How many times have you heard that health care costs are rising at record rates? Well, they aren't any more.
The Bureau of Labor Statistics reports that health care costs rose 7.5 percent in 2004, well under the 11.4 percent rise in 2002. The BLS also reports that costs for employers for health insurance per employee per hour worked has slowed down even more. From March 2001 to March 2002, it rose 11 perecnt; from March 2002 to March 2004, it rose 9 percent each year. But from March 2004 to December 2004, it rose only 3 percent.
Something is going on out there. Politicians and political commentators always assume that government must do something new and different if health care costs are to be held down to bearable increases. But the evidence is that health care costs are being held down, by the workings of the marketplace, partly in response to health care legislation passed in the last four years.
One thing that is going on is that employers are offering and employees are choosing health savings accounts and high-deductible health insurance in greater numbers. HSAs were given a big boost in the Medicare prescription drug bill passed in November 2003; indeed that was the reason that most Republicans voted for a bill that also included the biggest new entitlement program since Medicare was passed in 1965.
HSAs seem to be gaining in popularity. A survey by Watson Wyatt and the National Business Group on Health found that 8 percent of employers are offering health savings accounts in 2005, and 18 percent plan to offer them in 2006. Large majorities of employers believe that HSAs will help lower overall health care costs and that they will expand options for employees.
The number of people covered by HSAs and high-deductible insurance policies increased from 438,000 in September 2004 to 1,031,000 in March 2005. Nearly half of these are people over 40 -- though some predicted that such policies would not be attractive to them.
One thing that HSAs and high-deductible health insurance help do is to make employees more cost-conscious when it comes to health care decisions. HSAs allow employees to keep money they don't spend on health care this year and to roll it over to next year, and on and on -- therefore, there is an incentive not to fritter it away. High-deductible health insurance operates the same way high-deductible auto insurance does: It does not pay for the equivalent of your oil change but does pay you when your car is totaled.
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