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Combating Rising Costs with Wellness

By Sherri Kimmel


Economics Department Chair Ellen Magenheim is presenting her concerns about the health-care cost containment issue on Oct. 27, during Garnet Homecoming and Family Weekend. Photo by Laurence Kesterson

The Affordable Care Act is expected to extend health coverage to more than 30 million uninsured Americans by 2014 while actually reducing the deficit, according to the Congressional Budget Office, but its ability to curb the ever-rising cost of health care is still insufficient, according to many experts.

“Cost containment is a big issue,” says Ellen Magenheim, professor of economics. “It wasn’t the primary focus of the act, and it continues to be a real challenge to figure out how to contain costs. Many people believe the key is preventive care, but whatever savings are generated through preventive care will not be enough to solve the problem of increasing costs.”

Changing people’s expectation also is a challenge, she says. “People are resistant to limits on the quantity of care, and the tendency is to think that more is always better.”

But consuming more health care isn’t always cost effective, according to Assistant Professor of Economics Erin Todd Bronchetti. “People may want to use so much care that the health benefits of additional care are not outweighing the costs. It’s called flat-of-the-curve medicine.”

The National Bureau of Economics Research provides an example drawn from the treatment of heart attacks, “where patients in the U.S. are 10 times more likely to receive coronary bypass surgery or balloon angioplasty than patients in Canada but have no better short-term survival rates.”

In an effort to reduce costs and improve health, the ACA does feature many provisions designed to encourage wellness, fitness, and prevention. So far, under the law, 54 million people have received free services that previously would have cost them at least a co-payment, according to the Department of Health and Human Services.

At Swarthmore, Pamela Prescod-Caesar, vice president of human resources, notes, “The ACA’s preventative care benefits have already benefited employees.” Among the free services now available are screening for colorectal cancer and depression, immunizations, nutritional counseling, screenings for gestational diabetes and cervical cancer, and vision and lead screening for children.

However, she’s still waiting for the cost-curbing effects to kick in. In fact, some of the early provisions, such as extending coverage for young people up to age 26 on their parents’ plans, have increased costs.

In August, employees who subscribe to the College’s health plan received a one-time rebate, due to the ADA mandate that requires insurance companies to return premiums if the companies spend more than 15 percent of their premium income on administrative expenses. At most, some subscribers to the College’s Keystone health plans received one-time rebates of up to $50.

“There’s a lot coming down the pike as we prepare for compliance and also try to negotiate insurance costs to keep premiums stable,” says Prescod-Caesar. Among the challenges for her staff in the near future is the added burden to ensure that employees who opt out of the College health plan are signed up for coverage elsewhere.

While the College can’t control insurance premium rates, she says it can take steps to control costs by promoting healthy behaviors. According to researchers at Harvard University, “medical costs fall by about $3.27 for every dollar spent on wellness programs, and absenteeism costs fall by about $2.73 for every dollar spent.”

“We’re trying to embrace [wellness programming] to keep our employees healthy, subsequently controlling our costs,” Prescod-Caesar explains.

From the human-resources professional’s point of view, “It’s not about the mandates but about what each employer is doing to promote healthy behaviors and help employees make better choices. If there’s one place that can do this, it’s colleges and universities, because we have more educated staff here. We just need to give them the tools so they can see the benefits on down the line.”

Bottom line, she says, “The ACA is helping us think more creatively. Here are the rules—now you need to figure out how to make it work for your people.”

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