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Hawaii Association of Health Plans

The Hawaii Association of Health Plans

HAHP provides valuable information to Hawaii health care consumers, legislators, and the media, including contact information for HAHP's member organizations and information on current health care issues.

Rising Cost Of Healthcare

Why are Health Care Costs Rising?

0Health care costs nationwide over the last few years have skyrocketed at alarming double-digit rates, and were projected to increase more than 15 percent in 2003, according to Hewitt Associates. While raising health plan rates is the last thing health plan providers want to do, industry observers have noted that plans have been forced to adjust rates to keep pace with increases to continue covering the escalating cost of providing medical benefits to members.

If the issue of rising health care costs is not addressed, the situation will worsen.

It will take a communitywide effort. While some factors cannot be controlled, such as inflation and our aging population, there are small steps that we all can take to make a big difference in helping to keep costs down.

What's Causing the Rising Cost of Health Care?
In today's advanced technological age, we all want the best medical care, latest medications and life-saving techniques. But do we realize how much they cost? Consider these average medical costs in Hawaii:

• MRI: $2,000

• One-day stay in the hospital: $3,500

• Head trauma treatment: Almost $50,000

• Heart bypass surgery: $124,500

Paying directly for the total cost of these services would be a financial hardship for most individuals. As a member of a health plan, we rely on our physician and hospital to provide this care -- and we rely on our health plan to pay for it. Each health plan uses dues dollars from Hawaii employers and their employees, as well as individuals who purchase their insurance directly, to pay for these services.

We each need to understand that our personal decisions affect overall health care spending. Educating consumers will help us all make better informed choices to help control health care spending.

Major Cost Drivers

Prescription Drugs
Rising prescription drug costs pose a major challenge to our health care system, and new prescription drugs will increase costs even more. Prescription drug spending is the fastest-growing source of health care inflation nationwide, rising 17 percent a year. Drug costs in the United States are expected to reach $212 billion by next year-double the amount spent in 1999.

The main factors driving pharmacy costs are increased utilization, higher drug costs, and marketing. Consumers continue to use more drugs each year. This is partly due to our aging population and the availability of new treatments for diseases. New drugs account for most of the growth in prescription drug spending.

Promotional spending by pharmaceutical companies has grown dramatically. Pharmaceutical companies, on average, spend twice as much on marketing and administration as on research and development. Many of the new "designer" drugs are advertised directly to consumers in expensive TV and print ads, driving up advertising costs and consumer demand. For example, a leading manufacturer of an anti-arthritic pain relief medication spent $160 million on advertising in one year. That's more than the ad budgets for Pepsi and Nike. No wonder patients are more likely to choose expensive brand-name drugs than their less costly, but just as safe and effective generic equivalents.

Rising Expectations
Consumers these days have rising expectations when it comes to health care. We are more informed about our health due to mass marketing, the Internet and other media, and we expect fast results. We are willing to try new things and are not afraid to ask our doctors for new medications and procedures. With higher expectation comes higher demand for new and costly drugs, medical technology and services.

Medical Technology
Technology is a major driver of health care costs. While new advances can dramatically improve health, they also contribute to rapidly rising costs. Technology encompasses a broad range of innovations, from new diagnostic tests such as magnetic resonance imaging (MRI) and single photon-computed tomography (SPECT), to new drugs and new surgical procedures or a combination, such as the recently released drug-eluting stent, used to open up clogged blood vessels.

The costs for injectable drugs, radiology and laboratory services are all highly affected by advances in technology. Between 1999 and 2002, costs in these categories have increased dramatically, primarily driven by increased use of services.

1999 - 2002 Cost Increases:

Injectable Drugs 96.69 %

Radiology 31.95 %

Laboratory 23.20 %

Even though this is a small percentage of the overall expenditure of health care dollars, these expenditures illustrate cost increases due to new technology, and are expected to keep rising in the future.

Unhealthy Lifestyles
We're used to the convenience of "super-sized" fast foods and modern amenities such as computers, video games and television that contribute to a sedentary lifestyle. Lack of exercise and an improper diet can lead to serious and costly long-term health problems. It costs Americans billions of dollars in medical bills every year to treat cancer, heart disease, diabetes and other chronic diseases associated with unhealthy living.

0Since 1990, the proportion of people who are overweight or obese has increased both in the United States and in Hawaii. Currently, more than 50 percent of Hawaii's population is overweight or obese, up from 37 percent in 1990. And it's not just adults. Childhood obesity is also on the rise. In Hawaii, obesity in young people is twice the national average.

Being overweight and obese substantially raises the risk of high blood pressure, type 2 diabetes, heart disease, and breast, colon and prostate cancers, and is a major contributor to preventable causes of death. In addition to increased health risks, the total costs (medical costs and lost productivity) for obesity alone were estimated at $99 billion nationwide in 1995.

