• The cost of health care services continues to rise at a rate much faster than inflation - 8.2 percent in 2004.¹ While lower than the preceding five years, the 2004 rate continues to significantly outpace growth in the economy and family incomes.
• Rising health care costs have resulted in considerable increases in health insurance premiums for employers and out-of-pocket costs for consumers. Americans with employer-based health care coverage paid 79 percent more in 2003 than they did in 1996, while employers paid 89 percent more.² These escalating costs have forced many employers to drop coverage, contributing to the rising number of uninsured Americans.
• Health care costs have become an escalating burden for employers and consumers, which is why consumer-directed health plans (CDHPs) are catching on fast. CDHPs represent an innovative marketplace solution. Research has shown that total health spending is reduced when consumers bear more responsibility for their health care expenses.³

Background

Health care expenditures in the United States totaled nearly $1.7 trillion in 2003, more than twice the $696 billion spent in 1990 and almost seven times the $246 billion spent in 1980.⁴ Health care spending for 2003 represented 15.3 percent of the Gross Domestic Product (GDP), a figure expected to balloon to 18.7 percent by 2014.

Hospital care accounts for the largest share of spiraling health care costs - about one-third. In 2004, spending for outpatient hospital care increased 11.3 percent, while inpatient care spending rose 6.2 percent.⁵ Other factors fueling rising costs include escalating prescription drug costs, the steep cost of medical innovations, increasing consumer demand for high-cost services, state benefits mandates and an aging population.

The majority of Americans still get health insurance in the workplace, but employers have been eliminating or reducing coverage and increasing employees' out-of-pocket costs.

The Aetna Difference

Aetna is leading the way in helping plan sponsors and members control their costs with an array of benefit products and services, including a suite of CDHPs that offers employers more affordable benefits while encouraging greater use of preventive care. We also are integrating traditional medical with other health care services (for example, member health data is integrated with disability, behavioral health and pharmacy data) to improve health care cost efficiency, and we reach out to members to educate them about their medical conditions and enroll members in disease management programs to help them better maintain their health. In addition, we created a medical specialist network, Aexcel®, that is designed to improve the quality of health care delivery while controlling costs by including only those physicians who meet high standards of clinical excellence and value.

Aetna also offers a host of affordable health care services, including programs such as Vital Savings by Aetna® (dental discounts), Aetna Rx Home Delivery®, and a Medicare-approved drug discount card. And Strategic Resource Company, an Aetna company, provides affordable health coverage for part-time and hourly workers.

Consumerism Results

Aetna studied its own CDHP (Aetna HealthFund® HRA) in 2004 and found that members experienced only single-digit medical cost increases (3.7 to 6 percent) in the first year of adoption, which was significantly below the industry average for 2004.

Q. Why is health care so expensive?
A. There are many factors driving up the cost of health care in the U.S. But until recently, poor access to information and little control over individual health care spending made it difficult to be a responsible, informed and value-seeking consumer. The consumerism in health care trend is changing this. CDHPs and information tools, such as those available to Aetna members, are helping consumers become more informed and engaged. Consumerism gives individuals more control over their health care spending and informs them about the true cost of care, making them more cost conscious.

Q. Would a single-payer health care system, like that in Great Britain or Canada, provide health care more cheaply?
A: Single-payer health care systems have been equally plagued by rising costs. While health coverage systems vary across Europe, most have allowed private insurers back into the market, offering savings accounts and plans that reward consumers for being intelligent and efficient health care consumers. Most national health insurance plans achieve savings by creating quotas (and waiting lists, as a result) for elective procedures, effectively suppressing the introduction of new technologies and drugs, and regulating reimbursement for doctors and hospitals. Such measures in the United States would be controversial, at best. What has become apparent is that there is a better way to manage health care costs - through collaborative private and public initiatives that drive down costs while giving consumers the opportunity to make smart health decisions in their own best interests.

Q. Are health care companies profiting at the expense of consumers and employers?
A. It is in everyone's interest for Aetna and other health care companies to deliver health care benefits that are as affordable as possible. The competitive nature of the marketplace demands that health care companies deliver quality products and services at a good value or risk losing cost-conscious customers. It is important to remember that Aetna and many other health care companies compete against non-profit alternatives in virtually all markets, generating constant marketplace pressure to be cost competitive. Consequently, we've pioneered efforts to develop innovative consumer-directed health care products that are helping to slow rising costs while encouraging members to utilize preventive health services. In addition, we've diligently pursued provider network contracts that balance provider needs with customer cost, developed technology solutions that include cost-efficient Web-based transaction capabilities and taken a disciplined approach to managing operating expenses.

Q. What else can be done to help control rising health care costs?
A. As a leading provider of health care benefits, we're committed to improving the efficiency and accessibility of health care. Aetna was the first national health insurer to call for an individual coverage requirement that would not only result in all Americans possessing health insurance but also would address the problem of uncompensated care that contributes to rising health care costs for everyone. Public sector leadership also is needed. Federal and state lawmakers can help control rising health care costs by simplifying and coordinating disparate and often costly state regulations, reforming medical malpractice laws, investing in health information technology, stopping the spread of state benefits mandates that result in higher premiums, and generally creating a regulatory atmosphere that encourages private sector innovation and encourages individuals to take greater control of their health care.