Blue Cross Blue Shield of Massachusetts has captured the public’s attention, although not the way it would have liked, as reports of millions paid to the insurer’s former chief executive and hefty stipends paid to board members sparked outrage.
The outcry grew big enough to force Blue Cross board members to vote to suspend their own payments and to lead the insurer to make promises to curb excessive payouts to executives. There’s just one problem: Those steps will do little to fix soaring health care costs.
“I have the same outrage,’’ Stuart H. Altman, a national health policy professor at Brandeis University, said about Blue Cross’s payments. But, “We need to put executive pay and board salaries in perspective. It is not the major force, or even close to the major force, in driving up health care costs.’’
US health care spending hit $2.5 trillion in 2009, increasing by about $600 billion from 2004, according to the Centers for Medicare and Medicaid Services. Nearly two-thirds of the increase was driven by rising costs in three areas: hospitals, which accounted for 33 percent of the increase; doctors, which accounted for 19 percent; and prescription drugs, which accounted for 10 percent.
Administrative costs, which would include payments to board members, accounted for about 5 percent of overall health care cost increases. Altman said Massachusetts health insurers spend about 10 percent on administrative costs, lower than the national average, which is typically 15 to 20 percent.
In a report last year, Attorney General Martha Coakley concluded that price increases by providers accounted for 90 percent of the growth in Massachusetts health care costs between 2006 and 2009. The report also found that prices varied widely, but the highest prices were charged by the biggest providers with market power to push insurers to pay more. Insurers, in turn, passed at least some of the those costs to consumers.
Health care costs are growing much faster than the economy and wages, the report warned.
“Such increases, if unchecked,’’ the report said, “threaten the financial stability of individuals and businesses, and the future viability of our gains in health care access.’’
Under the state’s universal health care law, about 98 percent of Massachusetts residents have insurance. Blue Cross is the state’s largest insurer, insuring more than 3 million residents.
Health care providers and insurers have long clashed over who was responsible for rising health care costs, leaving Massachusetts employers to deal with double-digit premium increases. Many firms criticized Blue Cross and other insurers for the relentless increases that crimp hiring by raising the costs of adding workers.
But it is the compensation issue that has provoked populist anger, as workers struggle with stagnant wages and rising health insurance costs.Continued...
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