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Containing the Health Care Cost Spiral.

A major issue facing employers today is the rising cost of health care benefits. Since 1984, the Bureau of Labor Statistics Consumer Price Index for medical care has increased, on average, 7.1 percent a year. This increase is triggering employers to carefully examine their health care benefits, In Containing the Health Care Cost Spiral, Mary F. Callan and David C. Yeager provide timely analysis of this issue and examine practical steps for employers to follow to control health care costs.

The first two chapters examine the nature of current problems. The authors state that cost analysis is essential to pinpointing obstacles in employerprovided medical benefits. They stress that the inadequacy of cost control mechanisms in many insurance packages has led to higher insurance premiums, while lowering the level of services.

There are many factors behind the rising cost of providing medical benefits. The source of many premium increases emanates from medical technology and the industry's structure. For example, advancements in medical technology are allowing expensive procedures to bloat health care costs: bundling of medical procedures and complicated billing structures add additional pressure to the health care system. In addition, the increased demand by employees for coverage of optional medical procedures, such as cosmetic surgery, raises insurance costs. The authors contend that there is a lack of regard for health care cost containment, and to rectify this fact, employers must foster an awareness of health care costs.

Callan and Yeager suggest three phases to control health care costs: examination, evaluation, and implementation. This philosophy is tied to their endorsement of the Kaizen management theory, which asserts "that quality is a direct result of continual involvement in the process of redesigning and refining production and operations."

Examination requires creating an insurance committee to investigate insurance alternatives and company needs, according to the authors. Containing health care costs relies heavily on proper evaluation of current medical benefits expenditures and employee needs.

The authors consider the use of an insurance consultant vital in reorganizing health benefits. They suggest that employers evaluate the many types of consultants according to the services they provide and their fee structure. While consultants I provide expert insight, companies are cautioned to remain involved in the examination process to ensure that their objectives are met.

During the evaluation phase, the types of medical insurance coverage offered by employers are analyzed. The most common types are critiqued in this book. For example, fully insured programs-such as indemnity programs-- provide full service medical coverage with set deductibles. Alternatives the authors suggest to indemnity plans are health maintenance organizations (HMO), exclusive provider organizations (EPO), and preferred provider organizations (PPO), which typically impose lower outof-pocket expenses on employees. Another option is self-insured programs that require employers to finance and administer medical coverage themselves (or find a third party administrator). Selfinsured plans can significantly reduce health care costs if other cost containment strategies are also implemented.

The implementation of a new medical benefits package is discussed in the last chapters of the book. At the implementation stage, interaction between the insurance committee and the consultant is essential in selecting an insurance cartier. The authors provide insightful strategies for evaluating a new plan and selecting an insurance carrier. In regard to the benefits package, good communication between employees and management would allow employees to become - better "medical consumers," as would use of an education program and a benefits manager.

Callan and Yeager maintain that use of the Kaizen management theory and the principals stated in their book will assist in reducing health care costs. It is essential that all levels in an organization be involved. Continuous review of a firm's medical benefits, efficient employer-employee communication, and an educational program to train employees to be efficient health care consumers are essential in promoting cost containment policies. This book provides many suggestions for any organization that needs to restrain its spiraling medical expenses in an age of rising health care costs.

---Glenn M. Grossman

Division of Occupational Pay

and Employee Benefit Levels

Bureau of Labor Statistics
COPYRIGHT 1992 U.S. Bureau of Labor Statistics
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Author:Grossman, Glenn M.
Publication:Monthly Labor Review
Article Type:Book Review
Date:Jul 1, 1992
Words:669
Previous Article:Organizing and the Law, 4th ed.
Next Article:Evaluating the 1990 projections of occupational employment.
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