Health Costs: Steeper Still Outlines Research Proposal

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They must understand the capital outlays required for health care and make plans to fund these outlays. Firms that budget for health care effectively are the ones that are spending on prevention and increasing co-pays, to ensure that outlays are reduced and inflows are increased.

Analysis: The rising cost of health care is a major concern for firms. They need to remain competitive, but increasing amounts of their budget are tied up in health care costs. The estimate of $29,000 per employee just on health care costs ten years from now has a profound impact on the budgeting process. Firms have several ways to address this issue. In the article it was discussed that firms seek to lower the cost of health care by reducing the need for it. Over the long run, a logical conclusion is that firms will make investments in technology or techniques that allow them to employ fewer people. Budget decisions and investments today will lead firms down that path, so that when the $29,000 day comes they have fewer employees to cover.

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Financing of health care plans is one of the most crucial issues facing American companies. Pending the results of health care reform, firms must find creative ways to finance their health plans. At this point, they are absorbing much of the cost, and passing the rest onto their employees. The time will come, however, when they can no longer pass costs along and will need to have sufficient free cash flow to pay for health care premiums. Companies exist to make profits for their shareholders, not to send all of their money to insurance companies. The budget process will be concerned in the short-term with finding ways to contain costs, but in the long-term the role of health care coverage in the firm's budget will be addressed directly, and firms may need to cut….....

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