EBRI Issue Brief

Issues in Health Care Cost Management

Sep 1, 1991 17  pages


  • The United States now spends 12.4 percent of its Gross National Product on health care. For employers, health benefits have grown from 2.4 percent of total compensation and 23 percent of total benefits in 1970 to 5.8 percent of total compensation and 36 percent of benefits in 1989.
  • Although the effects of changes in tax policy on national health care expenditures are uncertain, it is clear that removing the tax preference for employer-sponsored health insurance would reduce the incidence of this coverage and the breadth of services it includes.
  • EBRI's study of employers in the Houston area found that plans with utilization review (UR) had significantly lower inpatient charges but higher outpatient charges. In a study of employers in the Losngeles area, EBRI found that UR was associated with lower outpatient charges and total plan charges. These savings were achieved by decreasing total charges per admission.
  • Systems have been developed to analyze hospitals' and physicians' medical records and measure outcomes using objective criteria that adjust for severity of illness. Health plans that use this information to selectively contract with providers are beginning for the first time to directly reward providers for low-cost, high quality health care.
  • Cost containment efforts have not been uniformly adopted in local markets. One survey found that while 79 percent of employers in the Pacific region and 77 percent of those in the Mid-Atlantic region offered employees a health maintenance organization option, only 44 percent of employers in the South Central region and 51 percent of those in the Mountain region did so.