Provider Costs are the Key Driver

A new study highlighted in Salon shows the cost of employer-based health insurance has soared  during the Great Recession, even though Americans use less medical services. The insightful article was written by Joshua Holland is an editor and senior writer at AlterNet.

The extent of the problem?

  • Employee healthcare costs have risen at 2X the rate of inflation.
  • Healthcare costs are the single most important factor driving US deficits long term.
  • If we paid the same for healthcare per person as the 30-plus countries with longer average life expectancies, we’d be looking at budget surpluses.

High costs lead to these poor outcomes:

  • Tens of thousands of unnecessary deaths annually.
  • Some of the worst health outcomes in the developed world.
  • American firms become less competitive in the global marketplace.
  • Wage stagnation for the middle class and working poor.

New Facts

The new study uses insurance industry data made available to the public for the first time. The data shows that the costs of medical services continue to climb much faster than the economy or wages. The report shows that working people covered by their employers “are paying more and getting less” because hospitals and other medical providers “just seem to be able to raise prices faster than general inflation.”

  • prices have increased at five times the rate of inflation in some areas like ER visits, outpatient surgery and mental health services.
  • Many Americans are simply foregoing services. Because while healthcare costs – and insurance premiums as a result –  continue to climb, an ever-larger share of the burden of those costs has been shifted onto the backs of working people.
  • Quality of care problems are growing. Another recent study found that half of those respondents who had been sick during the previous year thought that the “quality of care” they’d received was a problem, with three in four identifying rising costs as a serious issue.

Economist Jared Bernstein sums up the perfect storm facing healthcare:

“recession-induced falling incomes” + “faster growing prices for health services” + “increased cost-shifting from employers to workers.”

Healthcare Reform Was An Important Step

There is some evidence that the healthcare reforms of the Patient Protection and Affordable Care Act (PPACA, so-called “Obamacare”) is beginning to reduce costs to some degree. However, while the series of insurance reforms passed in 2009 were “valuable tweaks to our private insurance system,” but the reforms didn’t go very far to significantly “bend the cost curve.”

You Can’t Please Ideologues on Either Side

Compounding the problem is a misguided push to roll back those insurance reforms by political forces on both the right and the left.

Politically obstinate partisans on the left want to do away with “Obamacare” because:

they’re ideologically predisposed to buy into demagoguery about “death panels,” “government take-overs” and the supposed perfidy of the public healthcare systems that produce better outcomes for less in most of the rest of the developed world.

Some ideologically inclined progressive partisans also want to do away with it because:

It’s built around an individual mandate to buy private health insurance – long the signature Republican proposal…Their thinking appears to be that if we revert to the status quo ante, the system’s deep dysfunctions…will exert so much pressure on families and businesses that it will inevitably lead to an outcry for a single-payer system.

They’re All Wrong

However, repeal of the PPACA would reverse all this progress:

  • No lifetime and annual caps on out-of-pocket expenses.
  • The requirement that preventive care be covered without co-pays (which should eventually result in some cost containment),
  • The provision allowing young adults to stay on their parents’ plans.
  • Closing the “donut hole” that requires seniors to pay a big chunk of their prescription costs out-of-pocket.
  • Making 10 million low-income Americans – people largely priced out of the market at present — eligible for single-payer public healthcare as the threshold for Medicaid eligibility goes up by 50 percent. (According to one study, 75 percent of low-income workers lack health insurance.)

To give you an idea of the schizophrenic and generally uninformed American thinking about health care,  the individual mandate – which is absolutely essential to a well functioning private insurer-based healthcare system – has become almost universally unpopular, even though it is linked to the highly popular requirement that insurers cover people suffering from pre-existing conditions.

What If It’s Repealed?

Given the 15-year period between the last attempt to reform health care and the passage of the PPACA, and assuming it takes that long again to get a better set of reforms, there will be more cost shifting onto working families, more denial of coverage and widespread public suffering, including 10 million poor people who wouldn’t be covered under Medicaid.

According to  Joshua Holland, instead of “throwing away a decent set of insurance reforms, and a new infrastructure for (almost) universal coverage,” we need to

“keep moving the ball forward. With Americans paying more to get less health care, the moment is ripe to open up Medicare to all comers. And talk of going backward is hard to understand.”

Next Steps

Yes, but just what will “moving the ball forward” require?  The solutions lie here:

  • Realistic public awareness that the providers – not the insurers, not political ideologies – are the problem (Hospital groups, Suppliers and Big Pharma.)
  • A legislative agenda to bring the Providers into line.
  • De-politicization of the issue.

Only if the public comes to understand that Big Pharma profits are obscenely bloated in relation to those of other industries, as a result of a systematic campaign of political influence, and that this problem endangers the health and economy of a nation, a realistic way forward will be possible.

What do you think?