Caution: massive collection of health care benefit crisis articles ahead
Talk about what I’ve had backlogged: nearly every day I see something interesting about health care costs and save it in Blogger “draft” status. So a lot has built up.
With a holiday weekend available to play catch-up, and another summary judgment motion knocked out early (!) for filing Friday, I tackled a large collection of health care benefit articles.
The health insurance issue (along with all related sub-issues) is of course a major socio-political-economic issue, and one that would be getting much more attention but for our national security/military preoccupations. I apologize for writing what must be my longest post ever, but I hope that combining all this stuff in one place will result in a meaningful blog-collage-essay that can be appreciated by some of you who have serious interest in the subject. Hopefully, the whole is more than the sum of its parts.
I sense we are rapidly approaching a crossroads between heavy-handed, socialistic government intervention and creative, entrepreneurial, market-oriented “fixes” (can you tell which way I lean?) Of course, there’s probably a middle road that may be the best way (I’m a classic one-the-one-hand, on-the-other-hand, indecisive, compromising, middle-of-the-road swing voter).
Enough of what I think, let’s start with some of the more general stories, then follow up with some more specific reform ideas.
First, some (slightly) good news from last week’s New York Times: “Increases in Health Care Premiums Are Slowing,” by Milt Freudenheim
Here’s a picture that’s worth 1000 words:
That ought to make it crystal clear why health insurance is the No. 1 issue in labor negotiations, and why every American not concerned about this issue darn well oughta be.
The Times says:
Health insurance premiums are expected to rise up to 10 percent this year, well below the annual increases of 14 to 18 percent in the last few years . . .
Several factors are putting downward pressure on rate increases. A big force is last year’s decline in the costs of insured care provided by hospitals and physicians, as fewer people were hospitalized and consumers shied away from paying more for expensive drugs. That means many insurers socked away sizable profits that can enable them to restrain their premium increases this year. . . .
Are they saying costs actually went down, but all employers and consumers get to see going down is the rate of increase in premiums. If costs are down, why isn’t the rate of premium increase negative?
[I]nsurers would be less likely to curb their rate increases if it were not for a second, related factor: growing competitive pressure. In states where Blue Cross and Blue Shield companies are still nonprofit organizations . . . regulators and legislators are pointing to the insurers’ big surpluses and pushing the companies to limit the amount they raise premiums, or in some cases, even provide rebates. Lower rate increases by Blue Cross and Blue Shield plans . . . put pressure on commercial insurers to rein in their increases. . . .
Adding to the competition among insurers is the dwindling number of jobs in manufacturing and other fields that traditionally offered generous employer health plans. New jobs tend to be in small businesses and service industries likely to provide skimpier benefits, if any at all. That means the insurers are more likely to be fighting over customers - and competing on the basis of price. . . .
Gee, you think any of them would get creative enough to decide to pool small businesses together as a large group (instead of separately underwriting and rating each as a small group) and give them rates competitive with what they do for Fortune 500 corporations? Or does state law intended to protect consumers prevent this somehow?
The largest employers, which typically use their own money in self-insured health plans for their employees, are keeping cost increases per worker in the 6 percent to 8 percent range . . . .
An analysis of 34 nonprofit Blue Cross and Blue Shield plans by . . . helps explain the forces at work. The plans’ profit margins nearly doubled last year, to 4.8 percent, up from 2.5 percent in 2002.The combined surpluses of those plans increased 67 percent. . . . Read more
So we see a couple of interesting things here.
First, both competition and government efforts (enforcing nonprofit status) are having a positive effect.
Second, rate increases are somewhat cyclical. The large carriers get concerned about increasing payouts and overreact somewhat in their rate increases, resulting in higher profits and growing reserves, resulting in the ability to then reduce increases somewhat.
Third, self-insured employers are significantly better at controlling costs. Why is this? Will partially self-insured employees utilizing health savings accounts (HSA’s) achieve similar results?
