More powerful than the military-industrial complex, more powerful than the oil companies, and more powerful than the gun lobby, the health-care-industrial complex spent $5.36 billion on Congressional lobbying between now and 1998. And yet, the health care industry isn't typically criticized as routinely as the above-mentioned industries for their ways in political whoring. Hospitals, and health care centers more broadly, provide the bulk of good paying jobs in many of our cities. In addition to this, they're experts at building good will amongst the communities they operate in, via their charity and outreach efforts. They heal the sick, comfort the afflicted, and deliver cute little babies. Pollution spewing, war-mongering comic villains they are not.
And yet, health care spending is positively breaking the banks of everyday consumers and our national treasury alike. This is because these very same health care providers ruthlessly milk medical insurers, the government, and individual Americans for every cent they have. The end result is a health care system unlike any other in the world. My previous blog post included images from a 2011 comparative price report by the International Federation of Health Plans. The more recent 2012 report indicates that utterly nothing has changed; basic health care procedures, surgeries, hospital and physician visits, and drugs are outrageously more expensive in the States than they are in any other first world nation across the board.
Health care spending as a percentage of GDP is 17.6%, which adds up to a $2.7 trillion bill for consumers and the government. Some $955.87 billion of that (or roughly a quarter of all federal spending in fiscal year 2014) is paid for by the federal government (primarily via Medicare, Medicaid, and SCHIP). In fact, the Congressional Budget Office (CBO) has long since pinpointed federal health spending as the driving force behind our annual deficits. The rest of the tab is picked up by insurers and the uninsured. The uninsured who are unable to pay can expect a parade of notices from collection agencies, followed by a lawsuit, followed by (if they have any) wage garnishment. Many times, it ends in bankruptcy.
Why is this happening? Why is health care so expensive? That's not an easy question to answer, but the above-linked NY Times article has, to my mind, the best straightforward answer:
"A major factor behind the high costs is that the United States, unique among industrialized nations, does not generally regulate or intervene in medical pricing, aside from setting payment rates for Medicare and Medicaid, the government programs for older people and the poor. Many other countries deliver health care on a private fee-for-service basis, as does much of the American health care system, but they set rates as if health care were a public utility or negotiate fees with providers and insurers nationwide, for example.
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Consumers, the patients, do not see prices until after a service is provided, if they see them at all. And there is little quality data on hospitals and doctors to help determine good value, aside from surveys conducted by popular Web sites and magazines. Patients with insurance pay a tiny fraction of the bill, providing scant disincentive for spending."
That's the key, really - regulating the providers as much as we regulate the insurers. Currently, the government lets providers charge, by and large, whatever they please (thanks to the health industries' massive lobbying efforts). Hence, the stupidly high $40,364 price tag for hip replacements, and $1,185 for colonoscopies.
In America, the debate often begins and ends with how we can stick it to insurance companies. Insurers, being the gatekeepers to health care, are the intuitive villains in the health care equation. And yet, while I'm not one to defend insurance companies, that ill will might be misplaced. Health insurers operate on rather modest net operating profit margins between 3 and 4 percent. That's in stark contrast to the sky high margins of the pharmaceutical industry (around 20%) and medical device manufacturers (around 12%)
Indeed, many of the more egregious sins of the insurance industry were wiped out by the Affordable Care Act (I've decided that I fucking hate the term "Obamacare," as well as "Romneycare" or "Hillarycare" or any other some-fucking-politician-care). In exchange for millions of more paying customers and generous subsidies from the federal government, insurers are now banned from denying anyone based on pre-existing conditions, setting lifetime caps on coverage, dropping customers simply because they're too costly, and spending more than 15% and 20% of revenue (for smaller firms and larger firms, respectively) on anything but actual healthcare for enrollees. Though they're no saints, and their bottom line is still of most importance to them, the insurers have been, in essence, neutered.
