Escalator clauses examined as an underlying factor: Risk Managers

Filed Under: Costs

Summary: “Are escalator clauses, common to most Managed Care Contracts, the driving force behind trend factors?” Bill Rusteberg writes over at RiskManagers.com, his blog. Bill’s a broker in Texas, and a man with an encyclopedic knowledge of health care. “An actuary’s primer I stumbled upon while reading incredibly boring stuff (my answer to sleeping pills) may provide a clue: ‘Medical cost trends include components for many drivers.  Net unit price increases from providers drives half of the effect in general.  So a 5% increase in a schedule will drive a 10% overall cost increase.  The rest of the components include: increased utilization, coding creep, deductible leveraging, etc…’ This is wildly interesting! Escalator clauses average 5% and more (‘more’ being more common), compounded year after frigging year! (Excuse me but I do get emotional sometimes and it’s not a women thing!) That equals 10% compounded year after year after year.” Bill Rusteberg, “Managed Care Contracts & Trend Factors,” RiskManagers.com.