Jonathan Weisman writes in The Washington Post: “Sick About Health Care;
Employers and Politicians Struggle to Find Solution”
[I]n a presidential election year, when rising health care costs are climbing up the agenda, . . . the business community remains spooked by the prospect of a “Washington solution” to its spiraling costs and has studiously shied away from the political arena.
From the largest corporations to the smallest mom-and-pop shops, business executives identify double-digit increases in health insurance costs as perhaps the biggest threat to their bottom lines and their future. Yet beyond their vocal complaints, businesses have been strikingly absent from the burgeoning political debate and largely unwilling to take sides . . . .
“Employers always stand to lose, everyone stands to lose, when health care becomes politicized,” said James Klein, president of the business-backed American Benefits Council. “Employers have seen health care politics over the years, and good health care policy does not tend to emerge from health care politics.” . . . [yet as an examination of this organization's website indicates, it is not shy about making recommendations to government].
{R]ising costs have taken a toll. From 2001 to 2002, the ranks of the uninsured jumped 2.4 million, to 43.3 million, the largest increase since 1987. The Kaiser foundation attributes that almost exclusively to employers, especially small businesses, dumping their health coverage. . .
Both Kerry and Bush have health care proposals.
Bush would offer lower- and middle-income families a tax credit worth roughly $1,000 to purchase health insurance on their own. Costs would be held down by controlling medical malpractice lawsuits. Small businesses would be allowed to pool together to bargain for better private insurance deals, and tax-favored medical savings accounts would be expanded to defray out-of-pocket expenses, all at a 10-year cost of about $120 billion.
Kerry would offer a considerably larger — and, at $177 billion, more costly — tax credit. Unlike Bush, he would give individuals the option of purchasing insurance from the same federal employees’ health care plan that members of Congress use, an option that he says would bring down premiums significantly. He would also expand children’s eligibility for Medicaid and allow more parents to obtain coverage through the federal children’s health insurance plan.
Under the plan, small businesses could buy into the federal employees health care plan with a tax credit to cover up to half the cost of employee premiums. Because one serious illness can send a small business’s insurance costs skyrocketing, the government would cover up to three-quarters of “catastrophic” medical costs over roughly $50,000 for any business, large or small, that covers its employees and adopts “disease management” to hold down costs for the chronically ill. The disease management provision and a tax incentive for medical technology adoption should hold down health care costs by $250 billion to $300 billion over 10 years, Kerry advisers say.
Kerry’s idea of a national insurance pool to cover catastrophic costs may be a seed for bipartisan reform, said Bruce Josten, chief lobbyist for the generally Republican U.S. Chamber of Commerce. Earlier this month, three conservative economists — including the first chairman of Bush’s Council of Economic Advisers — published a lengthy opinion piece embracing a similar proposal. . . .
“The Kerry plan doesn’t solve the cost problem,” answered Helen Darling, president of the National Business Group on Health, which includes 46 of the 100 largest U.S. companies. “It shifts private sector costs to the government, but in so doing, it creates a blank check”. . . .
Darling said part of the problem is that neither Bush nor Kerry is emphasizing policy options that business groups believe will hold down costs — for them and the taxpayer. For instance, the federal government, as the largest consumer of health care, could mandate that it will no longer purchase services from hospitals, doctors and other providers that do not immediately adopt uniform, efficient technologies, such as online medical records and billing. . . .
Similarly, the government should purchase health care only from providers that track and publish information on health care quality, . . .
The National Institutes of Health could develop a set of reasonably priced medical insurance packages, complete with a list of tests proven to be cost-effective and reasons for hospitalization, that businesses and insurers could adopt nationally.
Labor unions have a different explanation for business’s political skittishness: Employers already have a solution, foisting rising costs on employees. . . . “The reason they are not seeking a legislative solution is that most workers don’t have the protection of a union, so most employers have been successful at shifting the cost,” said Richard Bank, director of the Center for Collective Bargaining at the AFL-CIO. . . .
