OP-ED

The Wrong Way to Save Money on Health Care

Employer outlays for workers’ health insurance slowed from a 9 percent jump last year to less than half that — 4 percent — this year, according to a new survey from the Kaiser Foundation. Good news?

Our political class believes it is. The Obama administration attributes the drop to the new Affordable Care Act, which, among other things, gives states funding to review insurance rate increases.

Republicans agree it’s good news but blame Obamacare for the fact that employer health-care costs continue to rise faster than inflation. “The new mandates contained in the health care law are significantly increasing the cost of insurance” says Wyoming senator Mike Enzi, top Republican on the Senate health committee.

But both sides ignore one big reason for the drop: Employers are shifting healthcare costs to their workers. (The survey shows workers contributing an average of $4,316 toward the cost of family health plans this year, up from $4,129 last year. Many are receiving little or no employer-provided coverage at all.)

Score another win for American corporations — whose profits continue to be robust despite the anemic recovery — and another loss for American workers.

Those profits aren’t due to a surge in sales. Exports are down (Europeans, Japanese, and Chinese are all pulling in their belts) and American consumers don’t have the dough to buy more.

The profits are largely due to lower corporate costs, especially when it comes to their payrolls. Employer-provided health and pension contributions are shrinking, and the real median wage continues to drop.

High unemployment has given companies more bargaining leverage over their workers, who have to accept lower real pay and benefits or risk losing their jobs.

When it comes to health insurance, employees increasingly have to choose between health-insurance policies with sky-high premiums or with sky-high co-payments and deductibles. And since they can’t afford the former they’re opting for the big co-payments and deductibles – or no insurance at all.

The result is fewer visits to the doctor and less use of other medical services.

This is a new trend, and it comes despite the Affordable Care Act (which hasn’t been fully phased in). And it wouldn’t be worrisome if we were seeing too much of doctors before, and using up medical resources we didn’t need.

But it’s worrisome if it means less preventive care, or health problems going untreated until they become chronic illnesses or crises.

Healthcare costs do have to be better controlled. They now claim 18 percent of our entire economy. But the best way to control them isn’t by cutting back care. It’s by wringing inefficiencies out of the system.

Our healthcare system wastes 30 cents of every dollar spent on health care, according to new calculations by the well-respected Institute of Medicine. Much of it is wasted on repeated tests, and a huge portion wasted on paperwork – between doctors and hospitals and specialists and insurers, to justify expenditures by one group to be paid by another.

A single-payer system would be far more efficient.

So back to my original question. Is the dramatic slowdown in employer health-care costs good news? It all depends. If we and our families are in good health, or we’re high earners who can afford good health coverage without big co-payments and deductibles, or if we own lots of shares in companies showing higher profits because they’re trimming pay and benefits – or we’re in all three categories – it’s probably good.

But if we’re none of these, it might not be good news – especially if it means we’re getting less care than would otherwise keep ourselves and our families healthy.

At the least, if we’re concerned about the health and well-being of all Americans, we need to find out much more before we celebrate.

Robert Reich served as the 22nd United States Secretary of Labor under President William Jefferson Clinton from 1992 to 1997. He shares many of his thoughts and columns at Robert Reich, where this post first appeared.

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an easy way to make moneymaggiemaharJohn LynchnurseCJ Recent comment authors
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an easy way to make money
Guest

A motivating discussion is worth comment. I believe that you ought to write more on this topic, it may
not be a taboo subject but typically folks don’t discuss these
issues. To the next! All the best!!

bob hertz
Guest

Good points about Germany.

All that I would add is that the American states which are closest to Canada are not too far behind Germany in most measures of security.. (Mass, NH, VT, MI, MN, WI, ND, MT, WA)

America gets its reputation for stinginess from the South, and from the border states near Mexico.

(see Michael Lind’s piece, “Uninsured LIke Me.”)

Some of Germany’s social protections go all the way back to Bismarck.

Biut other protections were installed by American occupiers, a fair number of whom were Jewish women admirers of FDR, All I can say is, quite the irony.

maggiemahar
Guest

John Lynch & Bob Very interesting about he ICU study at Mass General. Could you tell me where you found the study? As a doctor who speicalizes in intensive care once told me . . .”If people only knew . . . If they heard the patients groaning, saw them trying to jump out of their beds . . (which is why many have to be tied to their beds . . . ” There is such a thing as “ICU” dementia. I’m told that people usually get over it after they are released from the ICU (if they are.)… Read more »

John Lynch
Guest

It’s all well and good to focus on the insurance nuances of the ACA – and Maggie makes some compelling arguments in favor of regulated private insurance over single payer – but this debate completely omits the central roles of doctors and patients. The only allusions to doctors refer to their near universal insistence on defensive medical practices to protect themselves from lawsuits. This, of course, is a problem. But so is our stubborn refusal to recognize it as the unethical practice it inherently is – subjecting patients to medical interventions, including dangerous hospitalizations, they don’t need explicitly violates medical… Read more »

Jack Lohman
Guest

Don’t give up on single payer, it is the only thing that will work (well). Proof is the $125 million in campaign bribes given by the insurance industry to keep it off the table and give us instead ObamaCare mandates. And that’s its problem… it WORKS, and the least profitable (to politicians) is a system that works.

