Posts Tagged ‘healthcare’

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The Wall Street Journal refers to it as “insurers playing a game of thrones.”

Big U.S. insurers are courting one another for possible multibillion-dollar deals. How they pair off could have significant implications for the managed-care industry, its individual and corporate customers, and U.S. medical providers. . .

“Usually, fewer competitors means prices will be less advantageous for consumers,” saidGary Claxton, an insurance expert at the Kaiser Family Foundation. “It probably means they’re going to be in a better position to maintain their margins,” he said.

Given the high costs of U.S. healthcare, insurance is obviously the way most Americans are able to gain some kind of access to the health system.

According to the latest (January–March 2015) National Health Interview Survey (pdf), about two-thirds of Americans below the age of 65 rely on private health insurance. The rest either don’t have health insurance coverage (10.7 percent) or have some kind of public health plan (24.2 percent).

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The problem is, even without the latest proposed mega-mergers, the U.S. private health- insurance industry is already highly concentrated. Treating Blue Cross Blue Shield (BCBS) affiliates as a single industry (since, with few exceptions, they have exclusive, non-overlapping market territories and hence do not compete with one another), and adding in Anthem (which operates the for-profit Blue plans across 14 states), the national market share of the four largest insurers increased significantly from 74 percent in 2006 to 83 percent in 2014. By comparison, the four-firm concentration ratio for the airline industry is 62 percent.

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Much the same process of concentration has been confirmed by examining the so-called Herfindahl-Hirschman index.* Health insurance, as shown in the red line in the graph above, is the most concentrated industry (compared to, for example, hospitals and telecom). With a current index near 4,000 (having risen 79 percent between 2000 and 2014), and some states with indices exceeding 8,000, health insurance is easily considered highly concentrated.

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It should come as no surprise that growing concentration in health insurance (based, mostly, on mergers and acquisitions) has meant both lower payments to providers (like physicians and hospitals) and higher premiums for payers (both employers and individuals)—thus boosting health-insurance profits.

So, within the U.S. healthcare system, Americans who don’t qualify for public programs are forced to rely (directly or indirectly) on a private health-insurance industry that is increasingly concentrated (and, if the proposed mergers go through, will rise even higher on the Herfindahl-Hirschman index) and is able to dictate both prices and the quality of policies.

Right now, if private health insurers suffer losses (as they claim has been the case under Obamacare, when they can’t pick and choose the healthiest customers in the exchanges), they can take their ball and go home. As James Kwak explains,

The obvious market-based solution is to keep increasing the penalties for not being covered until enough healthy people join the pool so insurers can make profits. But all that accomplishes is shifting more of the overall losses onto healthy people.

The obvious alternative is to reap the benefits of the current level of concentration and transform the existing private health-insurance programs into a public single-payer system.** That would succeed in creating universal coverage, lowering healthcare costs, and redistributing the losses across the society on the basis of an ability to pay.

 

*The Herfindahl-Hirschman Index is used by the Antitrust Division of the U.S. Department of Justice and the Federal Trade Commission to evaluate the potential antitrust implications of acquisitions and mergers across many industries, including health care. It is calculated by summing the squares of the market shares of individual firms. Markets are then classified in one of three categories: (1) nonconcentrated, with an index below 1,500; (2) moderately concentrated, with an index between 1,500 and 2,500; and (3) highly concentrated, with an index above 2,500.

**It’s possible, of course, to imagine a middle ground, with higher marketplace subsidies for purchasing private insurance, stricter penalties for individuals who aren’t interested in purchasing insurance, and a limited government option. But that’s just an attempt to juggle the parameters of the existing institutional structure, without recognizing and overcoming the social costs of a system based on private health insurance.

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On Tuesday, I began a series on the unhealthy state of the U.S. healthcare system—starting with the fact that the United States spends far more on health than any other country, yet the life expectancy of the American population is actually shorter than in other countries that spend far less.

Today, I want to look at what U.S. workers are forced to pay to get access to the healthcare system.

According to the Kaiser Family Foundation, about half of the non-elderly population—147 million people in total—are covered by employer-sponsored insurance programs.* The average annual single coverage premium in 2015 was $6,251 and the average family coverage premium was $17,545. Each rose 4 percent over the 2014 average premiums. During the same period, workers’ wages increased only 1.9 percent while prices declined by 0.2 percent.

But the gap is even larger when looked at over the long run. Between 1999 and 2015, workers’ contributions to premiums increased by a whopping 221 percent, even more than the growth in health insurance premiums (203 percent), and far outpacing both inflation (42 percent) and workers’ earnings (56 percent).

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Most covered workers face additional out-of-pocket costs when they use health care services. Eighty-one percent of covered workers have a general annual deductible for single coverage that must be met before most services are paid for by the plan.** Since 2010, there has also been a sharp increase in both the percentage of workers on health plans with deductibles—which require members to pay a certain amount toward their care before the plan starts paying—and the size of those deductibles. The result has been a 67-percent rise in deductibles (for single coverage) since 2010, far outpacing not only the 24-percent growth in premiums, but also the 10-percent growth in workers’ wages and 9-percent rise in inflation.

In recent years, the increase in U..S. health costs has in fact slowed down. But the slowdown has been invisible to American workers, who have been forced to pay much higher premiums and deductibles in order to get access to healthcare for themselves and their families.