Clearly, public education about the long-term health consequences and risks associated with being overweight and how to achieve and maintain a healthy weight is necessary. While many people attempt to lose weight, studies show that the majority regain their lost weight within five years. To maintain weight loss, healthy dietary habits must be coupled with increased physical activity and permanent lifestyle change. (Health Trends in Hawaii)

Tobacco use is a serious public health problem in Hawaii. It causes more preventable disease, death and disability than any other health issue in the state. Currently, tobacco use in Hawaii accounts for 16 percent of deaths and costs the state more than $328 million every year. Efforts to address tobacco prevention and control in Hawaii utilize a comprehensive approach, involving preventing people from starting tobacco use, helping people quit using tobacco, reducing exposure to secondhand smoke, and identifying and eliminating disparities in tobacco use among population groups.


Alcohol and Substance Abuse
The rate of chronic drinking in Hawaii has consistently been above the national rate throughout the 1990s. Long-term heavy drinking can lead to heart disease, cancer, alcohol-related liver disease, and pancreatitis (inflammation of the pancreas).

Hawaii has the highest usage of crystal methamphetamine (or "ice") in the country, which results in higher health care costs for everyone, a social burden to society and a financial drain to the state's economy.

Aging Population
The older we get, the more health care products and services we need. And the increasing use of medical services directly translates into higher costs. Seniors have more chronic health problems than any other age group. They use health care services more often, are the heaviest users of emergency rooms and require more medication. These trends will continue as baby boomers continue to age.

Government Regulation and Lack of Fair Share Payments
Government mandates add to the cost of providing health care benefits, and these costs are passed on to businesses and consumers in the form of higher health plan dues. Since 1987, the Hawaii state Legislature has passed a total of 25 different health care mandates and regulations. The federal government has also passed several costly mandates and regulations such as the Health Insurance Portability and Accountability Act (HIPAA) and the Gramm-Leach-Bliley Act (GLBA). In addition, cost shifting has occurred as government programs such as Medicaid lower their reimbursement levels, and health care providers shift costs to private sector patients and health plans.

Misuse of Health Care
Making unwise medical choices not only affects an individual's health, but it also drives up health care expenses. Many people do not realize that it costs more to get treatment in an emergency room than in a doctor's office. If someone is experiencing a life-threatening illness or accident, they shouldn't hesitate to go to the emergency room. But for the common cold, the flu or other minor illnesses, they should consider seeing their personal physician or seeking over-the-counter medication. It costs an average of $638 to treat a cold in an ER in Hawaii, compared to $61 for the same treatment in a doctor's office.

Another example of medical misuse involves antibiotics. Some patients pressure doctors to prescribe antibiotics when they have a cold or the flu. But these viruses cannot be treated with antibiotics. Instead, simple over-the-counter medications help alleviate cold or flu symptoms. Improper use of antibiotics can lead to drug-resistant bacteria that require more costly medical attention in the long run.

Increasing Uninsured
Lack of health coverage is an issue that has been pushed to the forefront by concerned community leaders. In Hawaii, the number of uninsured totals nearly 120,000, which is about 10 percent of the state's population. An estimated 50 percent of those who are uninsured, or more than 58,400 people, are employed, according to the University of Hawaii Social Science Research Institute, which performed an extensive analysis of the 1996 to 2002 Current Population Survey conducted by the U.S. Census Bureau. Of the working uninsured in Hawaii, 80 percent work less than 20 hours per week, and 20 percent are sole proprietors or self-employed.

Uninsured in the United States

  • Only 8 percent of the uninsured in Hawaii have never had health insurance, and the remaining were previously insured via an employer or union (50 percent) or through someone else's employer or union (14 percent).
  • Nine percent of the uninsured in Hawaii had access to health insurance through a family member's plan; however, the majority of them believe that coverage is unaffordable.
  • Only 37 percent of the uninsured in Hawaii have looked for other ways to obtain health insurance.

    From The Hawaii Uninsured Project Web site

  • In 2002, Hawaii's hospitals lost an estimated $95 million due to uncompensated care for patients without insurance. Hospitals and community clinics shoulder the burden of providing care with little or no reimbursement, and compensate for these losses by increasing costs for patients who have insurance. This results in higher health plan dues for employers and members.

    Fraud and Abuse
    According to different national studies, 3 percent to 14 percent of all health care payments are based on fraudulent claims. The Blue Cross and Blue Shield Association estimates that fraud costs Americans $1 out of every $7 spent on health care. We all pay for fraud through increased health care costs.

    Medical Errors
    Postoperative infections, surgical wounds accidentally opening, and other often-preventable complications lead to more than 32,000 hospital deaths in the United States each year and cost more than $9 billion in extra health care costs. The Agency for Healthcare Research also found that such complications contribute to 2.4 million extra days in the hospital each year.

    What Can we All Do to Keep Health Care Costs Affordable?

    Rising health care costs is a problem that affects us all; health plans alone cannot solve this escalating problem. We each need to take personal responsibility for our own health and well-being. Together, we can help create a healthier Hawaii. Become a smart health care consumer by learning what the best choices are to keep you healthy and to keep costs down.

