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AAHP Unveils New PricewaterhouseCoopers Report Detailing Reasons for Rising Health Care Costs
Over 20 Percent of New Spending Driven By Mandates, Regulation,
Litigation Ignagni: ‘Pendulum Has Swung Too Far’
(Washington, DC) – The American Association of Health Plans (AAHP) today released a report conducted by PricewaterhouseCoopers that identifies the specific factors that are driving costs higher in the health care system. The report examines health care spending during 2001, finding that the average increase in health insurance premiums was 13.7 percent. PricewaterhouseCoopers attributes much of the rise in health care spending to the following factors:
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Mandates and government regulation 15 percent $10 billion
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Impact of litigation 7 percent $5 billion
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Fraud and abuse and other cost drivers 5 percent $3 billion
“The rising cost of health care is the most important challenge we will face in the health care system,” said AAHP President and CEO Karen Ignagni. “While there are some areas of new spending that add value to consumers, there is an emerging consensus that mandates, litigation and fraud are driving costs too high. We hope that this report will provide a roadmap for policymakers at all levels of government to develop solutions to bring health care costs under control.
“The effects of rising costs are felt by everyone: By 40 million Americans who cannot afford health insurance, by many millions more who are struggling to hold onto the coverage they already have, and by employers and government purchasers who are faced with difficult choices over whether to reduce benefits or pass on the higher costs.” Ignagni noted that the added spending in 2001 resulting from litigation, mandates and fraud and abuse – $18 billion – could have insured 6.8 million more Americans.
“Runaway lawsuits, a cascade of duplicative and conflicting regulations, and the unintended consequences of 1500 state and federal mandates make up 27 percent of the increase in health care costs – and we can all agree that this money would be better spent on insuring more people, ” said Ignagni. “This study shows that the pendulum has swung too far.”
The PricewaterhouseCoopers study also concludes that health plans continue to play an important role in keeping health care more affordable for consumers. Over the next five years, the report estimates that managed care will lower the cost of private health insurance by $182 billion, or about $1,600 per policyholder.