 

*Fifty-seven percent of firms offer health benefits to at least some of their employees, covering about 63 percent workers at those firms.

**Even workers without a general annual deductible often face other types of cost sharing when they use services, such as copayments or coinsurance for office visits and hospitalizations, and when they purchase prescription drugs.

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While I was finishing up the latest right-wing libertarian dystopian finance novel, I was also trying to figure out the dystopia that the U.S. healthcare system has become.

Clearly, for most Americans, the combination of private healthcare and private health insurance (and, now with Obamacare, public subsidies) is a nightmare. There is a glaring contradiction between healthy profits and the health of the U.S. population. Over the course of the next couple of weeks, I plan to explore various dimensions of that system.

To start with, consider how much of an outlier the United States is in terms of expenditures and outcomes compared to other countries. As Max Roser explains,

the US spends far more on health than any other country, yet the life expectancy of the American population is not longer but actually shorter than in other countries that spend far less.

If we look at the time trend for each country we first notice that all countries have followed an upward trajectory – the population lives increasingly longer as health expenditure increased. But again the US stands out as the the country is following a much flatter trajectory; gains in life expectancy from additional health spending in the U.S. were much smaller than in the other high-income countries, particularly since the mid-1980s.

This development led to a large inequality between the US and other rich countries: In the US health spending per capita is often more than three-times higher than in other rich countries, yet the populations of countries with much lower health spending than the US enjoy considerably longer lives. In the most extreme case we see that Americans spend 5-times more than Chileans, but the population of Chile actually lives longer than Americans.

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We’re all familiar with the usual indictment of the U.S. healthcare system: we pay much more and we get much less.

For example, according to the Commonwealth Fund:

Data from the OECD show that the U.S. spent 17.1 percent of its gross domestic product (GDP) on health care in 2013. This was almost 50 percent more than the next-highest spender (France, 11.6% of GDP) and almost double what was spent in the U.K. (8.8%).

Since 2009, health care spending growth has slowed in the U.S. and most other countries. The real growth rate per capita in the U.S. declined from 2.47 percent between 2003 and 2009 to 1.50 percent between 2009 and 2013. In Denmark and the United Kingdom, the growth rate actually became negative. The timing and cross-national nature of the slowdown suggest a connection to the 2007–2009 global financial crisis and its aftereffects, though additional factors also may be at play. . .

On several measures of population health, Americans had worse outcomes than their international peers. The U.S. had the lowest life expectancy at birth of the countries studied, at 78.8 years in 2013, compared with the OECD median of 81.2 years. Additionally, the U.S. had the highest infant mortality rate among the countries studied, at 6.1 deaths per 1,000 live births in 2011; the rate in the OECD median country was 3.5 deaths.

That alone is an argument in favor of Medicare for all.

On top of that, we know that healthcare outcomes within the United States are profoundly unequal (e.g., since the life expectancy gap between those at the top and bottom of the distribution of income is growing).

Now, we’re learning, thanks to a new study on healthcare use and expenditures that appears in the July 2016 issue of the journal Health Affairs [ht: sm], that healthcare spending itself is highly unequal.

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According to the authors of the study (unfortunately behind a paywall), even as the increase in overall health costs has slowed (starting in 2004), healthcare spending has become increasingly skewed toward wealthier Americans.

Before the 1965 passage of legislation creating Medicare and Medicaid, the lowest income quintile had the lowest expenditures, despite their worse health compared to other income groups. By 1977 the unadjusted expenditures for the lowest quintile exceeded those for all other income groups. This pattern persisted until 2004. Thereafter, expenditures fell for the lowest quintile, while rising more than 10 percent for the middle three quintiles and close to 20 percent for the highest income quintile, which had the highest expenditures in 2012. The post-2004 divergence of expenditure trends for the wealthy, middle class, and poor occurred only among the nonelderly. We conclude that the new pattern of spending post-2004, with the wealthiest quintile having the highest expenditures for health care, suggests that a redistribution of care toward wealthier Americans accompanied the health spending slowdown.

So, while the slowdown in health spending between 2004 and 2013 was widely reported and much celebrated, the breakdown by income groups suggests a much more sobering interpretation:

Slower spending growth (at least through 2012) was concentrated among poor and middle-income Americans, leading to a growing disparity in health expenditures across income groups.

What we’re seeing—in this pattern of sharply rising spending on healthcare by the wealthy and flat or slow growth for everyone else—is what the authors consider to be “a shift from need-based to income-based receipt of spending growth.” In other words, it represents a return to the unequal consequences of the pre-Medicaid, pre-Medicare financing of healthcare in the United Staes.

That’s the last straw. Do we really need any more arguments for universal healthcare, aka, Medicare for all?

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Special mention

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William J. Hager [ht: sm] said he killed his wife of more than 50 years because he could no longer afford to pay for her medications.

The killing in Port St. Lucie and Mr. Hager’s explanation were detailed in an arrest affidavit and by local news media. Mr. Hager was arrested and charged with first-degree premeditated murder. But the case appeared to also highlight the difficulties faced by older people who are retired or on fixed incomes and struggle to pay for their medicine when they are ill or in pain.

At the sheriff’s office, Mr. Hager told deputies that his wife had a “lot of illnesses and other ailments which required numerous medications,” which he “could no longer afford,” the affidavit said.