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.

Marketwatch has an article about how you should choose your high-deductible health plan and as you might expect it goes over ground that has been pretty well trod over here at THCB. Basically it suggests that an employee should guess whether they’re going to be healthy or sick over the coming year, factor in the premium contribution they’ll be asked for by their employer, and balance it out accordingly. (No prizes for guess which you should choose if you know you’re going to be one or the other).  But even though the author doesn’t realize it, the really interesting piece is a throwaway at the end about Cigna’s plans for its own employees:

The biggest changes for Cigna Corp.’s 26,000 employees during this year’s open enrollment include a total conversion to high-deductible plans, mandatory health-risk assessments and a 10% break on premiums for nonsmokers, said Catherine Hawkes, director of Cigna’s total health and productivity. The health-benefits company already has 40% of its workers enrolled in high-deductible plans for 2005, most of them in HRAs, she said. But they’ll have the choice of two HRAs and an HSA for 2006. For in-network coverage where the employer has negotiated rates with providers, single HSA plans will have a deductible of $2,000 and families will pay $4,000 up front, Hawkes said. The out of network HSAs will carry deductibles of $3,000 and $6,000 respectively. Cigna also is contributing to workers’ HSAs for the first time in the amount of $200 for single employees and $400 for family plans, she said. And workers will be able to choose from six mutual funds instead of the low-interest-bearing account currently in use. (Bold emphasis added by me)

This explains exactly how things will play out (much, it might be added, to the fears of Eric Novack). The basic problem with HSAs, (as I’ve explained add nauseam–for the math detail dig down in here) is that they allow the individual to pull money out of the risk pool, forcing the pool to find more money for the care of the sick 20% after the healthy 80% have taken their money out. A self-insured employer is a risk pool so there’s no logical incentive for an employer to put money into an HSA that an employee can walk off with.  But there is a logical incentive for them to move employees from low or no deductible plans into high-deducible ones and not fund that deductible.

Imagine if Cigna had 100 employees, and paid $500,000 total for their health care in a fully covered pool. Remember that 20 of them will take up 80% of spending ($400,000 at $20,000 each).  If Cigna  switches to a HDHP and put $2000 cash into each of their HSAs, by the time it came to find the $360,000 required for the sick 20 (the $400,000 minus the $40,000 in their HSAs), it would notice that it had already put $200,000 into the HSAs leaving a hole of $60,000. But if instead it started paying for its employees only when they spent more than $2000, they would now be spending $360,000 on health care for its sick 20 employees (the employees needing to come up with the first $2000 each) and nothing for the rest of them. So Cigna could even afford to throw a couple of hundred bucks into every employee’s HSA because it would all of a sudden be saving itself 25%, over what it cost it before. That’s why the HDHP is proving so popular among employers, because it gives them the ability to reduce their costs while claiming that they are "empowering" their employees.

No, of course reality isn’t quite like this, and Cigna’s employees are probably getting breaks on premium co-shares, and maybe even bigger pay rises that go along with this, and overall it’s a trend rather than an immediate shift. But that is what is going on here, and it’s not dissimilar to the Walmart/Costco situation, where Walmart pays fewer benefits and makes more money. So it’s just more evidence that the abdication of employer-based health insurance is well underway, and being led by health plans who are looking for the next big thing to sell to their dumb employer clients.

This rightly has sensible advocates of market reform like Brian Klepper and Pat Salber very worried. In their opinion piece in Modern Healthcare they note that we are essentially replacing employer-based health insurance with nothing. And that has big consequences for a health care delivery system which depends on third party payment to make up the numbers.

And I guess if Cigna et al eventually finish off employer-based health care by getting their clients out of the business of providing health benefits–well that wouldn’t be a great loss. After all it would mean the plans went out of business too! But I guess that’s slightly longer range thinking than the average health insurer’s management team is used to.

Ezra Klein has an article up the thorny problem of how to get health coverage or continue it to those who have been displaced. Ezra suggests extending COBRA to all of them. The major problem there of course is that proving who worked where is going to be a nightmare, and with no income many people won’t be able to afford COBRA (or any other kind of insurance, just before you jump in Ron!), and those employers that won’t survive Katrina or which are already effectively finished, will not be able to make their monthly premium payments — which will at some point mean the end of those employers’ plans for ex-employees to buy into using COBRA. This solution may though work for those who have stable employers and have coverage that the employers are continuing to pay for while they’re effectively laid-off or have the money to buy an extension of that employer’s coverage (even if the employer itself is no more) if the insurers can be persuaded to allow that (which I’m sure under the circumstances they can).

For everyone else (which is probably the vast majority)  Ezra basically suggests what seems to be the current prevailing thought. Let those people go on Medicaid in whichever states they end up and let the states make sure that the Feds pick up the tab as part of the overall disaster relief effort as promised.

Of course this is one more reason why a simple national universal insurance system would be a better way of handling things. If everyone was covered then providers could give services in the certainty that they’d get paid. Don’t forget that this will be the situation for those who are over 65, as Medicare is a national system (albeit administered regionally).

And at the least Katrina has uncovered the ugly secret of what it’s like to go without in America today….and going without health care coverage is a big part of going without.