control over costs, with 84 percent saying that employers can change costs moderately or considerably.

They had less confidence in their own companies’ abilities to change costs, however, with 23 percent saying that they had no control at all or only slight control over healthcare costs.

Over half of employers (54 percent) stated that they were considerably or highly likely to promote value-based payments. Nearly nine in ten respondents (88 percent) said that they were moderately, considerably, or highly likely to implement Individual Coverage Health Reimbursement Arrangements (ICHRAs).

Most employer respondents (87 percent) indicated that they believed that healthcare spending would become unsustainable in the next five to ten years.

“Clearly, a consensus has emerged among those who foot the bills that the health care industry is not taking seriously enough the impact of rising costs that fail to correlate with higher quality health care,” said Mitchell.

While employer respondents had embraced their own ability to change costs, many employers stated that the government should take on more of the financial and coverage burden in healthcare.

Employers largely supported anti-trust interventions (92 percent) and improving price transparency (90 percent) and reducing barriers to generics and biosimilars (56 percent).

Almost eight in ten respondents slightly, somewhat, or strongly agreed in capping hospital prices in areas with low competition.

The survey respondents were also fairly receptive to the government taking on greater coverage responsibility, with the majority agreeing in some capacity to lowering the Medicare age or creating a public option. However, the largest response segments for these options tended to be either “no opinion” or “slightly agree.”

Separate studies have shown that lowering the Medicare age  and offering a public option both have potential savings and drawbacks for employers, depending on certain variables.

“Any efforts to expand public coverage options or restrain prices will be met with strong opposition from the health care industry,” added Larry Levitt, executive vice president for health policy at KFF and an author of the report. “Employers, who foot much of the nation’s health care bill, could be a powerful counterweight.”