The Growing Uninsured Population by Steve Vagnino
Shifting Healthcare Costs to the Consumer by Steve Vagnino
The Growing Uninsured Population
By Steve Vagnino
Census Confirms a New High
According to the U.S. Census Bureau, 47 million Americans had no health insurance in 2006. That is an increase of more than two million from the previous year, with the uninsured population expected to reach 56 million by 2013. In a period of sustained economic growth, five years of expansion, why are we seeing numbers of the uninsured continue to rise? The answer appears to be in the disparity of growth between the two sectors. While workers wages are increasing by 1.5% to 2% a year, health insurance premiums are rising by an average of 7 percentage points. That’s causing many employers, especially those with fewer than 10 workers, to drop health insurance coverage because of affordability.
Who Are the Uninsured?
Contrary to the impression that the uninsured are also the unemployed, the majority of those who have no health insurance are working people. Nearly 70% come from families where at least one member is a full-time employee. However, even families making the median income of $48,500 per year can’t afford an average health insurance policy(for a family of four) of $12,000 annually. While the groups hardest hit are: young adults (18-34), Hispanics, African-Americans, and immigrant non-citizens, the numbers are increasing in more traditional middle-class segments as well. In a recent survey, 1.4 million of the uninsured had annual household incomes of $75,000 or more. As healthcare costs continue to rise, the problem of affordability is spreading to more and more segments of the population.
Drivers of Healthcare Costs
Many factors in our society are intersecting to cause the dramatic escalation of healthcare costs. Among them is the fact that we are voracious consumers of healthcare to solve problems associated with lifestyle choices, mainly obesity. Obesity due to inactivity and poor nutrition costs America $117 billion annually. Medication costs are 77% higher for an obese person compared to an individual at a healthy weight. Ironically, we are also living longer. As the Baby Boomers enter the 65+ age category, 1 in 5 Americans will be elderly, indicating an increase in the treatment of chronic, age-related illnesses like breathing disorders, heart disease and cancer. This, coupled with rising prescription drug costs, accounts for more than 15% of our overall national healthcare spending. And manufacturers continue to introduce new brand name drugs carrying hefty price tags with direct-to-consumer advertising to boost demand. Finally, the lack of competitiveness due to the consolidation of insurance providers points to steadily increasing premiums.
Solutions Require Action
Despite the fact that politicians, healthcare experts and industry leaders agree that expanding health coverage should be a top priority, it is unlikely the federal government will pass effective legislation on this issue soon. The Congress and the White House are deeply divided along party lines as evidenced by the recent veto of an expanded S-CHIP appropriation, which would have added additional coverage for children. The federal budget deficit is at its highest point in 40 years making funding options scarce. Currently, states like Massachusetts, California, Vermont and Maine are taking the lead in developing strategies to provide universal health coverage for their residents. These plans create insurance pools, which are funded by employers who do not provide health benefits and are supplemented by state and federal dollars. With the exception of California, the other states have relatively low rates of uninsured, so it will be interesting to follow the results of these programs in states which have large numbers of uninsured. If the U.S. hopes to create a healthcare system that delivers sustainable value to all, we will have to tackle the substantial political and economic obstacles, as well as ingrained public resistance to change.
Sources:
K. Davis, “Uninsured in America: Problems and Possible Solutions,” BM, February 17, 2007 (7589):346-8.
Jim Riesberg, “Lifestyle choices affect heath care costs,” The Greeley Tribune, November 1, 2007.
Health Alliance for Nonprofits, “Why are Healthcare Costs Rising?”
http://www.pano.org/documents/HealthAllianceRisingCosts.doc
Susan Dentzer, “Number of Uninsured Hits New High, Census Shows,” Online NewsHour, PBS, aired
August 28, 2007.
Shifting Healthcare Costs to the Consumer
By Steve Vagnino
Companies’ Health Costs to Rise Again in ‘08
According to several new studies, companies can expect to spend 7 percent more on heathcare in 2008, reaching an average of $9,312 per employee reports consulting firm, Towers Perrin. Companies paid an average of 78% of their employees’ coverage in ‘07, the firm said, but more and more will try to shift the burden onto their workers. The gap between wage increases and premium increases will be in the neighborhood of 3.7%, reports the Kaiser Family Foundation, with insurance plan costs rising faster than wages.
Consumer-Driven Plans, Prevention Programs
Although companies are shifting more of the cost of healthcare to employees through consumer-driven health (CDH) plans, such as low-premium, high deductible plans with health savings accounts attached to them, this still is not widespread. According to Kaiser, which estimates that in 2007, only 3.8 million workers were enrolled in such plans, the number represents just 5% of all workers with health benefits. The CDHs can have some tax benefits for the employee and allows for unused contributions to be rolled over from year to year. Additionally, decision-making regarding the amount of care is placed in the hands of the account holder and creates incentives for being more selective with healthcare options. One area that companies have noticed a dramatic decrease, when employees are footing the bill, is in prescription drug payouts. However, consumers tread a fine line when it comes to choosing between an appropriate amount of care and delaying necessary or preventive procedures based on cost factors alone.
As large corporations are turning over more of their healthcare responsibilities to workers, they are attempting to ameliorate the impact by making use of wellness programs to lower healthcare outlays. These programs usually include company-paid health screenings and education to promote healthier lifestyles.
Impact on Providers
Shifting more financial responsibility to patients will force hospitals, physician offices and other providers to modify their business practices. “The growth of CDH plans,” says Fred Sazelsberg, corporate VP at Baylor Healthcare System in Dallas, “is likely to lengthen the amount of time that an account remains unpaid or “receivable.” Collection problems are already rising as employers raise deductibles and switch from co-pays to coinsurance. Traditionally, providers are not well equipped to collect at the point of service. When patients present there is no exchange of money. Some physicians offices are good at collecting co-pays but not for a complete round of care. Beth Petlak, vice president of business development at Arkansas Children’s Hospital says, “ Any time you shift the financial burden away from the insurance company to the patient, it’s more difficult to collect.” Hospitals, she adds, will need additional resources for financial counseling, collections and administrative functions.”
What the Future Holds
Unlike the early 1990’s when employers embraced managed care’s promise of cost control and quality improvement, most employers today see no single innovative idea or model that inspires enough confidence to motivate widespread change. The Kaiser Family Foundation finds that 21 percent of firms are “very likely” to raise workers’ premium contributions next year and 13% indicated they will increase employee office visit cost-sharing. As the shift continues from third-party billing to first-party billing, providers will need to improve their ability to accurately estimate patient liability at the time of service. This involves more transparency from insurers who can provide real-time information on coverage and status of patients. That way, providers can better co-ordinate and communicate the financial obligations due from patients and carriers. It’s unclear whether the growing financial burden being placed on consumers will result in less healthcare or smarter healthcare.
Sources:
Lydia Regopoulos, Sally Trude, “Employers Shift Rising Health Care Costs to Workers,” Center for Studying Health System Change, Issue Briefs, May 2004 Kaiser Daily Health Policy Report, “Trend of Increased Health Insurance Cost-Shifting from Employers to Workers…’ Kaisernetwork.org, November 20, 2006 Alan Rappeport, “Health Benefit Costs to Rise Again in ’08,” CFO.com, October 2, 2007. Inside Consumer-Directed Care, “Providers Are Not Ready for Consumer-Directed Health Plans,” April 28, 2006