Human Resources
Thought Leadership

Health Care Reform: The Perils of Inaction and the Promise of Effective Action

Health Care Reform: The Perils of Inaction and the Promise of Effective ActionBusiness Roundtable, an association of chief executive officers of leading U.S. companies, commissioned Hewitt Associates to develop a new report that explores the cost of inaction around health care reform and identifies ways to build an improved, and more efficient delivery system.

Health Care Reform: The Perils of Inaction and the Promise of Effective Action, issued on September 15, 2009, reveals that annual per employee health care costs will triple to nearly $29,000 over the next decade without significant marketplace reforms that reduce costs, expand coverage, and improve delivery.

Key findings of the report include:

  • Without significant marketplace reforms, if current trends continue, annual health care costs for employers will rise 166 percent over the next decade, from $10,743 per employee today to $28,530 by 20191.
  • These runaway costs, combined with a $56 billion cost shift to payors from uncompensated care, would cripple the employer-based system that currently provides coverage for the majority of Americans and their families.
  • If nothing changes, by 2019, total health care spending will reach $4.4 trillion, consuming more than 20 percent of the U.S. Gross Domestic Product.

The report suggests that the U.S. can reduce upward health care cost trends and expand health care access for most Americans if:

  • Health insurance coverage is expanded to as close to universal levels as we can reasonably get. There is compelling evidence that the economic benefits of expanding coverage could potentially result in a positive return on investment if done right. Potential benefits include improving markets, reducing cost shifting, encouraging innovation, improving health and productivity, enabling greater workforce mobility, improving personal financial health, narrowing disparities in care, and more.
  • Existing sources of employer-based coverage are not disrupted or displaced or saddled with significant additional costs and compliance burdens. The employer-sponsored health care system covers 177 million Americans, or 88 percent of all individuals with private insurance. While employers believe it is good business practice to provide health care benefits, the cumulative effect of rapid health care cost increases now threatens that system. As we look to expand coverage and improve the health of all Americans, we must accomplish this worthy goal in a way that preserves, strengthens, and stabilizes existing employer-based coverage.
  • Expanded coverage is accompanied by meaningful delivery system reform led by changes to Medicare that will spread to the private sector. Promising changes include strong insurance market reforms that create new markets and enable competition, bundled payments to medical providers, accountable care organizations, patient-centered medical homes, and health risk assessments, among others. The single best place to initiate these types of delivery system reforms is with the Medicare program. As the largest single purchaser of health care services in the U.S., its actions can have a direct effect on the actions of private purchasers and on provider behavior more broadly; changes that diffuse into the broader health care system.

Read the full report. (PDF format)

Read more about Hewitt's efforts to participate in the health care reform debate.

1Methodology: From 2001 to 2009, total health costs increased annually by an average rate of 10.2 percent. Projection to 2019 assumes the same trend occurs over the next 10 years, accumulating a 166 percent cost increase.