Indeed, a new trend has developed called “consumer-directed health care,” in which employees are given large deductibles, or even a limited pot of money each year, and encouraged to shop for the best health care deal they can find. . . .
“If costs don’t abate, the likely possibility is that employers will just want to get out of the business.” Read more
OK. Here we go.
Employers got into the health-insurance business because they were able to offer employees a valued benefit. Since the perceived value to an employee of an in-kind health care benefit was more than its cost to the employer, offering the benefit was rational. Employees received less cash take-home pay than they might have otherwise, but preferred the health coverage.
Providing this benefit initially provided a competitive attract-and-retain advantage to the early-adopter employers — until health coverage became so widespread and routine that employees came to consider it “free.”
Now, as the tough labor negotiations and strikes this year suggest, while employees still desire and expect health benefits, the perceived value to the employee lags behind the increased cost to the employer. Hence, employees fail to appreciate the extent to which they must trade-off wage increases for maintenance of health benefits. Most employees have no idea of the cost of their coverage until they face a COBRA election.
So isn’t it only rational to give someone more cash and less benefit if they appreciate the cash more?
There would be nothing whatsoever wrong with employers getting “out of the [health care] business” if adequate alternatives were available and employee wages were adjusted to reflect the employers’ cost savings (this is occurring as employers shift the healthcare costs to employees and keep increasing pay).
But smart employers (or employer associations) that are able to find ways to provide more healthcare for less cost than the alternatives will still have an advantage in offering health care benefits instead of cash (because the perceived value to employees will exceed the cost to the employer).
An important point in this article concerns the need to address two distinct, but related problems: availability of coverage and its cost.
There is a real risk, as pointed out, that policies focused exclusively on increasing coverage of the uninsured will fail to address cost problems. If the coverage extended to the uninsured population does not have appropriate incentives, it may increase individual expenditures, as well as aggregate expenditures.
The government catastrophic loss policy is an interesting notion, but I fail to see why it is superior to private catastrophic loss policies in a competitive insurance market which, as the New York Times article points out, although dominated by a few large carriers, is still at least somewhat responsive to competitive pressures.
Ms. Darling’s ideas strike me as the most interesting and creative roles for government.
A while back, Slate had this: “Capitalists for Hillarycare; Look who’s supporting universal health care now” by Daniel Gross (cheerful photo of Hillary included)
The American health care system, a patchwork of government-provided benefits overlaid on a voluntary system of private-sector coverage, is a case study in economic inefficiency. Companies that provide health care to employees put themselves at a disadvantage to competitors — domestic and foreign — that don’t. . . .
Well . . . doesn’t that competitiveness depend on the cost of the overall wage and benefit package rather than whether or not healthcare benefits are provided, per se? Here again, employee perception of the value of the benefit is key. Can you compete against a competitor that pays $13.00 an hour by paying $10.00 an hour wages plus $3.00 an hour worth of health insurance? Only if employees value the benefit at $3.00 an hour or more.
And isn’t there still a competitive attract-and-retain advantage to providing a highly desired — and increasingly rare and thus appreciated — employee benefit? (Only if employees appreciate the value . . .)
This advantage may be invisible in recessionary times, but will be increasingly visible and important as the job market tightens and valuable employees jump ship (topic for another upcoming post).
The Slate article continues:
In the early 1990s, big business largely opposed Hillary Clinton’s ill-conceived effort to establish a government-run universal health insurance plan. But over the past several years — and especially in the past year — large corporations, and the trade groups that speak for them, have been subtly changing their tune.
The first hint of change was Big Business’s embrace of the Medicare prescription drug benefit. . . .
In December, a study released by two business establishment trade groups, the Manufacturers Alliance and the National Association of Manufacturers, found that when it came to structural costs –environmental compliance, taxes, and employee benefits — American companies pay more compared to many foreign competitors. . . . The largest single structural cost borne by the American private sector is health care.
The clear implication: Unless society (read: the government) does something to relieve manufacturers of their health-care burden, the sector will suffer further.
