Tuesday, June 17, 2008

Health Care and Increasing Costs

Americans are faced each year with increasing health care costs. Management of these expenses is a major concern when bills come due, and most people think about health care costs on a regular basis. Seniors are primarily concerned about how to pay for prescriptions not covered by Medicare or a Supplemental plan and for costs not paid for by either of these programs including dental and other ancillary services, not to mention catastrophic health events. Families worry about meeting expectations for paying medical bills, especially if their children have major health issues. To prevent significant budget busting, Americans must make sure that they have a handle on regularly managing costs for health care.

AIS Health Business Daily reported this month that people in consumer directed plans use less care including emergency departments and prescriptions. Utilization in these areas is lower as plan members have more control over costs and managing health issues. The report indicated that the good news is that people in CDHPs are not forgoing preventive care. The users on these plans are saving money and more effectively managing their health care expenses.

By several measures according to the National Coalition on Health Care, health care spending continues to rise at the fastest rate in our history. Experts agree that our health care system is riddled with inefficiencies, excessive administrative expenses, inflated prices, poor management, and inappropriate care, waste and fraud. These problems significantly increase the cost of medical care and health insurance for employers and workers and affect the security of American families. In 2007, total national health expenditures were expected to rise 6.9 percent — two times the rate of inflation. Total spending was $2.3 TRILLION in 2007, or $7600 per person. Total health care spending represented 16% of the gross domestic product (GDP). Health care spending in the U.S. is expected to increase at similar levels for the next decade reaching $4.2 TRILLION in 2016, or 20% of GDP.

In 2007, according to the NCHC, employer health insurance premiums increased by 6.1% - two times the rate of inflation. The annual premium for an employer health plan covering a family of four averaged nearly $12,100. The annual premium for single coverage averaged over $4,400. Premiums for employer-based health insurance rose by 6.1 percent in 2007. Small employers saw their premiums, on average, increase 5.5%. Firms with less than 24 workers, experienced an increase of 6.8%. The annual premium that a health insurer charges an employer for a health plan covering a family of four averaged $12,100 in 2007. Workers contributed nearly $3,300, or 10% more than they did in 2006.2 The annual premiums for family coverage significantly eclipsed the gross earnings for a full-time, minimum-wage worker ($10,712). Workers are now paying $1,400 more in premiums annually for family coverage than they did in 2000.

Since 2000, employment-based health insurance premiums have increased 100%, compared to cumulative inflation of 24% and cumulative wage growth of 21% during the same period as reported by the NCHC. Health insurance expenses are the fastest growing cost component for employers. Unless something changes dramatically, health insurance costs will overtake profits by 2008. And, according to the Kaiser Family Foundation and the Health Research and Educational Trust, premiums for employer-sponsored health insurance in the United States have been rising four times faster on average than workers’ earnings since 2000. The average employee contribution to company-provided health insurance has increased more than 143% since 2000. Average out-of-pocket costs for deductibles, co-payments for medications, and co-insurance for physician and hospital visits rose 115% during the same period. The percentage of Americans under age 65 whose family-level, out-of-pocket spending for health care, including health insurance, that exceeds $2,000 a year, rose from 37.3% in 1996 to 43.1% in 2003 - a 16% increase.

So how is all this survey information translated to how Americans are dealing with the increased costs of health care? Here are some ways that people are affected as reported by the NCHC:

1.) National surveys show that the primary reason people are uninsured is the high cost of health insurance coverage. Economists have found that rising health care costs correlate to drops in health insurance coverage.
2.) Nearly one-quarter (23%) of the uninsured reported changing their way of life significantly in order to pay medical bills. In a Wall Street Journal-NBC Survey almost 50% of the American public say the cost of health care is their number one economic concern.
3.) In a USA Today/ABC News survey, 80% of Americans said that they were dissatisfied (60% were very dissatisfied) with high national health care spending.
4.) Rising health care costs is the top personal pocketbook concern for Democratic voters (45%) and Republicans (35%), well ahead of higher taxes or retirement security.
5.) One in four Americans say their family has had a problem paying for medical care during the past year, up 7% points over the past nine years. Nearly 30% say someone in their family has delayed medical care in the past year, a new high based on recent polling. Most say the medical condition was at least somewhat serious.
6.) A recent study by Harvard University researchers found that the average out-of-pocket medical debt for those who filed for bankruptcy was $12,000. The study noted that 68% of those who filed for bankruptcy had health insurance. In addition, the study found that 50 percent of all bankruptcy filings were partly the result of medical expenses. Every 30 seconds in the United States someone files for bankruptcy in the aftermath of a serious health problem.
7.) One half of workers in the lowest-compensation jobs and one-half of workers in mid range-compensation jobs either had problems with medical bills in a 12-month period or were paying off accrued debt. One-quarter of workers in higher-compensated positions also reported problems with medical bills or were paying off accrued debt.

The Christian Science Monitor reported some ways to help stem the tide of increased health care expenses. Here are some suggestions by experts, not all politically easy to obtain:
• Provide more information to consumers on what drug works, what procedures are best, which hospitals and physicians have good records. Insurance, for instance, shouldn't cover extra costs if a patient uses a brand-name drug when a cheaper generic does the job.
• Cut off expensive treatment if it extends someone's life only a few days or months.
• Spend more on prevention of disease by encouraging better lifestyles, improved nutrition, and other steps.
• Ban or control the advertising of prescription drugs to consumers, and cap malpractice awards so doctors need not prescribe so many tests and other defensive practices.
• Let HMOs and other healthcare providers return to tighter management of costs.

So we know that Americans are struggling with medical expenses and the ever increasing cost of health care. What needs to happen is for the market place to self-adjust to more acceptable pricing. The way that should take place is for the medical community, employers, insurance companies, and government to work together for more reasonable rates and cost structure. Individuals and families cannot afford continued upward spiraling of costs, and Americans cannot afford government run universal healthcare. The answer is somewhere in between.

Until next time. Let me know what you think.

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