Monday, February 25, 2008

Health Care and National Spend

According to a report by Employee Benefit News in January of this year, spending for health care in the U.S. rose over the past year almost 7% to over $2 trillion for the most recent published data (2006). That translates to a little over $7,000 per person based on info from the Centers for Medicare & Medicaid Services. They also reported that the health care part of our GDP was 16%--a little greater than the previous year. Additionally, the GMS said that overall private insurance premiums increased almost 6%. America's Health Insurance Plans (AHIP) based this slowest increase in the past decade upon cost containment and quality improvement activities by insurance plans. AHIP also feels that insurance plans are improving the use of health care dollars. Health care spending by businesses did not increase that much that year due to "deceleration of employer payments.'' This was primarily due to cost-shifting to employees.

The Employee Benefit Research Institute reported last year that couples should have about $300,000 in retirement savings to pay for health expenses based on the assumption that they live a normal life expectancy and Medicare benefits don't change. However, to anticipate how much Americans will need to cover medical expenses is a little like going to Vegas. You're betting against the house that you won't have huge health care costs over a couple of decades and that you will be able to pay for medical costs when they happen during that time. Usually when someone bets against the house, they lose. In gambling, the main thing to understand is that the odds always favor the house.

A representative with Nationwide said in a recent article published by ArcaMax.com that health care expenses now account for about 20% of all personal spending. Expenses for medical issues have risen 45% over the past five years and will continue to increase at a rate higher compared to other consumer spending. Even churches and religious organizations are not exempt from the increases in medical insurance and health care costs. A current article published in the online version of the Washington Post has reported that some protestant denominations are suffering the woes of paying more for health expenses. A spokesman for the National Council of Churches reported that health care problems are common among big and small churches.

Research that was provided in the report indicates that many Protestant clergy tend to have more health issues due to depression, stress and being overweight; these problems carry huge risks for health care. Some denominations have become more pro-active in encouraging ministers to get healthier--offering financial incentives for wellness options and using participating network medical providers. Even with these extra modifications, though, deductibles still increase and often double just to keep insurance premium costs from going too high. Everyone, including clergy, needs to get more actively involved in managing their personal health care.

The Kaiser Foundation reported this month that a large percentage of families worry about whether their incomes will keep pace with rising prices. These people also wonder if they will have to pay more for health care or health insurance--in part from the relatively fast increases in the costs of employer-based health insurance in the last few years. Many people directly feel the burden of health care costs when they use medical services. However, another way these expenses may affect families’ well-being is by slowing the increase in their paychecks each year. The KF report shows that the share of employee compensation going to health benefits has risen substantially over time, while the share going to wages has fallen.

According to Towers Perrin, Americans are being asked to pay a bigger share of the cost increases. Over the last five years, while employer costs have risen 40 percent, employee costs are up a whopping 60 percent, according to that same survey. And it's an even bigger bite for family coverage. With overall increases in technologies, new medications, provider employee raises, and more, the increases in coverage is taking a financial toll on everyone. There is currently a trend in employers moving from a co-pay system to co-insurance. Many workers are charged a $25 co-pay for a doctor visit. However, with co-insurance, instead employees pay 20 percent of the doctor's bill for that visit. Also, co-insurance can make a big difference when it comes to drug coverage. And as an added hit, healthy individuals generally live longer than unhealthy people (like those with obesity and smokers) and end up paying more for health care.

Lifetime health care costs for obese individuals and smokers are lower than those for healthy individuals who live years longer according to a recent study released by the Kaiser Foundation. However, the study found that obese individuals and smokers had lower lifetime costs because they died earlier. The answer is to make wise health care choices to stay healthy and save enough money to pay for medical issues that will develop later in life. According to the Kaiser Foundation, hospital care accounts for the largest share (30%) of health expenditures. Physician services are the next largest items, comprising one-fifth of the national health spending. Prescription drugs, while accounting for only 10% of total expenditures, has been one of the biggest contributors to the growth in spending.

Financial planning for the long term must take into account the costs associated with paying for medical needs, long term care, health care costs, and additional unseen health related issues that will require attention. Going into a nursing home broke is not the best option. Being able to pay doctor bills and medical costs during late senior years will be considerably better than living on government assistance. Plan now for the future.

Until next time. Let me know what you think.

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