The same certainly can't be said for healthcare providers. Healthcare networks across the country are merging, consolidating, and becoming monopolistic behemoths; too large to fail, and too powerful to regulate. Ideally, insurers and providers come to the negotiating table as relative equals, with the providers seeking the highest prices they can obtain, and the insurers seeking the lowest possible prices for their enrollees. But the increasing might of the providers has drastically shifted the balance of power in their favor, thereby creating the most expensive health care system in the world. The insurers respond by passing along the costs to customers, in the form of higher premiums, co-pays, and deductibles.
This dynamic can be observed over the last decade within the group market, or the employer-provided market, thanks to the latest iteration of the Employer Health Benefits Survey, an annual study conducted by the Kaiser Family Foundation. A plurality of insured Americans, about a 149 million, obtain health care insurance through their employer. Unfortunately, premiums for family coverage within this market have risen 80% since 2003, from $9,068 a year to $16,351.
As the above image indicates, the average worker's contribution towards the total cost of the premium has also risen (89% increase since 2003). But higher premiums aren't the only way insurers pass along costs to enrollees. Currently, 78% of insured workers have an annual deductible that they must pay before health care services are reimbursed by the insurer. Worse, annual deductibles of $1,000 or more are becoming increasingly common - from 10% of covered workers in 2006 to 38% in 2013. For smaller firms, it's already greater than 50%.
Health care costs are rising at a brisker rate than general inflation. Insurers are responding by raising premiums and forcing customers to contribute more via deductibles and co-payments.
So, what does the ACA do about all of this?
The verdict is still out on that. The broader purpose of the law is to make health care insurance more accessible; it's impact on overall costs is less clear at this time. But there is some evidence to suggest that the law has already decreased the cost of American healthcare. Via Paul Krugman of the New York Times:
"Since 2010, when the act was passed, real health spending per capita - that is, total spending adjusted for overall inflation and population growth - has risen less than a third as rapidly as its long-term average. Real spending per Medicare recipient hasn't risen at all; real spending per Medicaid beneficiary has actually fallen slightly.
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So what aspects of Obamacare might be causing health costs to slow? One clear answer is the act's reduction in Medicare "overpayments" - mainly a reduction in the subsidies to private insurers offering Medicare Advantage Plans, but also cuts in some provider payments. A less certain but likely source of savings involves changes in the way Medicare pays for services. The program now penalizes hospitals if many of their patins end up being readmitted soon after being released - an indicator of poor care - and readmission rates have, in fact, fallen substantially. Medicare is also encouraging a shift from fee-for-service, in which doctors and hospitals get paid by the procedure, to "accountable care," in which health organizations get rewarded for overall success in improving care while controlling costs."
The primary way the ACA controls cost, not surprisingly, is through our existing government insurance schemes; especially Medicare. But the most important provision also happens to be the most controversial. The law allows for the creation of an Independent Payment Advisory Board, which has yet to be assembled. But when it is, it will consist of medical experts tasked with enacting changes to Medicare's payment system. In the event that Medicare's costs exceed its projected threshold in a given year, the Board is given broad powers to implement changes to reduce future growth in the program. This Board was lovingly referred to as a "death panel" by Sarah Palin and Co. back in 2009; a whopper that has since earned the distinguished honor of being labeled "lie of year" by PolitiFact.
In addition to the changes in Medicare and Medicaid, the private plans offered in the federal and state exchanges tend to have narrower networks and lower reimbursement rates than existing plans in the group market. This tends to be reported as a black mark against the ACA, but I see it differently. In fact, if enough people sign up for insurance in the exchanges, then it might be the impetus that shifts the balance of power back towards the insurers by bringing reimbursement rates in line with that of the rest of the industrialized world. Again, this remains to be seen. Open enrollment in the ACA began Oct. 1st, and ends on Mar. 31st.
Either way, the fate of the ACA is undeniably tied to the broader fate of our existing unsustainable health care costs.
