25 Million Americans Are 'Underinsured'
Middle- and upper-income families find it harder to get needed medical care, report says
By Steven Reinberg
HealthDay
Posted June 10, 2008
TUESDAY, June 10 (HealthDay News) — The number of American adults who had inadequate health insurance to cover their medical expenses rose 60 percent from 2003 to 2007, from 16 million to more than 25 million people.
Hardest hit were families with middle and higher incomes, those whose income was 200 percent above the federal poverty level or those with an annual income of $40,000 or more, a new report by The Commonwealth Fund found.
“Insurance coverage is the ticket into the health-care system,” Karen Davis, president of The Commonwealth Fund, said during a Monday teleconference. “For too many, that ticket does not buy financial security or genuine access to care.
“We need to extend effective, affordable health insurance to all,” added Davis. “Shifting costs to patients is not an equitable or effective solution to rising health-care costs. It is time for serious consideration of changes in the way we pay for and deliver health services. Ultimately, we need a national solution to the problem of millions of uninsured and underinsured Americans.”
The report is published in the June 10 issue of Health Affairs.
To make their estimates, the researchers conducted a national survey in 2007 of 3,501 adults. They found that among adults aged 19 to 64, 25.2 million were “underinsured.” That number was based on out-of-pocket health-care costs as a proportion of income.
“Overall, the study finds a startling 60 percent increase in the number of underinsured working age adults over the past four years,” said study co-author Cathy Schoen, a senior vice president at The Commonwealth Fund. “A jump up to 25 million underinsured in 2007, compared to only 16 million in 2003.”
Approximately 42 percent of adults aged 19 to 64 years old — 75 million people — were either underinsured or didn’t have health insurance in 2007. That represents an increase of 33 percent since 2003, when the last survey was done, Schoen said.
People who are underinsured are people who have health insurance but spend 10 percent or more of their income on out-of-pocket medical expenses. For people below 200 percent of the federal poverty level, being underinsured means spending more than 5 percent of income on out-of-pocket medical costs.
Being underinsured also means paying deductibles of 5 percent or more of family income.
The researchers found that people who were underinsured were more likely to go without needed health care and have problems paying medical bills, compared with people who have adequate health insurance.
In fact, 53 percent of the underinsured and 68 percent of those without health insurance had to forgo needed medical care, such as not seeing a doctor when sick, not filling prescriptions, and not getting recommended diagnostic tests or treatments. “The underinsured look a lot like the uninsured,” Schoen said.
Among the underinsured, 45 percent reported having difficulty paying bills, being contacted by collection agencies for unpaid bills, and curtailing their way of life to pay their medical bills, compared with 21 percent of people with adequate health insurance.
Also, underinsured people were more likely to have insurance plans that limit payments. They were also more likely to have high deductibles. For example, one quarter of underinsured people had deductibles of $1,000 or more, the report found.
However, premiums for the underinsured were similar to or higher than those paid by people with adequate insurance, the researchers found.
“Today in the United States you can have health insurance all year long but still go into medical debt or face bankruptcy when you get sick,” Schoen said. “This erosion of insurance protection is putting patients, families and the nation’s health and economic security at risk.”
Kim Bailey, a senior policy analyst at Families USA, a health-care advocacy group, said she thinks the trend toward greater out-of-pocket costs for health care is likely to continue.
“It is clear that American families are facing a growing burden of out-of-pocket costs, and this is consistent with a decay in the comprehensiveness of health benefits being offered,” she said.
Bailey noted that between 2000 and 2007, the average family premium for employer-sponsored insurance rose more than 90 percent. “We are getting to a place were a number of people are feeling the squeeze,” she said. “This report highlights the thinning of benefits on higher income people and that is new. That indicates to me that a call for change is likely to be strengthened.”
Another expert said the new report probably underestimates the problem of underinsurance.
“There are a whole lot of ways to be underinsured that the report does not capture,” said Dr. Steffie Woolhandler, an associate professor of medicine at Harvard Medical School and co-founder of Physicians for a National Health Program.
The deductible is only a fraction of the total amount one has to pay out-of-pocket, Woolhandler said. “In addition to the deductible, there are issues such as co-insurance and the issue of uncovered services, which are not part of the deductible,” she said.
Woolhandler also noted that many people lose their job and their health insurance when they become disabled. “At least 25 percent of employers terminate employment the day you become disabled,” she said.
Taiwan: Surprising Lessons From a Small Island
By John Reichard
CQ HealthBeat Editor
[Excerpts] In the middle of May, two Taiwanese officials, Hou Sheng-Mou and Michael S. Chen, came to Washington facing a tough assignment: promote single payer health care in a city where it’s widely regarded as a non-starter in the debate over revamping the U.S. system.
Their visit didn’t command much attention from reporters covering that debate; countries like the Netherlands or Switzerland that have universal coverage based on strong private health care systems loom larger as potential models for a U.S. overhaul.
