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Report Reveals Healthcare Spending Leads to Improved Health Outcomes (But to What Extent)

Quick look: People invest in healthcare spending in the hopes of having it pay off in the long run, and fortunately, a July 2022 Health Affairs study supports this strategy. However, between current inflation and lack of equal accessibility, dedicating additional costs to medical services may not be as simple as it seems, which gives brokers a chance to get creative when finding solutions for their clients.

Healthcare spending is rarely an indicator of good news, but a recent Health Affairs report reveals increased spending between 1996 and 2006 resulted in improved health outcomes. During the 10-year-period, healthcare spending increased by $1.4 trillion, though in more expensive cases, the rate of increase was less than overall causes.

To measure spending effectiveness, researchers used a disability-adjusted life-year (DALY). A DALY is “the sum of years of life lost due to premature mortality, as well as years lived with disability among people living with a given cause.” During this date range, total DALYs increased by over 17 million. Though, as a measure of burden, a health system’s goal is to avoid them.

When using $100,000 as the value per DALY averted, healthcare prices increased by 4%, but when the value was increased to $150,000 per DALY averted, prices fell by 13%. However, spending effectiveness also depends on conditions being treated as well as factors such as age-sex structure, population size, and exposure to health risks.

To control these factors, researchers performed a decomposition analysis to calculate the effect of change in DALYs per case. Researchers found the U.S. spent $114,339 per DALY averted between 1996 and 2016, though reported a vast difference across 34 evaluated causes with high spending. For 11 of these causes, the median ratio was below $100,000 per DALY averted and higher than $500,000 for eight of the causes, five of which were nonfatal disorders.

To improve spending effectiveness estimates in the future, there will need to be research on health-adjusted life expectancy, changes in the severity of illness over time, and an exploration of spending effectiveness over different time periods. Though research has shown a rise in healthcare spending delivers improved capabilities of health outcomes within this specific data set, it’s important to manage expectations.

Many are struggling with saving for the future to afford current medical care. The idea of spending more as an investment to protect one’s future health is a logical concept. Yet, when put into the context of limitations, the solution must be flexible enough to adapt to socioeconomic changes. Brokers who team up with a professional employer organization (PEO) partner can personalize solutions for small- and medium-sized businesses (SMBs) to save on costs and provide the desired output.

Looking at healthcare spending from the other side

When companies are faced with higher healthcare costs, it typically reduces their employment numbers and company investments, making them less competitive. Additionally, rising healthcare costs mean less income to spend on other areas of necessity, which could reduce employee access to healthcare and negatively affect their ability to save.

Accessibility doesn’t support demand

Despite the rise in demand for mental health services, access to care remains low. 56% of Americans seek mental health services, though 74% believe they are not available for everyone and 47% consider options limited.

Not all health insurance plans provide mental health coverage, and for many, out-of-pocket expenses remain out of reach. The combination of rising costs with limited insurance coverage makes it difficult for many to gain affordable access to the support and care they need.

Lack of affordability

Additionally, there’s cost pressure on all generations to save for future medical expenses due to current financial struggles. Nearly half of millennials have delayed medical care because of costs. This generation represents individuals who have experienced setbacks caused by both the Great Recession in 2008 and the more recent COVID-19 pandemic.

However, retirees face higher healthcare spending concerns as well. Medical expenses in retirement have increased 5% year-over-year totaling an average of $315,000 for a couple over 65. Even if people spend more now to preserve their future health, they may have to continuously keep up with inflation to afford medical treatment.

Planning for the future with a PEO solution

Despite the optimism of recent research, there’s no catch-all solution applicable to all SMBs equally since data has to consider context to be effective. An increase in healthcare spending doesn’t automatically improve health outcomes, but it can. For many, the challenge feels like an endless loop of preparing for the future and preserving physical, mental, and financial health in the present moment. Therefore, SMB leaders are constantly leaning on their broker partnerships for guidance to evaluate strategies and opportunities which will make it easier on themselves and their employees.

In addition to maximizing healthcare plan options, brokers can extend their service value by working with a PEO partner like ExtensisHR. ExtensisHR is led by a team of HR professionals who are focused on delivering cost-effective solutions to support a company’s unique needs. They can help mitigate the rise in healthcare spending by tailoring flexible services and empowering businesses as they grow.

These comprehensive services include HR, payroll, recruiting, and risk management and compliance via a mobile-first platform allowing SMBs to handle HR tasks anywhere, at any time. A PEO solution also offers support for benefits education and implementation, plus a proactive approach to trends and an ability to adapt to industry changes.

SMBs seek creative solutions to help keep them competitive in a rapidly evolving market. A PEO solution amplifies broker support to solidify client relationships and business success. In a time when rising healthcare spending is the trend, focusing on delivering value is how they can benefit. Contact our experts today to help empower your clients to grow.

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