Ahem . . . is corporate self-help not a viable alternative? Why not? Why do some people think government is always the solution? The same reason others think it is always the problem — because it is easier than thinking creatively?
The Slate article continues:
The health-reform meme is now colonizing another group of Fortune 500 companies — major hospital chains. This week, HCA, the nation’s largest hospital company, unexpectedly lowered earnings estimates for the year by about 10 percent. The main reason: It had to set aside extra cash to deal with swelling numbers of uninsured patients who can’t pay their bills.
Just as old-line industrial firms with unionized workforces and large numbers of retirees are seeing their balance sheets undermined by the health-care crisis, so too are full-service hospital companies. They’re losing market share for lucrative procedures to small, start-up surgical centers. And because they treat the uninsured, they’re forced to pay for the health care that employers and the government are not funding. . . .
We’re still a long way from the entire Fortune 500 clamoring for Hillarycare. But we’re getting closer. Which sector will be the next to clamber onboard the Hillary train? My bet: the airlines. Read more
Seems to me the author’s aboard — and helping to drive the train. Where’s the brakeman?
This AP piece (via CNN.com) challenges one of our widely-held beliefs — that American healthcare may be costly, but “you get what you pay for”: “Best medicine in the U.S.? Maybe not”
A new study challenges a widely held view in the United States that Americans have the best medical care in the world.
A review of health care in the United States and four other industrialized, English-speaking countries, published Tuesday in the journal Health Affairs, found that the United States leads in some areas and trails in others.
Breast cancer survival rates were higher in the United States than in Australia, Canada, England and New Zealand . . . . American women also were screened for cervical cancer at a higher rate than women in the other countries. Yet the United States was the only country that registered a rise in deaths from asthma. The rate of infection from hepatitis B also was highest in the United States.
“No country scores consistently the best or worst overall, and each country has at least one area of care where it could learn from international experience,” the study said. . . .
[T]he report notes that U.S. politicians frequently state, as President Bush did in his State of the Union address in January, “Americans have the best medical care in the world.” . . .
A related report in Health Affairs examines why the United States spends far more on health care than any other nation, and whether the country can afford it. [It] conclude[s] that health insurance will become increasingly unaffordable to lower-income workers, forcing lawmakers to choose between some form of universal health care and a system in which there is a stark difference in the quality of care based on ability to pay.
Read more
The latter choice may sound terribly unfair, but it would be the American way. We have “stark difference[s]” in all other aspects of quality of life “based on ability to pay.”
With medical care, as with other human needs, we can try to narrow those differences (or at least raise the floor) by: 1) providing government handouts (medical equivalent of food stamps or welfare checks) that may reduce incentives to work and create value (failed Great Society quasi-socialism); 2) encouraging private charitable assistance (do doctors and other medical professionals face the kind of ethical “pro bono — free service to the needy — expectations that lawyers do?); 3) enacting redistributionist tax policies that may be somewhat less blunt in their perverse incentives; or 4) simply generally pursuing economic growth and opportunity for all, increasing the “ability to pay.”
The cited article, “U.S. Health Care Spending In An International Context,” by
Uwe E. Reinhardt, Peter S. Hussey and Gerard F. Anderson, is available in full here, and is quite interesting and analytical and multifaceted.
My favorite sound bite:
To quote economist Henry Aaron on this point: “Like many other observers, I look at the U.S. health care system and see an administrative monstrosity, a truly bizarre mélange of thousands of payers with payment systems that differ for no socially beneficial reason, as well as staggeringly complex public system with mind-boggling administered prices and other rules expressing distinctions that can only be regarded as weird.”
This from the Denver Business Journal (by Amy Fletcher): “Health Care
Experts differ on what’s to blame for rising health costs”
[A]s employers have faced double-digit increases in health insurance, [t]he publicity has fueled a blame game of sorts that has become more heated as employers look for ways to curb rising health care costs. . . .
Nearly 60 percent of Colorado’s small businesses saw their health insurance premiums increase more than 20 percent in 2003 . . .
