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POLICY: The uninsured, health care costs, and the insurance industry’s vacuous response

It won’t surprise regular readers at THCB but there are a lot of uninsured people in this country, and the problem is getting worse. Why?  Well some bright wonks (John Holahan and Allison Cook at the generally liberal Urban Institute) have some answers and a closer look at the uninsured in a special for Health Affairs. (And of course only liberals care about this stuff–I’m happy to say that unequivocally, and not even all of them do!). They’ve mined the CPS for the 2000-2004 period and have come up with these conclusions (which I quote from freely as many of you can’t get Health Affairs for free–something else that should be changed if any Foundations are listening). Here’s what they found:

(1) The number of uninsured Americans rose by 6.0 million between 2000 and 2004 (the U.S. population increased by 10.0 million). The increase in uninsurance occurred primarily because of the decline in employer coverage, which fell both because a large number of Americans were not working and because coverage declined among workers. The latter no doubt reflects increases in health insurance premiums, which rose much faster (12.2 percent per year) than wages (2.9 percent per year) during this period. The percentage of small and midsize businesses (3–199 workers) offering health benefits also declined, from 68 percent in 2000 to 63 percent in 2004). Employers seem to have tried to shift the cost of health insurance to workers, and it is likely that a growing share of workers chose not to accept employers’ offers.The change in coverage was affected also by the shift in employment from industries that historically have had high rates of coverage to industries that have not, as well as from large firms to small firms and self-employment. Employer coverage rates fell in all types of industries and firms, but the declines were particularly great in low-coverage industries and in small firms. The fact that employer coverage rates fell among workers, not just among those who lost their jobs, suggests that rates of coverage could continue to decline, even as the economy improves.(2) About two-thirds of the increase in uninsurance was among people below 200 percent of poverty. This is due to increases in both the size of the low-income population and the uninsurance rate of that group. Importantly, however, middle- and higher-income Americans were also clearly affected. The remaining one-third of the growth in uninsurance (2.0 million) occurred among those above 200 percent of poverty, even though this group only grew by 900,000. Thus, the lack of health insurance coverage is clearly beginning to affect middle- and higher-income Americans.(3) Much of the increase in the uninsurance occurred among young adults, whites, and the native-born. About 50 percent of the uninsurance growth was among those ages 19–34; about 55 percent among whites; and about 73 percent among native-born citizens. Thus, rising uninsurance is clearly not a problem affecting primarily racial and ethnic minorities and noncitizens. Further, more than half of the increase in the uninsured occurred in the South, where uninsurance rates were already the highest in the country.(4) Children actually gained health insurance coverage. The expansions of coverage in Medicaid and SCHIP that occurred in the late 1990s meant that children’s coverage was maintained, even with the loss of employer coverage. The expansion of public programs increased enrollment substantially. The result was actually a slight decline in uninsurance among children. Adults’ experiences were in sharp contrast, primarily because adults experienced the same declines in employer coverage but did not have the same access to public coverage. Also, people ages 55–64 actually saw improvements in both income and health insurance coverage. Without the gains seen for this group, the overall picture of rising uninsurance would have been much worse.The decline in employer coverage is likely to continue. Increases in health care costs, and thus health insurance premiums, are likely to continue to grow faster than workers’ earnings. The decline in employer coverage will be further exacerbated if the shift from working in large and midsize firms to small firms and self-employment and from high- to low-coverage industries continues

So to recap, the problem of uninsurance (which is a problem for everyone but mostly of course for those uninsured) is largely borne by a) the working poor (less than 200% of poverty)  — although its increasingly making its way up the income ladder, b) the young, and c) whites, d) southerners, and e) anyone likely to work for a small firm rather than a big one. What’s driving this is the higher cost of health care and the fact that employers are opting out of offering (affordable) benefits. Meanwhile public programs (i.e. Medicaid) are only picking up kids. Given the preponderance of lower income whites in the South who vote Republican, I’d be very interested in these numbers if I was a Democrat looking for new voters.

Of course as I’ve said many times on THCB, the presence of the uninsured is a safety valve allowing the participants in our health system to ratchet up costs as much as they can, because those who can’t pay can be jettisoned into the uninsured pool. No one is responsible for the global cost for the whole system, because if they were they’d bring it down for everyone, not just those uninsured, and the total dollars going into it would be less. (At least that’s how it’s done in every other country).

