New Report from California Employers Says Higher Health Care Costs Are the Result of…Higher Prices

The Bay Area Council, which represents more than 275 of the largest employers in the San Francisco Bay Area, today released a new report entitled “Roadmap to a High-Value Health System”.  In the report, the Council lays out a four concrete steps policymakers can take to improve quality while lowering costs.  The steps include:

1. Financially Rewarding High-Value Care

2. Building a Successful Health Benefit Exchange

3. Focusing on Health Outcomes

4. Effectively Engaging Consumers

The report also examines the reasons behind higher health care costs.  Here are some critical lines:

  • If we are interested in holding healthcare cost growth down, we must understand the factors that drive costs up.
  • High healthcare costs are the result of the high price of healthcare.
  • A McKinsey Global Institute report4 is one among many analyses showing that in the United States the answer is not primarily higher administrative costs. These costs account for only 7% of all healthcare spending in our country and explain only 14% of our excess spending as compared to the rest of the world.
  • Costs are higher in the United States because we pay more for healthcare.  We pay more for physician visits, hospitals stays, pharmaceuticals, medical devices and most other healthcare services.
  • Controlling healthcare costs, therefore, will primarily involve paying less over time to some providers for some services and more over time to providers who deliver high-value care consistently.

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