Hospital spending in the United States increased 9.5 percent to $486.5 billion in 2002, the fourth consecutive year of accelerated growth and the first time hospital spending has outpaced the growth of overall health care spending since 1991. Overall health care spending increased 9.3 percent to $1.6 trillion in 2002, according to the Centers for Medicare & Medicaid Services.
I’m not that good at math, but this doesn’t quite compute. If costs are up 9%-10%, why are so many businesses facing premium increases over 20%?
Hospitals in metro Denver have posted substantial profits the last several years. In 2002, the most recent year for which data is available, hospitals in metro Denver averaged a 10 percent margin on patient care and hospital services and a 10.3 percent profit overall. Denver-area hospitals averaged an 11.2 percent profit margin in 2001.
The Colorado Health and Hospital Association says a minimum margin of 6 percent is recommended to maintain and update physical structure, buy new technology, provide new programs and services and reduce outstanding debt. . .
[I]ncreases in hospital spending are not the same as increases in the rates hospitals charge to health plans. [W]while hospital spending rose 9.5 percent in 2002, health insurance premiums have been growing by double digits.
“National data show that the rates hospitals charge health plans have been rising by about 5 percent or less over the last decade,” the report stated. “Data show that increasing use of hospital services is, in fact, the largest driver of increased spending on hospital care nationwide.”
Colorado health plans are skeptical of the last assertion. While gross volumes may be increasing, said Dr. Larry Wolk, medical director for Cigna Healthcare, the average patient is using fewer hospital services.
“Rates are going up,” he said. “The bulk of the trend … is actually the unit cost and not increases in utilization.”
Health plans, however, acknowledge the struggle hospitals face in providing care to people covered by such government programs as Medicaid and Medicare, which do not pay the full cost of care, and the growing number of patients without insurance.
“[Hospitals] have had to increase their charges to the insured population to make up for what they are dealing with in the working uninsured,” . . . Read more
So . . .we don’t even have a good analysis of exactly what causes the increases in premiums — but some apparently is increased profitability of hospitals and insurers, which is disturbing at a time when employers and employees are being pinched so hard on premiums.
Some is increased services utilization due to an aging, increasingly obese population and constant development of costly new drugs and procedures, some actual unit cost increases at the provider level, some unnecessary administrative costs, some unnecessary “defensive medicine,” some excessive use of drugs and services by insured patients who have no incentive to economize, some shifting of the growing cost of treating the uninsured and the underpaying Medicaid and Medicare patients.
Good solutions to our healthcare cost crisis can’t be found until we know the dimensions and causes of the problem. Government, educational institutions, and think tanks all need to be working on careful analysis of all these various aspects of this multidimensional problem.
Speaking of educational institutions, Harvard Business Review has this: “Redefining Competition in Health Care” (abstract only; article available for download or hard copy here for $6.00)
The U.S. health care system is in bad shape. Medical services are restricted or rationed, many patients receive poor care, and high rates of preventable medical error persist. There are wide and inexplicable differences in costs and quality among providers and across geographic areas.
In well-functioning, competitive markets, such outcomes would be inconceivable. In health care, these results are intolerable.
Competition in health care needs to change, say the authors. It currently operates at the wrong level. Payers, health plans, providers, physicians, and others in the system wrangle over the wrong things, in the wrong locations, and at the wrong times. System participants divide value instead of creating it. (And in some instances, they destroy it.) They shift costs onto one another, restrict access to care, stifle innovation, and hoard information–all without truly benefiting patients.
This form of zero-sum competition must be replaced by competition at the level of preventing, diagnosing, and treating individual conditions and diseases.
Among the authors’ well-researched recommendations for reform: Standardized information about individual diseases and treatments should be collected and disseminated widely so patients can make informed choices about their care. Payers, providers, and health plans should establish transparent billing and pricing mechanisms to reduce cost shifting, confusion, pricing discrimination, and other inefficiencies in the system. And health care providers should be experts in certain conditions and treatments rather than try to be all things to all people. U.S. employers can also play a big role in reform by changing how they manage their health benefits.