But the scale at which that jettisoning is going on (due to those cost increases) is even worrying those who make their living selling insurance. Here’s what the CEO of Independence Blue Cross (the Blues in Philly) had to say about the fact that premium for his PPO product is up 65% in the past 5 years and now costs $17,000 for a family:

One day soon, if the cost of health care continues to escalate, employers and families won’t be able to afford the solid coverage of Personal Choice,"

So what is he going to do about that? Well there is the odd nod to pay for performance and disease management, but no one will be surprised to hear that like his competitors, CHDPs and better technology are the cures for Independence.

"First," he said, "we must better respond to the emerging trends in health-care consumerism." IBC efforts in this area already include rolling out a variety of consumer-directed health plan options and launching its Connections Health Management program, which helps subscribers better manage chronic illnesses. <snip> Frick also wants to see the company expanding its use of technology to drive down administrative costs and improve customer service.

Now, as an actual health plan customer I’m in now way objecting to health insurers bring their customer service into the 1990s, but suggesting that this is going to cure the underlying cost of health care is rubbish. Meanwhile over at The New Republic, non-Volvo driving liberal Jonathan Cohn has a great article explaining why (again not news for THCB readers) that consumer driven plans are in general worse for poor and sick people. But don’t bother telling that to the insurance industry. it’s decided that CDHP is all it can sell, and it’s the only idea it’s got.

So I was interested in the response when in the middle of a mostly vacuous interview (PDF transcript here) Jack Rowe at Aetna last month was asked by a single payer advocate whether we should have an insurance industry at all.

BERNIE FEDDERLY [misspelled?]: And the one thing you would do to bring down a healthcare cost would simply be to go to a national healthcare plan – a single payor plan, which would eliminate those costs. The best thing we could do is probably get Aetna out of the healthcare field. How do you take on that?

JACK ROWE MD I think we disagree. I think Aetna’s part of the solution. It’s not part of the problem and I think there are lots of ways that private health insurers can improve the quality and access of care and help control the costs. I don’t think it’s proven that having a national system would help correct the healthcare cost problems. The costs, most economists agree, are driven up–not by health insurers, whose operating margins are, as you probably know, are well less than 10 percent on average but by demographic changes and technological advances. Neither of which are under our control. Those are a couple of other ways we disagree but I’m sure there are others.

Frankly if I was getting $18 million a year I’d have a better defense of my position than that, given that I’ve admitted that you could get 10% savings right off the top by nationalizing me, and given no reasons for not doing it. Especially when my business strategy (for all the BS in his talk about Aetna promoting racially sensitive health care) was to boot about half the people on my insurance rolls off them (no prizes for guessing whether they were the healthier half or not) and thereby add to the uninsurance and cost problems of the nation and its taxpayers because of it. Rowe’s lesser paid colleague Frick over at Independence at least has a bit more humility.

"I’ll be the first person to tell you we don’t have all the answers," Frick told DVHC members. "And I’ll be the first to tell you we don’t always get it right the first time, but we stick with it until we do."

Of course doing something that you know is not going to work expecting that it will is pretty close to the text book version of insanity. And his conclusion sounds frighteningly like that.

If health insurers gave a rat’s arse about the problems of the uninsured or health care costs, they would have a come-to-Jesus moment, get together and plot out a way that the uninsurance problem and the cost problem could be solved with them still remaining in the mix. That’s kinda of where they were forced to in the Clinton plan, and it still seems a better long-term option to me. As it is, they seem to be determined to take the short-term cash, and help the system break down to a point where a future government will be forced to take them out and replace them with a government-run plan. But there’ll be a whole lot more pain, suffering, and anguish before then.

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ChristianSophiepDIPAK PATELGary Lampman Recent comment authors
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Christian
Guest

At CNAOnlineGuide.com they have several articles about how to become a certified Nurse and Certified Nursing Certification. They also share some information on how to get Free Online CNA Certification and Training. http://www.cnaonlineguide.com

Sophie
Guest

The global financial crisis contributed so much in the decline of the number of insured in the United States and I bet many Americans are worried not about their health. Such a very bad news but it is true. Actually even travelers are quite frightened already with the expensive health care services in the United State.

p
Guest
p

Where is it that we come from? Our forefathers defined certain unalienable rights. Life, Liberty and Pursuit of happiness. The constitution enforces these rights and the right to protect ourselves. Government is empowered by our taxes to protect our common defense. Among the rights we are guaranteed are not clothing housing or health insurance. These are included in our pursuit of happiness and liberty to seek and earn live the life that we choose. Over time individuals of faith have felt the duty to assist others who have been born or found themselves with less fortune to rise to a… Read more »

DIPAK PATEL
Guest
DIPAK PATEL

all insurance company ripping up to people. Still goverment doing nothing. i paying 1100/month to away from medical expense. Also more expensive medical than all other country. People paying lot of taxes than other country still not beneficial for people.