    Practice Prevention
    Prevention, detection and early treatment of disease are the most effective ways to avoid serious and costly long-term illnesses. Check with your doctor for recommended screenings. Taking the time for these simple tests can help avoid more frequent and expensive trips to the doctor in the long run:


  • Blood pressure and cholesterol checks for heart disease.
  • Glucose test for diabetes.
  • Fecal occult or stool blood test for colorectal cancer.
  • For women, regular Pap smears for cervical cancer, mammograms for breast cancer, and examinations for chlamydia and osteoporosis.
  • Self-tests for breast and testicular cancers.
  • For infants and children, TB tests.

    In addition, all children ages 12 and under should receive appropriate immunizations, starting at birth. Everyone ages 50 and older should receive an annual influenza vaccine, and those ages 65 and older should receive a pneumococcal vaccine at least once in their lifetime. People who have chronic conditions such as diabetes, heart disease, kidney disease, alcoholism, AIDS or HIV should also receive an annual influenza vaccination and a pneumococcal vaccination before age 65.

    Preventable Injuries
    Three major causes of preventable injuries are automobile crashes, bicycle accidents and other sports activities. These and other preventable injuries cost Americans billions of dollars every year.

    There are simple steps you can take to reduce the risk of these injuries. Make sure you buckle up in the car and that your child is secured in a safety seat. It's also important to wear a helmet while riding a motorcycle, moped or bike.

    Stay Fit
    It's important to take care of yourself by adopting good lifestyle habits. Proper nutrition, exercise, adequate rest and activities to relieve stress can help you stay healthy and avoid costly medical care. You don't need to be a marathon runner or bodybuilder to stay fit. A regular walk or bike ride in the park greatly improves the cardiovascular system and helps lower cholesterol. Exercising with light weights can tone muscles and help you lose fat.


    In 1999, one in four of Hawaii residents had no leisure-time physical activity. This is equivalent to the U.S. rate and marks a decrease from the 1990 rate. However, this rate has risen from 1994 and remains above the Year 2010 objective of 20 percent. (Health Trends in Hawaii)

    Make Wise Medical Choices
    Medications can help us live longer, healthier lives. But the continual introduction of new drugs also contributes to the high cost of health care. Drug prices have risen dramatically due to new "designer" drugs on the market, as well as an increase in over-the-counter supplements and herbs. There are simple steps you can take to help keep drug prices down:

    Choose generic
    When appropriate, ask your doctor or pharmacist about generic equivalents approved by the U.S. Food and Drug Administration (FDA). They are just as safe and effective as brand-name drugs, but cost an average of one-third less.

    Manage your medications
    Alert your doctor or pharmacist about the various medications, supplements and over-the-counter medicines you are taking. This can help avoid additional medical treatment from adverse effects caused by taking multiple medications.

    Use Antibiotics Wisely
    Don't pressure your doctor to prescribe antibiotics to treat a virus. Inappropriate antibiotic use can lead to more health problems. Cold symptoms can usually be treated with an appropriate cough syrup, and fevers can be controlled with aspirin or Tylenol. Get plenty of rest and fluids.

    Is it an Emergency?
    Emergency rooms should be used for real medical emergencies only. They should not be used as a convenient alternative to making a doctor's appointment. Yet an increasing number of people go to the ER for non-urgent problems, such as the common cold or flu. This drives up heath care expenses since it costs more for treatment at the ER than at the doctor's office. Overcrowded emergency rooms also delay care for those in need of true emergency treatment. If you're not sure if it's an emergency, call your doctor's office for advice.

    Emergency rooms should be used for life-threatening conditions only, such as:

  • Severe bleeding
  • Difficulty breathing
  • Loss of consciousness
  • Chest pains
  • Broken bones
  • Deep wounds that may need stitches
  • Severe and persistent abdominal pain
  • Sudden severe headache (if there's no history of migraine)
  • Signs of stroke (sudden numbness, weakness, disorientation or difficulty speaking)

    Know Your Benefits
    You can help prevent health care fraud by keeping track of the medical services or supplies you receive. Check all statements that are mailed to you from health care providers and your health plan that. Make sure you're not being billed for services that you did not receive. Contact your provider if you have questions about medical charges.

    Health Care Coverage Basics
    Traditionally, health care coverage has been the means for guarding against unexpected economic loss due to accidental or other catastrophic medical conditions. Today's health plans are still based on that "risk of loss" philosophy, but many have evolved to include preventive and wellness components. In addition, health coverage has expanded from being a means to compensate for the cost of health care services to a means of managing the quality as well as the cost of those services. Health plans group people together to combine those with a probability of incurring high medical expenses with those who will probably incur little or no medical expenses. This allows health plans to keep premiums reasonable for everyone within this group. On an average, 80 percent of all claims are from only 20 percent of a plan's members.