Cato Institute challenges a basic “fact” cited in many, many stories about health care – the number of uninsured: “‘Cover the Uninsured Week’ — With Honesty” (by Michael F. Cannon)
Last week’s national “Cover the Uninsured Week” should have kicked off with a little honesty. The campaign is a coalition of over 100 groups . . . “to publicize the problem of allowing nearly 44 million Americans to live without health care coverage, and to highlight proposed solutions.” The first problem the coalition should have addressed is how it is misleading the public.
As far back as the Clinton administration, some critics have tried to create a sense of urgency behind expanding government health programs by citing a government statistic that said something like 40 million Americans lack health insurance.
Originally, “40-something-million-uninsured” meant the persistently uninsured, i.e., those who lacked health insurance for the entire year. The Congressional Budget Office shot holes in that statistic last May when it reported the correct figure is between 21 million and 31 million. Difficult as it may be to believe, an official government statistic was off the mark by maybe 110 percent.
The CBO’s figures may still be too high because they count millions of Americans who are Medicaid-eligible, and therefore have coverage whenever they need it. . . . Moreover, the persistently uninsured are mostly young . . . or healthy . . .
Cover the Uninsured Week continues to claim there are 44 million uninsured. The only possible way to explain this is that they take refuge in the CBO’s finding that the original, faulty government statistic does happen to be roughly equivalent to the number of Americans who lack insurance at any specific point in time, rather than for the entire year.
But this broader measure just adds to the count even more not-so-hard cases. In addition to those eligible for Medicaid, for instance, it includes people who lose their health insurance for only a brief period, such as when they graduate from college or change jobs. Over 3 million such people will regain coverage within four months, and another 6 million will regain coverage within 12 months. Various studies suggest that one-fourth (10 million) of this group decline coverage that is offered by their employers, and one-fifth (8 million) live in households making more than $50,000 per year.
The danger in overstating the number of uninsured is that we might do something foolhardy, like force taxpayers to provide them with coverage. . . .
Not every Cover the Uninsured Week sponsor supports expanding government programs. But once they commit to covering all the uninsured, there is no way to reach that goal short of compulsory health coverage. Whether it is administered by government or the private sector, compulsory health coverage means government-run health care. The campaign’s official glossary even defines the underinsured as “people who have some type of health insurance, such as catastrophic care, but not enough insurance to cover all their health care costs.” It’s clear that Cover the Uninsured Week will drag on until all health care costs are socialized and individual responsibility is nil.
A better goal would be to restore to America’s largely socialized health care system the market processes where producers compete to provide consumers with value, and consumers keep costs down by patronizing efficient producers and avoiding inefficient producers. That patient-centered process has begun with the introduction this year of health savings accounts, and it will do more to provide quality, affordable health care to the masses than a century of Cover the Uninsured Weeks.Read more
I’m pretty much in agreement with the conclusion, and it’s always helpful to look deeper than a single alarming statistic that is parroted by the media and politicians as if it were one-dimensional instead of one view of a complex multi-dimensional reality.
But I find Cato too cavalier about the short-term or young and healthy uninsured. Obviously, these people in the aggregate represent a substantial risk of major medical expenses not being covered. Nonetheless, it is useful to recognize they represent a different aspect of the problem of the uninsured than folks whose employers provide no insurance, for example.
Brief introduction to the debate over HSA’s (health savings accounts) from Investors.com (by Tyler Pearson): “New health accounts get backing, some criticism”
Congress received a glowing report . . . on the new Health Savings Accounts, including an endorsement from Treasury Secretary John Snow, but at least one dissenter said the plans create a two-tier system the benefits younger, healthier workers. Read more
For those interested in more detailed expert views on HSA’s from the above-mentioned congressional testimony, check this out: “Treasury Secretary John Snow and Others To Testify About Health Savings Accounts”
A recent survey conducted by Mercer Human Resource Consulting found that nearly 75 percent of employers say they are likely to offer the new accounts to their workers by 2006.
