There are seemingly endless factors creating significant concerns for employers when it comes to healthcare, with each challenge more complex than the last. While I’m grateful for the job security as a professional who helps businesses navigate this ever-changing employee benefits landscape, it’s just as important for business leaders to understand how Medicare and pharmaceutical changes can impact your organization.
Medicare Tipping the Scale
A 2022 American Hospital Association study detailed, “94 percent of hospitals have 50 percent of their inpatient days paid by Medicare and Medicaid and more than three quarters of hospitals have 67 percent Medicare and Medicaid inpatient days.”
The same study noted that in 2020, the Medicare Payment Advisory Commission found that hospitals experienced a -8.5 percent margin on Medicare services. Yes, that is a negative sign in front of the margin received by hospitals for Medicare reimbursement!
The ongoing shift to private payment through employers will continue and has averaged 199 percent for all hospital services, according to a Kaiser Family Foundation analysis, which means employer plans help fill the fiscal hole created by Medicare, Medicaid, and uninsured care in the healthcare system.
Pharmaceutical Spending Continues to Grow
Median pharmacy expense in 2022 represented 24 percent of every dollar spent in healthcare, and there are no signs of the double-digit growth in this area slowing.
In fact, 80 percent of the drugs anticipated to receive FDA approval in 2023 are specialty medications and most are created to treat relatively rare diseases with average expected annual costs in the several hundred-thousand-dollar range.
For instance, weight loss Semaglutide “wonder drugs” — a.k.a. Ozempic and the like — have stormed onto the scene leaving clinicians, underwriters, and employers with an economic conundrum where a $10,000 plus annual expense and a wide field of eligible participants is nearly impossible to fiscally justify.
Prepare to Explore Non-Traditional Approaches to Healthcare
So, what are employers to do when the deck appears to be stacked against them? Is it time to accept the inevitable and hope the job security lasts? No. We all aspire to better outcomes than that.
Now, more than ever, employers are considering pathways that may have been off the table of consideration in the past. There is a collective sense of unsustainability with the circumstances we mutually face.
What we should expect is that traditional bundled approaches to healthcare delivery will be pressured by a variety of solutions. Narrow networks, pharmacy carve-out, specialty drug alternate procurement, direct contracting, limited formularies, new technology and more, plus ongoing cost shifting are changing how we operate. It is a lot to navigate, but the time to start exploring is now.
The good news is you don’t have to figure this out alone. Our Holmes Murphy Employee Benefits team is ready to help find a solution for your employees and business. Reach out to us to start a conversation today!
