Health Care Reform Myths Vs. Realities

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Myth: Higher health care costs are the result of continually rising insurance premiums, inflating the price of health care.

Just the opposite is true. Because insurance is a means of financing health care, premiums have to track the underlying cost of health care services. Those underlying costs have been rising and insurance premiums have simply kept pace.

Health care costs drive insurance premiums, not the other way around. Over the last decade, health care costs have risen about 7.7 percent a year on average, and insurance premiums have also risen at 7.7 percent.* The overall rise in health care costs is a result of higher rates of chronic conditions such as obesity, diabetes and heart disease, more expensive technologies and procedures becoming available, and "cost shifting by the government" – that is, doctors and hospitals charge privately insured patients more to offset the losses that come from Medicare/Medicaid underpayments that do not cover costs. In fact, about 11 percent of the average family commercial Preferred Provider Organization (PPO) premium stems from government cost shifting.** Other drivers of cost include waste in the system and how providers are reimbursed for delivering health care services; they are paid by procedure, which many believe leads to unnecessary care.