Here’s where you can find links to the actual Senate testimony
More on HSA’s from The HSA Insider (by Richard Nadler and Dan Perrin”: “CBPP Study on HSA Premium Tax Deduction Misses the Point”
The potential effectiveness of HSA’s in reducing the numbers of uninsured is hotly debated. Another issue, of course, is what impact they may have on costs.
It is counter-intuitive to believe that a policy which lowers the price of a service will reduce demand for that service. But that is precisely what authors Edwin Park and Robert Greenstein contend in a recent Center on Budget and Policy Priorities analysis of a tax deduction designed to encourage the purchase of health insurance. . . .
The Park-Greenstein analysis, “Proposal for New HSA Tax Deduction Found Likely to Increase the Ranks of the Uninsured,” reports that the HSA premium deduction will cause an absolute increase of 341,000 in the ranks of the uninsured; that it will prove of little use to the working poor who most need it; that it will provide an unnecessary tax break to the wealthy who don’t need it; that it will cause employers to reduce their commitment to health care benefits; that it will remove the healthy from the insurance pool; and that it will make the health insurance system more expensive administratively without reducing its global costs. . .
“Proposal for New HSA Tax Deduction Found Likely to Increase the Ranks of the Uninsured” is both the name and the principal conclusion of the May 10, 2004 analysis released by the Center on Budget and Policy Priorities [CBPP]. The conclusion is unsupportable. Correcting only for the CBPP misstatement of the percentage of deduction claimants previously uninsured, the enactment of the HSA premium deduction should be associated with a gain in the ranks of the health-insured ranging between 1,207,440 and 1,941,600. Additional corrections for deduction-utilization and employer incentives further raise the range of the gain in insured: between 3,365,280 and 4,309,200.
The CBPP study comes to the wrong conclusion regarding the impact of the HSA tax deduction because its authors’ underlying assumptions regarding Health Savings Accounts are incorrect.
But if HSAs will not wreck the insurance pool, disenfranchise the poor, drive out employers, or increase the ranks of the uninsured, failure to enact policies which disseminate them will. Since 2000, employer health care costs have risen by more than 10% per year. From 1990 to 2002, per capita expenditures have risen 99%. And as the product became more expensive, the consumer base for insurance has contracted. From 2000 to 2002, number of Americans without health insurance rose from 39.6 million to 43.3 million. The ills which CBPP attributes to HSAs, and policies which encourage their use, are in fact associated with the anti-market third-party payment system which HSAs are designed to rectify. Read more
The third-party payment system means patients who make choices about treatment aren’t paying for the consequences of those choices, and have no idea what they cost or any incentive or ability to find out, while prices are secretly set between providers and institutional payors. And every single office visit becomes an insurance claim to be processed through a paperwork nightmare.
One of the CBPP criticisms: “Nearly 87 percent of those who would use the deduction would already have health insurance — of whom the overwhelming majority have coverage purchased through the individual market — and essentially be obtaining a tax break for health insurance they already can afford.”
It’s not apples to apples. The insurance they will get with the HSA is high-deductible. When people have a good year and don’t hit the deductible, the leftover money stays in their pocket, rather than enriching some insurance company or going to pay for the high medical costs incurred by someone else who doesn’t exercise, smokes, is overweight, doesn’t use available generic meds, etc.
This won’t solve the problem of the uninsured, but saving money for consumers instead of feeding fat government or fat corporations is a desirable result, in any event, in my book.
Of course, this debate is ideologically tinged. but we’ll be finding out the truth about HSA’s as they are increasingly adopted.
The Boston Business Journal (by Mark Hollmer) discusses the somewhat broader topic of “consumer driven health plans”Employees warily eye consumer-driven plans
Despite double-digit hikes in health care insurance prices, Bay State business owners and their employees are not yet embracing cheaper consumer-driven health plans. The new plans, typically with high deductibles, aim to give consumers greater financial responsibility for their day-to-day health care costs.