Aren’t our esteemed politicians great?

nurse
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nurse

It is very informative to know how many of you believe the numbers will work out. Others even have formulas to calculate that out of pocket expenses. Reducing costs related to health is imperative with our current system. However, what role does quality of care play into all of this. Are the individuals really going to obtain more for their money? or are they going to be short changed because of fear from providers of penalties. At least with the ACO payments and rewards for hospitals will be based not on how much their providers do but instead how well… Read more »

Barry Carol
Guest
Barry Carol

Bob – While I don’t have a complete answer for you about Germans going on vacation all over the place while paying high taxes, I can make the following points: 1. When my wife and I go on organized tours either abroad or in the U.S. or on a cruise, it seems like everyone has plenty of money to travel. However, we’re just meeting the 20% of the people that do 80% of the traveling. Lots of people either don’t go anywhere or visit a nearby beach or their relatives. 2. The German economy is more export driven than most… Read more »

Bob Hertz
Guest

Barry I agree with you 100% that the Exchanges and subsidies will be wildly and (from a budget point of view) dangerously popular. In the absence of unions, most employers who stop offering health insurance will not raise wages very much. And once those employers get a taste of ‘freedom’ from benefits, it will be very hard to get them back in a generous mode ever again. I have seen this first hand in the construction trades and in trucking. Your comments on Germany are valuable. Still, writers like Steven Hill and Tom Geoghegan point out the “dissonance” …..whereby Germans… Read more »

Barry Carol
Guest
Barry Carol

Bob – While the German approach to financing health insurance has some conceptual appeal, it’s not as simple and straightforward as it sounds. If you’re unemployed in Germany, your health insurance premium is paid by the unemployment fund. If you’re retired, it’s paid by the pension fund – equivalent to our social security fund. To pay for all this, however, as I noted yesterday, workers pay slightly over 20% of wages for health insurance, long term care insurance, unemployment insurance and pension fund contributions combined up to certain limits that I alluded to previously. The employer pays a comparable sum.… Read more »

Bob Hertz
Guest

Maggie, I think that the employer penalty for dropping all health insurance is only $2,000-$3000 per employee. If the employer has been paying $4000 to $12,000 for employee’s health insurance, (depending on single or family coverage), they will accept the penalty in a heartbeat. But let’s not debate the above scenario too much. The sentence in your excellent response that i want to review is the statement that “employers who move their employees into the exchanges must contribute what they are paying now into the pools.” This hits on an issue that has troubled me for a while. The American… Read more »

CJ
Guest
CJ

People are putting off dealing with health issues that wouldn’t be a big deal if addressed in a timely way. And skipping doses to stretch a rx. And docs have no time to address the numerous issues ppl have in 15 mins or to talk about preventive behavior change. So much unnecessary cost, of all kinds – much of it impossible to measure, but that has an insidious impact on QOL in America, today and into the future.

maggiemahar
Guest

Bob & Barry & every commenting on Single Payer: Bob: There is no way for large employers to “slide their employees” into the Exchanges where they will receive subsidies. A large employer would wind up paying large penalties if he doen’t offer affordable insurance. (If necessary, those penalties coudl be raised, but I don’t anticipate many large employers dropping heatlh benefits. They have been asking employees to pay higher co-pays or deductibles, but there is a limit to what they will be able to do under the ACA–if out of pocket expenses are too high, the insurance will not be… Read more »

Margalit Gur-Arie
Guest

” I also think that everyone above the FPL income level should pay something in income taxes even if it’s only $50 or $100 just to convey the idea that government services and benefits aren’t free.” I actually think you’re right, Barry. And I also think this should go the other way as well. I think those with exponential multiples of FPL should be made to feel a slight pain too, so they also understand that doing business in a country that makes untold riches possible is not free. I’m not sure what amount of taxation would bring that message… Read more »

DeterminedMD
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DeterminedMD

Statistics can be a double edged sword, and for health care especially, you can get cut both ways. Doesn’t really matter if Romney or Obama are in the White House come January 2012, the legislation as is will not solve problems, and why is it Democrat supporters either shout down facts/data that show concern or just turn and ignore the dissent, until it goes away? I mean really, pass significant legislation and wait for the main parts to kick in 4 years later? What does that say about the viability of a bill? I don’t need data or irrefutable facts… Read more »

DeterminedMD
Guest
DeterminedMD

Just curious to any who want to take this on: if the PPACA was such a wonderful legislative masterpiece that was going to save the nation, why did no Democrat use it in campaigning and why did the Democrats lose such a large proportion of the House in 2010? That is a fact and data shows the American people as a majority did not like the legislation as a sizeable part to their voting choices. Not that I like the substitutions made, but hey, this one party system doesn’t give real invested and involved voters much choice, doofus or roofus.… Read more »

DeterminedMD
Guest
DeterminedMD

Oh, and if the Massachusetts health care model is so wonderful and effective, why is it NO state has bothered to try to initiate their own model while fighting the federal legislation, to my knowledge as of now? I haven’t read the federal laws trump Massachusett’s law, so, what gives? Again, deeds not words are the telling tales here. Maybe even Democrats in their own little State worlds see the coming problems and are not eager to jump onto that vessel the Democrats are sailing with such clueless glee into those deeper, colder waters. It was titanic legislation,right? Doubt anyone… Read more »

bob hertz
Guest

In the ACA Exchanges, a family whose income is $50,000 will get a subsidy of at least $10,000 a year if they buy a qualifying family policy. The drafters of the ACA assumed that the exchanges would only cover about 15 million persons from the individual market, and that a lot of the new participants would not be familiies. However, if corporations find a way to slide their employees into the exchanges, where the employees will be better off at most income levels, the costs of the ACA will take off. 20 million families getting a subsidy of $10,000 a… Read more »