Gary Lampman
Guest
Gary Lampman

My Personal experience with Health Markets is one of deception, exploitation and usury.A agent knowingly and willfully took money from us. Knowing of my sons pre-existing Condition and knowingly had been aware of a state Guaranteed insurance coverage.This agent was aware that it would be rejected and still took a down payment.
Applying the money to their bank account and we had to fight to get our money back. Some $75.00 was never recovered.

Ted Roe
Guest

We are a law firm based in Portland, Oregon. I recently met with several individuals living in Oregon who have had health insurance through HealthMarkets Inc., North Richland Hills, Texas, and subsidiaries MEGA Life and Health Insurance and Mid-West National Life Insurance. We are in the process of investigating the potential for a class action lawsuit in Oregon against these companies for unfair and deceptive practices in marketing and administering limited-benefit health plans sold to small businesses and individuals in the state. The carriers appear to have targeted the self-employed along with small business owners with products packaged as part… Read more »

aman
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aman

I am aman, this article is very good. people who have quick respond in this matter. Now a days health care is important to us. Unfortunately If you are living without health insurance you are taking a big financial gamble. Even minor health care needs can cost you thousands of dollars that you cannot afford. Unpaid medical bills can lead to financial struggles, bad credit, and even bankruptcy. Don’t put yourself or your family at risk anymore. However the US government has to implement free medical policy for below poverty line people.

Darrell Vest
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Darrell Vest

“The costs, most economists agree, are driven up–not by health insurers, whose operating margins are, as you probably know, are well less than 10 percent on average but by demographic changes and technological advances.” a Jack Rowe MD quote has missed the supply and demand class – if 50% of busineses dropped their health plans, then the other 50% would have a large premium increase. Thus, year after year, rates raise 15% as the uninsured loose out on affordbility. If all insurance companies dropped rates and the membership pool doubles, then more money for them, more people insured, and no… Read more »

Sherri Roytan
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Sherri Roytan

Consumer Directed Healthcare? As healthcare in the United States has gotten so expensive, and because delivery systems have become so inefficient, some experts suggest that putting more control and decision-making into the hands of consumers will improve the healthcare system. This type of initiative is called consumer-driven or consumer-directed healthcare. Why do Discount Healthcare Programs sound too good to be true? Middle class America is most affected by the healthcare crisis. Many are without benefits and cannot find affordable or cheap health insurance. They make too much to qualify for Medicaid, but too little to afford the high premiums of… Read more »

mike
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mike

Man, I feel the fool right now.
It should have been 36 billion, 600 million dollars for those that can’t figure it out like me.
I feel stupid, sorry.

mike
Guest
mike

What would happen if for instance, we started paying the hospitals directly? By that, I mean instead of paying the insurance companies as a go-between or 3rd party, we pay the hospital direct. We pay the hospital that we want, that provides the care we are looking for and need. We send them monthly payments just like insurance but, for at least 1/2 the amount. Hospitals, would then have a pay schedule that would pay the doctors and their assistant. The doctors would collect from the hospitals a set fee for their service. In effect, the doctors would be sub-contractors… Read more »

Nancy Montana
Guest

We say that we do not have socialized medicine, but in reality, we do. Just not the way we normally think of it. People who have insuance, or money to pay for medical expenses are carrying the costs of those who do not have insurance. Then there is Medicaid, the government aid plan that pays for the elderly, disabled, etc. If that is not socialized medicine on a limited bases, what is it. And is it all bad? Being an Oregonian, I find that the Oregon Health Plan really assists in cutting down the losses of the medical community, and… Read more »

Deborah
Guest

Make sure you and your family are covered. Choose your own plan for discount health benefits, dental, medical, prescription, chiropractic and vision. Added pluses. It’s too costly to not be insured. I am 55 and recently lost my job. I know I cannot afford regular insurance. I am now part of a company that cares about me and you.

Lily
Guest

We have neighbors who work hard but have jobs without health insurance. I found a prescription discount card that they could use to save on the price of their meds at the drugstore. It’s at http://www.rxdrugcard.com. The monthly family membership fee is only $4.95 and drug prices are on the website to check before joining.

Clint Chapman
Guest

I put the wrong link in my previous post. Please click on my name in this blog to go to my website.