Forces Changing Healthcare

Population Demographics

A very visible force that is reshaping the nation's healthcare is the aging of the population and the workforce. The population in general is aging; those who are already elderly are living longer; and the healthcare workforce, particularly in nursing, the largest healthcare profession, is aging. This force suggests that there will be increasing demand for care, which, in turn, will increasingly tax the current diminishing workforce.

Retiree Healthcare Benefits

Many of the nation's employers have ceased to provide, or are in the process of discontinuing, healthcare benefits to their retirees. Employers continuing retiree health benefits are shifting more of the cost to retirees. The Agency for Healthcare Research and Quality (AHRQ) reports that only 13% of private-sector employers offered health benefits to their retirees in 2005, down from 22% in 1997. Even many large employers are not offering their retirees healthcare benefits. It appears that the implementation of the recent Medicare prescription drug benefit in 2006 further encouraged employers to have their retirees rely solely on public-sector healthcare benefits, despite the federal subsidy to employers maintaining their retiree plans.

Payer Market Consolidation

The nation's health insurance industry has undergone tremendous consolidation, and this can be expected to continue, albeit less rapidly, until such a time when mergers and acquisitions trigger a major reaction from government antitrust agencies. While consolidation has been under way for some time, a key turning point occurred in 2004 with the merger of Anthem and WellPoint Health Networks—the largest ever managed-care merger, which encompassed a $16.4 billion deal that has increased the plan's membership to about 28.5 million enrollees. WellPoint, Inc., has since acquired Empire Blue Cross, Blue Shield, moving into the eastern part of the country and thereby becoming more of a national company. The United Health Group has also made major acquisitions and become a national player. These two health insurance giants are changing the face of the health insurance market as they assume a dominant position, and thereby offer less flexibility in reimbursement to many healthcare providers.

Patient Cost Sharing

In recent years, consumer-directed healthcare (CDHC) has emerged as one of the most potent ideas in healthcare reform. However, CDHC means different things to various people. CDHC, which involves enrollment in consumer-directed health plans (CDHPs), refers to insurance that provides financial incentives for consumers to become more involved in their healthcare-purchasing decisions. Most of the literature uses the term consumer-directed health plans to refer to any high-deductible insurance plan. Typically, high-deductible denotes a plan with a deductible of $1,000 or more. High-deductible plans are sometimes coupled with personal health savings accounts (HSAs). HSAs are tax-advantaged health savings accounts that may be used to pay for qualified medical expenses. HSAs must be paired with a health plan whose minimum deductible is $1,000 for individuals or $2,000 for families in 2008 and the annual out-of-pocket expenses do not exceed $5,000 for individuals and $11,200 for families. Health reimbursement accounts (HRAs) are similar to HSAs but are owned by employers and do not need to be coupled with a high-deductible plan.

...