Health care debate continues
Here are a bunch more healthcare benefit links. This issue, which is one of employers’ (and unions’) biggest headaches these days, is getting some much-needed attention.
USA Today (Julie Appleby) reports: “Health insurance premiums crash down on middle class”
Rising health care costs are increasingly pressuring the middle class, adding a large and politically influential group to the category of those who fear they may soon have to do without.
There’s little hope for relief in the short term. Health spending is expected to rise well above inflation for years to come. Employers are increasingly passing on the additional costs to their insured workers, causing some workers to opt out, saying they can’t afford it. And, at some workplaces, employers are dropping coverage altogether.For those who have to buy their own insurance — or those on the low end of the income scale — insurance has long been hard to afford.
“What this country is actually doing is gradually pricing the lower third of the wage and income distribution out of health care,” says Uwe Reinhardt, a Princeton economist.
The success or failure of efforts to control health care costs in the next decade will determine whether those in higher income brackets are similarly shut out, he says.
Harvard economist David Cutler estimates that if medical costs rise 5% above inflation for each of the next four years, at least 3 million more U.S. residents will be without coverage. . . . Many of those will be workers with good jobs and decent pay. . . .
Today’s average premium for a family insurance policy — $9,086 a year — already represents 21% of the national median household income of $42,409. . . .
Some analysts say the rising cost of premiums and increasing load of deductibles and other fees will lead more of the currently insured to drop their coverage.
“People will start playing roulette with their health insurance,” says Glenn Melnick, professor of health care financing at the University of Southern California. “I can see a middle-class family saying, ‘We need to cover Mom and Dad, but we’ll let the kids go without and put that money into their college fund.’ ” . . .
Many employers still pick up a large chunk of health insurance premiums . . . . Even so, last year workers paid an average of $2,412 toward their premiums, an amount equal to 5.6% of the median household income. . . .
Here’s a discussion by Devon M. Herrick, Ph.D., from the National Center for Policy Analysis: “Bush versus Kerry on Health Care”
Biased against Kerry, but has some useful details.
The Bush approach moves away from the bias in favor of large-employer-provided plans, by encouraging individual insurance, health savings accounts, and association health care, all of which are job-portable. This portability is important so labor mobility is not impaired by employees making job choices based on healthcare benefits. Small employers should not be handicapped in competing for good employees by their lack of health care buying power — or the presence of a few relatively unhealthy employees who jack up the rates.
Kerry’s reliance on expanding coverage under government plans doesn’t seem to offer anything towards cost control. The large and growing uninsured population is a problem, but not one which can be divorced from runaway costs. To the contrary, many are uninsured because of high costs. Coverage and costs must both be addressed.
A March 17 opinion piece by Holman Jenkins in the Wall Street Journal took a strong stand on Kerry’s position, as summarized here: “Sen. Kerry’s Health Care Proposal Should End Subsidies to Employers for Providing Health Coverage, Columnist Says”
Kerry should include in his health care proposal a provision that would eliminate the “nutty system” of tax subsidies for employer-sponsored health insurance that fuels “an unnatural urge to channel every ache, pain and prescription through a third-party payment bureaucracy.” . . .
As part of a proposal that Kerry announced earlier this year, the federal government would assume 75% of annual health care costs care that exceed $50,000 for individuals with health coverage, provided that health insurers pass the savings to employers and employees . . . . However, according to [the Journal piece], the proposal would only shift health care costs to taxpayers and would not provide an “injection of efficiency” or a “reason to imagine total costs won’t continue to grow wildly.”
[The piece suggests] . . . Kerry should include in his proposal a provision under which the federal government would end “tax-free treatment of employer-provided health insurance” in exchange for “assuming the catastrophic cases.” Such a provision would allow employers to end the “primitive practice of bartering health care for labor” and the “crazy spur to channel every routine medical expenditure through the insurance system.” . . .
“Mr. Kerry could be a leader here. Too bad he’s a political wuss and a Democrat, two facts that likely rule out any hope of him having a single creative thought on health care — or any urge beyond simply throwing more taxpayer money at it, which we already get from the GOP.”
Many people are suggesting that maybe we need to move away from the idea of full-coverage insurance, and from employer-provided coverage. Unfortunately, the insight in that piece is in danger of being eclipsed by the harsh partisan name-calling ending.
Here’s a great little interview with Harvard Business professor Regina Herzlinger, arguing strongly for consumer-driven healthcare — more dollars spent directly by the consumer, with market forces playing a greater role, not a lesser one (as they would with a more government-driven approach), and touching on other interesting issues: “Herzlinger: From Market-Driven to Consumer-Driven Healthcare,” by Richard L. Reece, M.D., for HealthLeaders News, March 15, 2004
Herzlinger: Consumers are very smart, and they will make better decisions than those would act for them. Many of the “top-down” technocrats who run HMOs or government programs do not believe consumers are smart enough and only they, the technocrats, have the wisdom and compassion to run the health system. On the contrary, I would say nobody at the top is smart enough to know everything that goes on at the market level. Nobody is that brilliant.
Reece: What can be done to dampen the current rate of healthcare inflation?