Adding to their challenge was that Drs. Hou and Chen hoped to influence U.S. policy in a forum unlikely to compel much attention by mainstream media — an event organized by Michigan House Democrat John Conyers, Jr., a lawmaker who isn’t widely perceived as specializing in health care issues and who, until recently, was regarded as little more than a fringe liberal by the mainstream media.
But to ignore the event meant missing a chance to consider a nation that has successfully grappled with the challenges the United States now faces — intolerable health cost increases and a large uninsured population.
It also meant missing a glimpse of the surprising power the single-payer idea still holds in parts of America’s own health policy community, and the role U.S. academics played in Taiwan’s adoption in 1995 of single-payer health care. The academics’ enthusiasm for the single-payer approach endures more than a dozen years later, despite the emphatic rejection by Congress in 1994 of government-run health care…
“In Taiwan, we have no waiting lists,” says Hou. “In Taiwan, the doctor works on Saturday. They operate on Saturday afternoon.” Moreover, the government does not tell its citizens where they must go for care, he said. Sophisticated information technology is a part of the health system. Each resident of the country carries a “smart card” to entitles them to health care.
“With the smart card you can go to any clinic at any time without an appointment,” Hou said. And there is no “gatekeeper” denying access to specialists, a frequent complaint among Americans about U.S. managed care companies.
This freedom of choice helps improve quality because providers must compete to attract patients, Hou says.
The smart card also contributes to the quality and efficiency of the system by giving doctors a medical profile of the patient and by automating payment. When a provider swipes the card, the patient’s medical history and medications show up on the computer screen and the government is billed for the provider’s services.
Under the Taiwanese system, “everyone is included and at a very reasonable cost,” Hou summarizes.
The climate now in Taiwan is a marked contrast with its situation before its adoption of a single-payer system of universal coverage in 1995. Only 59 percent of the population had health insurance at the time, and health costs were growing at double-digit rates. Now 99 percent of the Taiwan population is covered and health costs are growing between 4 and 5 percent annually.
Hou says the single payer approach is key to keeping costs generally affordable because everyone is in the same insurance pool. That means premium money left over because of the relatively low costs of healthy people can be used to pay for the care of sick people. In a system of multiple smaller insurers, sicker people have a hard time finding affordable coverage because insurers try to make money by appealing to good risks and avoiding bad ones.
Taiwan also relies on global budgets to keep costs under control. Payments are based on a point system that measures the level of health care resources being used. The payment rate per point drops if doctors are ordering so many appointments, tests, and procedures that the cap is likely to be exceeded. Points are recalibrated every three months and doctors respond to changes, seeing fewer patients if point values drop, Hou says. But payment rates for critical care are not adjusted based on utilization, he adds.
Having just one payer eases uniformity of billing and payment systems unlike a system in which multiple insurers compete for profits. Administrative costs average below two percent of all health spending in Taiwan. In the United States, however, administrative costs gobble up 15 to 30 cents of the health care dollar, analysts say…
But there is a missing ingredient in the United States when it comes to universal coverage. “What you do not have is political commitment.”
For single-payer advocates at least, there’s no question Capitol Hill is generally hostile terrain. Many analysts say single-payer systems are underfunded and that adopting one in the United States would choke off the profits needed to fund America’s position as the world’s leader in medical innovation.
Aside from philosophical and economic objections, drug and insurance companies happen to be the source of campaign donations that prop up the political careers of many lawmakers…
The term ‘singe payer’ by itself does not mean government-run. It simply means that all health care bills are paid by a single organization. That entity is usually the government, but the doctors and hospitals it pays may be in private practice or privately owned…
People might think the single-payer approach is bureaucratic and inefficient, but speakers at the forum extolled the efficiency of Taiwan’s system.
Only 1.6 percent of Taiwan’s health care spending goes to administrative costs, while those expenses consume 15 to 30 percent of health care spending in the United States, speakers said. “What is not spent on administration can be spent on other things,” noted Tsung-Mei Cheng, a Princeton University-based health policy analyst who helped design Taiwan’s single-payer plan. “It’s like night and day, or heaven and hell, pardon the word,” she said of the difference in administrative costs.
The nation’s health information system allows timely monitoring of medical conditions for which patients are seeking treatment, assisting efforts to counter threats to public health, speakers said…
A payroll tax of 4.5 percent helps fund the system but employees don’t pay it all; employers and the government also chip in to help pay it. A surcharge on tobacco and lottery revenues also helps fund the system.
And the switch to universal coverage hasn’t led to health care gobbling up a big share of Taiwan’s Gross Domestic Product. Health care accounted for 4.8 percent of GDP before universal coverage was adopted in 1995 and now stands at around 6 percent, Cheng said. In comparison, the United States spends 16 percent of its GDP on health care and has some 45 million uninsured people.
The lesson of Taiwan and other countries with single-payer systems is that “universal coverage is possible without breaking the bank,” said Gerard Anderson, a health policy professor at Johns Hopkins University who helped Taiwan plan its system. “We have our 45, 47, 48 million Americans without health insurance coverage and yet we spend twice as much per capita as most other industrialized countries.”