The same certainly can't be said for healthcare providers. Healthcare networks across the country are merging, consolidating, and becoming monopolistic behemoths; too large to fail, and too powerful to regulate. Ideally, insurers and providers come to the negotiating table as relative equals, with the providers seeking the highest prices they can obtain, and the insurers seeking the lowest possible prices for their enrollees. But the increasing might of the providers has drastically shifted the balance of power in their favor, thereby creating the most expensive health care system in the world. The insurers respond by passing along the costs to customers, in the form of higher premiums, co-pays, and deductibles.
This dynamic can be observed over the last decade within the group market, or the employer-provided market, thanks to the latest iteration of the Employer Health Benefits Survey, an annual study conducted by the Kaiser Family Foundation. A plurality of insured Americans, about a 149 million, obtain health care insurance through their employer. Unfortunately, premiums for family coverage within this market have risen 80% since 2003, from $9,068 a year to $16,351.
As the above image indicates, the average worker's contribution towards the total cost of the premium has also risen (89% increase since 2003). But higher premiums aren't the only way insurers pass along costs to enrollees. Currently, 78% of insured workers have an annual deductible that they must pay before health care services are reimbursed by the insurer. Worse, annual deductibles of $1,000 or more are becoming increasingly common - from 10% of covered workers in 2006 to 38% in 2013. For smaller firms, it's already greater than 50%.
Health care costs are rising at a brisker rate than general inflation. Insurers are responding by raising premiums and forcing customers to contribute more via deductibles and co-payments.
So, what does the ACA do about all of this?
The verdict is still out on that. The broader purpose of the law is to make health care insurance more accessible; it's impact on overall costs is less clear at this time. But there is some evidence to suggest that the law has already decreased the cost of American healthcare. Via Paul Krugman of the New York Times:
"Since 2010, when the act was passed, real health spending per capita - that is, total spending adjusted for overall inflation and population growth - has risen less than a third as rapidly as its long-term average. Real spending per Medicare recipient hasn't risen at all; real spending per Medicaid beneficiary has actually fallen slightly.
***
So what aspects of Obamacare might be causing health costs to slow? One clear answer is the act's reduction in Medicare "overpayments" - mainly a reduction in the subsidies to private insurers offering Medicare Advantage Plans, but also cuts in some provider payments. A less certain but likely source of savings involves changes in the way Medicare pays for services. The program now penalizes hospitals if many of their patins end up being readmitted soon after being released - an indicator of poor care - and readmission rates have, in fact, fallen substantially. Medicare is also encouraging a shift from fee-for-service, in which doctors and hospitals get paid by the procedure, to "accountable care," in which health organizations get rewarded for overall success in improving care while controlling costs."
The primary way the ACA controls cost, not surprisingly, is through our existing government insurance schemes; especially Medicare. But the most important provision also happens to be the most controversial. The law allows for the creation of an Independent Payment Advisory Board, which has yet to be assembled. But when it is, it will consist of medical experts tasked with enacting changes to Medicare's payment system. In the event that Medicare's costs exceed its projected threshold in a given year, the Board is given broad powers to implement changes to reduce future growth in the program. This Board was lovingly referred to as a "death panel" by Sarah Palin and Co. back in 2009; a whopper that has since earned the distinguished honor of being labeled "lie of year" by PolitiFact.
In addition to the changes in Medicare and Medicaid, the private plans offered in the federal and state exchanges tend to have narrower networks and lower reimbursement rates than existing plans in the group market. This tends to be reported as a black mark against the ACA, but I see it differently. In fact, if enough people sign up for insurance in the exchanges, then it might be the impetus that shifts the balance of power back towards the insurers by bringing reimbursement rates in line with that of the rest of the industrialized world. Again, this remains to be seen. Open enrollment in the ACA began Oct. 1st, and ends on Mar. 31st.
Either way, the fate of the ACA is undeniably tied to the broader fate of our existing unsustainable health care costs.
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