Condition Critical: A Look at America’s Ailing Health Insurance System

[bholas]

Franz Kafka couldn’t have written it any better.

Each day, you wake up and pay premiums to a faceless health insurer that seems bent on denying what its name implies. And each time you encounter a new medical situation, you contemplate the dreaded limbo of “claim pending.”

Through this murk, one thing is clear: No matter the reformist posturing of politicians, the tinkering of think tankers or the blue-sky brainstorming of consumer health advocates, you will pay more for healthcare tomorrow than you did today -- whether you write a check, submit to a payroll deduction or simply acknowledge that in a free labor market, employer-paid premiums strip thousands of dollars from your gross pay.

The numbers make vivid the nightmare. US health insurance premium hikes vary widely over the years, but nearly always trounce wage increases and general inflation. From 2000 to 2006, premiums cumulatively rose 87 percent, while inflation rose 18 percent and wages grew 20 percent, according to the Kaiser Family Foundation’s Employer Health Benefits 2006 Annual Survey. The 2008 survey reports that while premiums rose a "modest 5 percent," they have more than doubled since 1999. Over that same the time period, wages increased 34 percent and inflation rose 29 percent.

And the nightmare is national: The United States spent 16 percent of its gross domestic product on healthcare in 2007, and that proportion is projected to reach 20 percent by 2015. Our doctor and hospital bills have passed $2 trillion, and are rising rapidly.

How can we wake ourselves from this bad dream? First, we must understand the fundamental problems -- or at least survey diverging views on what ails our byzantine system of healthcare financing.

Big Problems and a Divisive Search for Solutions

Here’s the US healthcare financing crisis -- in a nutshell: Out of trillions in healthcare spending, insurance companies spend hundreds of billions of dollars to compete with each other, generate profits for shareholders and contain costs by denying claims. At the same time, we want the best treatments for all our ills, regardless of cost. And we leave approximately 47 million uninsured, which shifts their healthcare costs to taxpayers and the insured population.

In the community of stakeholders -- which includes healthcare consumers, providers, insurers, employers and government -- there is no consensus on where Americans should look for solutions.

Consumer advocates are quick to point to the insurance industry as a prime cause of overpriced healthcare. “In Ohio alone, if we eliminate insurers, we save $11.6 billion a year,” says Jerry Gordon, secretary of Single-Payer Action Network Ohio, a grassroots group.

By contrast, insurers and their consultants tend to believe that free markets and consumerism can help control healthcare costs. “We need to remove barriers so that the market can take care of itself, instead of regulating it to the point where it can’t respond to what people are looking for,” says Bill Copeland, national managing director for the life sciences and healthcare practice at Deloitte Consulting LLP.

State and Federal Initiatives

However, many private insurers do believe government must play a role in controlling healthcare costs.

“The government is critical to getting more people insured, but the government shouldn’t own the system,” says Bill Barr, executive vice president of operations at Regence, a nonprofit healthcare provider.

For their part, many states, including Massachusetts and California, have hatched health insurance reforms that seek to cover nearly every resident.

“The debate in California is incredibly promising,” says Dr. Ralph deVere White, director of the University of California Davis Cancer Center. “We have to give constant encouragement to our lawmakers to do something about this, because the public wants it.”

But some in the private sector believe that most government efforts to date are off-target.

“Health plans would like to serve the uninsured and underinsured, but what the states want to sell is not something those consumers can afford,” Copeland says. “The price point in Massachusetts doesn’t make the plan affordable.”

What Role Should Employers Play Going Forward?

Even as many employers struggle to pay health insurance premiums, employees continue to lose ground. Millions of workers find themselves paying an ever-greater share of ever-rising employer-sponsored health insurance premiums -- or not paying the premiums and going without insurance. The average worker contributed $2,973 to the $11,480 premium for an employer-sponsored family policy, the Kaiser survey reports.

And of the 25 percent of Americans who have trouble paying medical bills, 69 percent have health insurance, according to an October 2006 poll by USA Today, the Kaiser Family Foundation and ABC News.

Because paying premiums, copayments and deductibles can bring on personal bankruptcy, employer-sponsored health insurance isn’t a complete solution even for those workers fortunate enough to have it.

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