Herzlinger: Consumer-driven health care will ultimately correct healthcare inflation. The reason is quite simple. Consumer driven care will bring about prudent consumer spending and increased productivity. Let me turn your question back to you. Why do you think health care inflation is so high while the rest of the economy has such a low inflation rate? The answer is higher productivity in the non-healthcare sector. We must bring higher productivity to the health care sector, and that will come from the bottom-up, from consumers acting in their own best interest and providers responding.
Reece: How do you do that in medicine? The patient-physician relationship is basically a one-on-one relationship. How do you make that more productive? Won’t that lead to depersonalization of the relationship?
Herzlinger: On the contrary, CDHC [consumer directed health care] will personalize, deepen, and enrich the relationship. Focused factories [centers for treating AIDS, diabetes, asthma, and congestive failure and other chronic diseases that consume 80 percent of our health care dollars] will help the relationship too. Teams of physicians and other healthcare professionals focusing on one disease and complications surrounding that disease will enhance quality, value, and productivity. . . .
Reece: The New York Times last month carried on an article on the strange nature of Medicare payments for disease. . . . Medicare payments punished hospitals and physicians who improved quality. In other words, if you improve quality and save hospital days, Medicare frequently pays you less. Is this a problem in your mind?
Herzlinger: It is a huge problem, and the whole Medicare payment system needs to be revamped to reward quality and productivity.
Reece: What about the doctor’s role in all of this?
Herzlinger: I love doctors. As a matter of fact, my daughter is a doctor. . . . Doctors will be the sources of virtually all the CDHC productivity gains in response to their patients’ needs. Right now, doctors have been seduced by insurance companies. They have become too dependent on them. . . .
I doubt doctorswould agree about their “seduction,” but many surely would like to be free of the insurance companies.
Herzlinger’s book, “Consumer-Driven Health Care [link to Amazon description]” will be published in April.
The Galen Institute has this report by Greg Scandlen: “Consumer Choice Matters, #55″He discusses his testimony on “the uninsured” before the Health Subcommittee of the Ways & Means Committee in the House.
Glenn Melnick of the University of Southern California discussed how hospital pricing, especially “the lack of a rational and transparent pricing system for self-pay patients,” disadvantages the uninsured and potentially stifles the market for Health Savings Accounts.
I tried to make the case that previous state and federal policies, especially tax policy and ERISA, have distorted the market and made coverage more expensive and less accessible for anyone not in the subsidized systems of Medicare, Medicaid, and employer-sponsored health insurance.
[S]ometimes when a problem seems intractable it is because we are not framing it correctly. We are not asking the right questions. Perhaps there is another way to look at this issue.
Instead of asking why so many people are uninsured, perhaps we should look more closely at who is insured and for what. None of us is insured for everything, nor should we be. Health insurance is only one way to pay for health care services, and often not the best way. . . .
The real question is what is the appropriate role for health insurance versus other forms of financing? There is an entire universe of stuff out there that can be considered “health care.” Insurance can never cover it all. We are all “uninsured” for something.
If we start with this reality, the next question is “What is appropriate for an insurance plan to cover? And who decides?” Is it really a good use of the clumsy insurance mechanism to pay for a $60 physician’s office visit? Is insurance, with its administrative costs, the best way to pay for Viagra and birth control pills? Aren’t these things better paid in cash and save the insurance to prevent . . . bankruptcies?
There is always a concern about low-income people – “How can they be expected to pay cash?” But insurance isn’t a particularly good way to subsidize their health care needs, either. First, they or someone else has to pay premiums if insurance is used to pay for their care, and the premiums would be lower if routine expenses were paid directly. The money that would otherwise go into premiums could be made available for them to pay cash. Second, to the extent there is administrative waste involved in passing claims through insurance, it is not a very good use of their scarce resources. Getting more bang-for-the-buck is even more attractive to the low-income than it is for other people. Third, is it really a good thing that even low-income people are required to pay premiums for services like in vitro fertilization or psychiatric social workers? Perhaps they should be allowed to use their limited resources to cover only those services that are high priorities for them. . . . [The reference to psychiatric social workers reflects a common but misguided anti-mental health bias; mental health services can be of the absolute highest proiority for many people, not a luxury, in some cases even a matter of life and death (e.g., severe suicidal depression)]
Hospital pricing is heating up as one of the key issues in the care of “self pay” patients, including both the uninsured and those with HSAs. Perhaps the person who has done the most to bring attention to this issue is K.B. Forbes, one time spokesman for both Steve Forbes and Pat Buchanan during the 2000 presidential primaries. He has organized a group . . .that is focusing on uninsured Hispanics who are often charged three and four times as much as insurance companies for hospital care. He calls it price gouging and has wrested some concessions from the Tenet hospitals in California. Unfortunately, the hospitals tend to give price breaks only to patients they deem needy, not to others who simply prefer to pay in cash.
Indeed, it is unfortunate that providers won’t offer uniform pricing, allowing alternative payment mechanisms to flourish. Of course, this came about not out of a desire to discriminate, but out of the HMO/PPO models, in which insurers’ market power was used to hammer on providers’ prices.
Finally, from fellow bloggers:
Workers Comp Insider reports on a little-noticed aspect of the problem: “Number of uninsured workers at large employers growing”
And Walking the Line (formerly sonria.org) reports: “Health insurance: why it should not be an employment benefit,” excerpting a Reuters article, “Cost of Worker Benefits Weighs on Hiring”