In Massachusetts, enrollment growth in these plans is closer to a slow and steady trickle. . .
Harvard Pilgrim Health Care, Blue Cross Blue Shield of Massachusetts and Tufts Health Plan say they expect their consumer-driven enrollment numbers to grow over time. But other insiders say the lower enrollment rates reflect real anxiety from employers and employees alike about letting consumers shoulder more of their health care costs. . .
The whole concept of it is still not proven, and there are some people who say this could backfire.
At the same time, there is definable interest. . .
Rosenberg added that employers are interested but focusing first at trying to save money by increasing employee insurance co-payments.
Employers can save significant money. Harvard Pilgrim, for example, says its typical high-deductible plan costs businesses 20 percent less than a standard HMO product. Blue Cross Blue Shield says its plans can save between 15 percent and 40 percent, depending on the deductible. And Tufts says its consumer-driven plan can save employers 5 percent to 25 percent.
John McDonough, executive director for the consumer group Health Care For All, says the trend is a fad that will fade when the job market improves and employees look for the best job with the most comprehensive health care.
“Employers who offer these plans with huge deductibles will be at a huge disadvantage,” he said. Read more
Not if coupled with HSA accounts that have been properly explained, so that employees see and understand the opportunity for saving and growing a portion of their health care benefit dollar free of taxation, enabling them to pay the high deductible to the extent necessary, instead of having it grow insurance company profits at the expense of their employer’s profitability.
Employee Benefit News (by Jill Elswick) has another good general article on the consumer directed health care trend, including the insurance industry perspective: “Insurers deepen roots of consumer-driven health care”
Market interest in consumer-driven health insurance continues to grow, particularly after the Bush administration’s accolades for health savings accounts (HSAs) created by Medicare legislation. Insurers, third-party administrators and brokers report steady requests from employers for information on consumer-driven health plans (CDHPs), generally defined as plans combining a high deductible with a spending account. . .
Employer interest in CDHPs is “up 1,000%,” says Roger Schulz, senior vice president and director of sales for employee benefits broker J. Smith Lanier & Co., based in Atlanta, Ga. . .
“Almost nobody wants to go out and make a sales call without some sort of consumer-directed proposal as an option,” adds David Cowles, executive vice president of Benemax, a benefits management company based in Medfield, Mass. Seventy-five of Benemax’s 225 clients now offer a “true-blue” HRA, he says. . .
Fifteen out of 41 Blues plans surveyed by the association last year had delivered HRA-based products to market. Another 15 were planning to launch HRAs during 2004. By the end of this year, 75% of Blues plans will offer them, predicts Crawford, citing market competitiveness as the trend’s driving force. . .
[P]eople enrolled in CDHPs have shown more willingness to use tools and resources designed to help them become better consumers, says Robin Downey, head of product development for Aetna. Chris Delaney, spokesperson for Definity Health, calls CDHPs “the ante” for getting consumers involved in health care decisions. Read more
And now some unadorned links for further reading if you still haven’t had enough:
Kaisernetwork.org: “Wall Street Journal Examines Efforts by Companies To Lower Health Costs by Using Tiered Health Plans”
Reuters: “House Backs Two Health Bills on ‘Uninsured Week’”
Reuters: “Researchers: Exercise Lowers Employers’ Health Costs”
Workforce Management: “Caesars Betting Onsite Pharmacy Will Yield Savings”
Sacramento Bee (by Gilbert Chan): “CalPERS drops 36 hospitals”
The Business Journal of Milwaukee (by Erik Brooks): “Manpower, Johnson Controls join pool for uninsured; Health insurance coalition serves part-timers, temps”
The Orlando Business Journal (by Gabrielle Arnold): “Osceola chamber to help insure small business workers”
The San Francisco Business Times (by Chris Rauber): “Biz group offers Kaiser option in pool for small businesses”
BenefitNews Connect: “Small businesses get help finding health insurance”
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