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The Key to Reforming Health Care: Holding Down Medical Costs

Health care reform extends affordable insurance to millions, and that's important. But the rising medical costs that drove insurance premiums before the passage of reform legislation are still our biggest challenge.

In fact, if we don't find a way to hold down medical costs, our health care system and the entire economy is in danger. The Congressional Budget Office estimates that if current cost trends hold, by 2025 health care spending will account for more than 25% of our gross domestic product.1

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Why Medical Costs are Skyrocketing

Medical services are getting more expensive, and people are receiving more care. So insurance companies are paying more in medical benefits than ever before.

And Americans are spending more on health care today than ever before:

  • In 1970, total health care spending: $75 billion ($356 per person)
  • Today, total health care spending: $2.2 trillion ($7,421 per person)2

Between 2006 and 2007, national medical cost increases were driven primarily by higher prices for medical services, other factors that contribute to overall cost increases include:

  • New treatments
  • Changes in insurance benefits
  • An aging population
  • Increased use of diagnostic tests
  • Lifestyle challenges (smoking, obesity, malnutrition and physical inactivity)2

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The Prices of Medical Services Keep Rising

Between 2000 to 2009:3

  • The cost for a hospital admission has risen 102%, from $6,148 to $12,933.4
  • The cost for an emergency room visit has risen 211%, from $513 to $1596.
  • The cost of a doctor's office visit has risen 71%.5
  • The cost of obesity surgery has increased 112%, from $9,902 to $21,085.
  • The cost of knee replacement surgery has increased 60%, from $15,546 to $24,895.
  • The cost of hip replacement surgery has increased 72%, from $14,863 to $25,572.

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People are Using More Medical Services

From 2000 to 2009, the frequency of other common medical services increased.6

  • Obesity surgeries have increased a staggering 738%.7
  • Knee replacements have increased 94%.
  • Hip replacements have increased 38%.
  • The number of MRI scans has increased 77%, while CT scans have increased 104%.

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What BCBSNC is Doing About Costs

BCBSNC has set a goal to reduce our administrative costs by 20 percent by 2014. However, it's important to recognize that 87 cents of every premium dollar our customers pay goes straight to medical costs.

We're also enhancing our programs to hold down costs and improve the quality of health care for our customers:

  • Our Blue Quality Physician's Program rewards doctors and hospitals for the quality of care they provide, not just the quantity of care. In the pilot that led to this program, patients spent less on health care annually and were 34% less likely to visit the emergency room and 24% less likely to need to see a specialist.8
  • Blue Distinction Centers are hospitals that have met tough national quality standards, often at a lower cost. For example, bariatric surgery costs approximately $3,500 less at our Blue Distinction Centers, and patient outcomes are better. Our Blue Distinction Centers page offers more details about this program.
  • We review certain procedures that tend to be over-used to ensure that they are effective and medically necessary.
  • We offer programs that support healthier living and help manage chronic diseases.
  • Our plans cover many preventive services with no out-of-pocket customer payment.

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What You Can Do About Costs

  • Partner with your doctor and discuss your medical needs and options. Talk with your doctor about less-expensive generic drugs.
  • Try our new HealthNAV iPhone application to find lower-cost drug options, average drug costs, locate the nearest in-network urgent care center and save your drug information in one convenient place.
  • Unless it's a true medical emergency, save money and time by visiting your primary care doctor or an urgent care center instead of an emergency room.
  • Take advantage of your insurer's programs to support good health and help manage chronic diseases. Almost half of health care spending is used to treat just 5 percent of the population.9
  • Eating right, maintaining a healthy weight and not using tobacco can have an enormous impact on your own health and our nation's health care costs.
    • Nationally, nearly $1.8 trillion a year is spent on chronic diseases, including diabetes, heart disease and cancer. Obesity accounts for $152 billion annually in the United States, which is 9.1% of total health care spending.10 If we just hold obesity to today's levels, the nation could save nearly $200 billion a year in health costs by 2018.11
    • In North Carolina, poor nutrition, excess weight and obesity cost North Carolina $12.1 billion a year in excess medical costs - that's $1,366 for every man, woman and child in the state.12 Tobacco use costs our state $4.75 billion a year, or $536 per resident.12
  • Choose a health insurance plan with higher deductibles to lower your monthly premiums. Our Blue Options HSASM plan is one such plan that offers lower premiums.
  • Call the toll-free number on your BCBSNC Member ID card to find out more about lowering your premium if you're concerned that you can't afford individual insurance.

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1 "The Long-Term Outlook for Health Care Spending," Congressional Budget Office, November 2007. http://www.cbo.gov/ftpdocs/87xx/doc8758/11-13-LT-Health.pdf

2 BCBSNC claims data, 2007-2009, insured group customers, average allowed charge.

3 "The Factors Fueling Rising Health Care Costs 2008," Prepared for America's Health Insurance Plans, December 2008. http://www.americanhealthsolution.org/assets/Reform-Resources/Cost-Trends-and-Cost-Shifting/risinghealthcarecostsfactors2008.pdf

4 BCBSNC claims data, 2007-2009, insured group customers, average allowed charge.

5 Costs are for Office visits for established patients for evaluation and management. Excludes lab costs.

6 BCBSNC claims data, 2007-2009, insured group customers.

7 Includes both Bariatric and Lap Band Surgery.

8 BCBSNC data, Bridges to Excellence pilot study.

9 Medical Expenditure Panel Survey (MEPS), conducted by the Agency for Health Care Research and Quality, U.S. Department of Health and Human Services. Cited in "Health Care Costs: A Primer," The Kaiser Family Foundation, March 2009. http://www.kff.org/insurance/7670.cfm

10 Finkelstein, E., Trogdon, J., Cohen, J. W., & Dietz, W. (2009). Annual medical spending attributable to obesity: Payer-and service-specific estimates. Health Affairs, 28(5), w822-w831.http://content.healthaffairs.org/cgi/content/short/hlthaff.28.5.w822

11 "The Future Costs of Obesity: National and State Estimates of the Impact of Obesity on Direct Health Care Expenses," United Health Foundation, the American Public Health Association and Partnership for Prevention. Updated November 2009. http://www.americashealthrankings.org/2009/report/Cost%20Obesity%20Report-final.pdf

12 US Bureau of the Census, Fact Sheet: North Carolina, 2006. Cited in North Carolina Prevention Report Card 2008: A Progress Report on Prevention & Health in North Carolina, 2005-2007. NC Prevention Partners. http://www.ncpreventionpartners.org/dnn/LinkClick.aspx?fileticket=Kt38jQLmv6c%3D&tabid=162