For Immediate Release:
May 21, 2013

Contact: Nicole Bradshaw
734.542.8001 or
Jeffrey Guilfoyle
517.485.9444

CRC Report Highlights Health Care Cost Drivers and Policy Solutions

In light of constantly increasing health care costs, policymakers at the state and federal levels are seeking policy options to reduce the burden for families, businesses, and governments. In 2009, Michigan families, businesses, and governments spent $65.9 billion on personal health care services and products, which is more than $6,600 per Michigan resident.

Perhaps even more alarming than the level of health care spending, is the growth rate. While health care spending growth in Michigan is below the national average, it is still higher than the rate of inflation and increasingly growing in its share of the economy. On average, households spend 6.2 percent of their adjusted personal income on health care costs. Businesses spend the equivalent of 10.2 percent of wages and salaries on health care costs. In 2003, health insurance premiums paid by individuals and their employers in Michigan represented 14.6 percent of household income, and by 2011, this figure had risen to 20.0 percent. At the same time that insurance premium prices are rising, employees are covering a larger portion of their health care costs through increased deductibles and other out of pocket expenses. High health care costs are a significant financial risk to the uninsured and even to some covered by health insurance.

CRC’s new report, Health Care Costs in Michigan: Drivers and Policy Options outlines the problem with the current level and growth rate of health care spending. The report synthesizes the research on 17 potential cost drivers, and discusses over 20 state policy reform options that may lower the level of spending or cost growth going forward.

“It’s not just that health care spending is growing over time, but that it is growing at rate faster than the rest of the economy, and it is not clear that improvements in health outcomes are commensurate with this increase in spending” said Nicole Bradshaw, a Research Associate with CRC.

Major topics covered in the new CRC report include:

  • An overview of the state of health care spending nationally and in Michigan and how it has changed for families, businesses, and governments since 1990.
  • Analyses of various health care cost drivers and how they may be adding to Michigan’s health spending. These drivers include high prices, opacity of prices, provider payment systems, competition among providers, medical malpractice, and no-fault auto insurance.
  • State-level policy reform options for each health care cost driver.
  • Pertinent information about how the federal Affordable Care Act may play a role in certain health care cost drivers.

A variety of factors are contributing to the high levels and growth rate of spending. The health care market does not operate like other markets and there are perverse incentives that encourage spending factors such as overuse by patients and providers.

“Policy intervention has the potential to reduce health care spending. Families and businesses may be able to use the savings generated toward more productive ventures,” said Bradshaw. “Many of the policy reforms, if implemented thoughtfully, will have little to no impact on the quality of health care, and may even improve quality in addition to providing a greater value for service.”

This report was made possible through a generous grant from the Small Business Association of Michigan. The full report is available at no cost on the Citizens Research Council’s website, www.crcmich.org.

Founded in 1916, CRC works to improve government in Michigan. The organization provides factual, unbiased, independent information concerning significant issues of state and local government organization, policy, and finance. By delivery of this information to policymakers and citizens, CRC aims to ensure sound and rational public policy formation in Michigan. For more information, visit www.crcmich.org.

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