Employer (and Employee) Medical Costs are About to Soar
Years of mismanagement, a dysfunctional economic system, general inflation, and the Big Beautiful Bill are colliding. Costs are about to soar!
Employer medical costs are seeing the biggest increases in a decade, and they are going to rocket even higher. Many employers don’t know it yet, because they won’t see their renewals until September or October.
For the last several years, hospitals feasted on $135 billion of stimulus through a vast array of COVID related programs. While seemingly beneficial, the phenomenon is similar to the results of easy-money student loans. While the loans seem great for students, the flow of money to universities over the past 20 years has created the greatest inflation in tuition in history. Today’s and tomorrow’s students are paying the price.
Education and healthcare are the two biggest markets where we seem to think we can ignore economics. We can’t. Easy money always leads to inflation, and we fight corrective deflation tooth-and-nail.
As the flow of money abates, lower prices are never in the cards. High costs with fewer customers means passing more on to each customer. But wait…there’s a constraint. The market doesn’t set Medicare and Medicaid prices. The government does. That means costs have to be piled onto the private sector, the only place hospitals and health systems can pass their costs to. Today’s and tomorrow’s employers (and their employees) are paying the price of healthcare inflation, and they’re paying it disproportionately. Defying economics comes at a cost.
Now, with the passage of the Big Beautiful Bill, hospitals are set to see their revenues decline. Medicaid will be impacted in particular, but Medicare prices will be constrained, too. Who is going to pay the price? The answer is American companies. Hospitals can’t easily pass on higher costs to government payers, but they can raise their prices for the private sector without limits. Brace yourselves…
Employers are facing a triple whammy.
The end of COVID stimulus
General inflation
The Big Beautiful Bill
Now, more than ever, employers need to embrace serious strategies to reign in costs.
For most employers, controlling medical costs is not their domain of expertise. So, they rely on employee benefit brokers and consultants to tell them how to do it. Unfortunately, that path is fraught with the peril of conflicted interests.
Of course there are some great brokers and benefit consultants out there, too. They’re just scarce. They are the ones that want to earn a good living while providing their clients with full transparency, and good, honest strategies to actually drive down costs. It is going to be a particularly challenging renewal cycle this year, so buckle up!
If you’d like some independent advice on your health plan design or broker/benefit-consultant selection, feel free to contact me confidentially at david.silverstein@brokenhealthcare.org. All inquiries that come via this address are kept in strict confidence.