Let's Not Hide Health Costs
2 July, 2008
We are awash in health-care proposals. President Bush has one. So does California Gov. Arnold Schwarzenegger. Democratic Sen. Ron Wyden has a plan, as does a coalition led by Families USA (a liberal advocacy group) and America's Health Insurance Plans (a trade group). To some extent, all these plans and others aim to provide insurance to the estimated 47 million Americans who lack it--a situation widely deplored as a national disgrace. But the real significance of all these proposals, I submit, lies elsewhere.
For decades, Americans have treated health care as if it exists in a separate economic and political world: when people need care, they should get it; costs should remain out of sight. About 60 percent of Americans receive insurance through their employers; to most workers, the full costs are unknown. The 65-and-older population and many poor people receive government insurance. Except for modest Medicare premiums and payroll taxes, costs are largely buried in federal and state budgets.
It is this segregation of health care from everything else that is now crumbling--and the various health proposals are just one sign. We see others all the time. For example, even with employer-provided insurance, workers' monthly premiums (which cover only part of the costs) have skyrocketed. From 1999 to 2006, they doubled from $129 to $248.
Look at Massachusetts. Last year the then Gov. Mitt Romney made headlines by signing legislation to cover all the state's uninsured. The law required that everyone with incomes three times the federal poverty line buy "affordable" insurance (people with incomes below that threshold would be subsidized on a sliding scale). Romney suggested annual premiums for a single worker might total $2,400. But when insurance companies recently provided real estimates, the cost was much higher: $4,560. Is it sensible policy to force workers with a $30,000 income--about triple the poverty line--to spend nearly a sixth of their budget on health insurance, as opposed to food, rent or transportation? Good question.
The hard questions won't sit still, because health care (now a sixth of the economy, up from an 11th in 1980) is too big to be hidden. Myths abound. Contrary to conventional wisdom, the doubling of premiums for employer-provided coverage doesn't mean companies shifted a greater share of costs to workers. In both 1999 and 2006, premiums covered 27 percent of costs, says Paul Fronstin of the Employee Benefit Research Institute. It's simply the rapid rise in total health spending that's depressed workers' take-home pay.
One myth about the uninsured is that, because they're heavy users of emergency-room services, providing them with insurance (and regular care) would actually lower their costs. This may be true for some--but not most. The trouble is that the uninsured don't really use emergency rooms heavily. A study in the journal Health Affairs finds that their use is similar to that of people with private insurance--and half that of people with Medicaid. The upshot is that extending insurance to all the uninsured would be costly, because they would get more and (presumably) better care. John Sheils of the Lewin Group estimates the annual cost of their care would rise 75 percent to $145 billion.
References : http://www.newsweek.com |