Countries with single-payer systems also “are able to control health care expenditures over a period of time” at growth rates the same or lower than that of the United States, Anderson added. “And when they go in and decide they are not spending enough money on health care compared to other industrialized countries, they can take action to do this.”
Laura Morlock , another health policy expert at Johns Hopkins University, said that health care is the most popular government service in Taiwan. But the system faces challenges as well, she noted.
“Perhaps the greatest challenge at the moment is their attempt to balance revenues and medical expenditures,” she said. Medical care expenditures are growing at about 5.5 percent while their revenues are growing at an average rate of 4.7 percent. “The shortfall is only about 10 days of their expenditures, still you don’t want that situation to increase.” To insulate those who set premium charges from political pressures, rate increases should be tied automatically to medical expenditure levels, she said…
The Michigan Democrat is the sponsor of legislation (HR 676) that would bring a single-payer system similar to Taiwan’s to the United States. The measure would provide health care to all individuals residing in the United States, virtually wipe out the for-profit health insurance industry and disqualify other for-profit providers from participating and create global budgets to control costs.
Despite American antipathy toward single payer systems, HR 676 boosters seemed upbeat that they could make the bill part of the emerging debate over overhauling U.S. health care.
Momentum is building for single payer health care, claimed Robert Zarr, president of the Washington, D.C. branch of Physicians for a National Health Program. “Let it be clear that there is growing support,” he said. Conyers’ measure has 90 Democratic co-sponsors. Citing a survey published March 31 in the Annals of Internal Medicine, Zarr said that 59 percent of doctors now support the creation of a national health insurance plan in the United States.
Physicians experience fewer hassles because they don’t have to deal with multiple insurance companies, and single-payer systems like Taiwan’s offer easy access to providers, advocates of the systems say.
Doctors in the U.S. may seem to have greater freedom to order tests like advanced medical imaging, but Zarr said some countries offer more MRI and CT scans. They also have higher ratios of nurses and doctors to patients, he said.
Advocates added that the single-payer concept is hardly foreign in America — Medicare is a single-payer system and is popular among seniors…
Asked whether the Taiwan model could be adopted in the United States, Hou noted that one key difference is that in Taiwan, the insurance industry was not particularly opposed to a single payer system, unlike the U.S insurance industry. Taiwanese insurers were more interesting in offering life insurance than health insurance, he said…
But to single-payer die-hards, such talk is beside the point. To them, the real issue is one of morality, the idea that a decent society simply does not permit millions of its citizens to go without adequate health care.
The right leadership is crucial, said one member of the audience who stood up to address the forum.
It turned out be none other than Uwe Reinhardt, the German-born Princeton professor who is perhaps academia’s most passionate advocate for single payer health care. Reinhardt, as it happens, is married to Taiwan-born Cheng, both of whom are now U.S. citizens…
Reinhardt said Americans “act more and more like a people sharing a geography. You don’t have the ethos that goes with being a nation. In Canada, in Taiwan, they view health care as the cement that makes a nation out of a group of people, rich or poor, when they are sick.
“The other thing we need to recover in this country is a sense of shame.
“All the details, the technical details, we can cover that … what we cannot do is get the politics straight. And the politics is just another name for moral tradeoffs,” Reinhardt said.
Hou made a similar point in his interview. In Taiwan, “the social value has it that the government must take care of the people, while Americans believe in self-reliance,” he said. Self-reliance is “respectable,” but the facts show “that it can not solve the problem of the uninsured.
“With strong political leadership, national health insurance is definitely not beyond reach, not so far-fetched,” Hou said.
Under the Taiwanese system, “everyone is included and at a very reasonable cost,” Hou summarizes.
25 Million Americans Are ‘Underinsured’
Middle- and upper-income families find it harder to get needed medical care, report says
By Steven Reinberg
HealthDay
Posted June 10, 2008
TUESDAY, June 10 (HealthDay News) — The number of American adults who had inadequate health insurance to cover their medical expenses rose 60 percent from 2003 to 2007, from 16 million to more than 25 million people.
Hardest hit were families with middle and higher incomes, those whose income was 200 percent above the federal poverty level or those with an annual income of $40,000 or more, a new report by The Commonwealth Fund found.
“Insurance coverage is the ticket into the health-care system,” Karen Davis, president of The Commonwealth Fund, said during a Monday teleconference. “For too many, that ticket does not buy financial security or genuine access to care.
“We need to extend effective, affordable health insurance to all,” added Davis. “Shifting costs to patients is not an equitable or effective solution to rising health-care costs. It is time for serious consideration of changes in the way we pay for and deliver health services. Ultimately, we need a national solution to the problem of millions of uninsured and underinsured Americans.”
The report is published in the June 10 issue of Health Affairs.
To make their estimates, the researchers conducted a national survey in 2007 of 3,501 adults. They found that among adults aged 19 to 64, 25.2 million were “underinsured.” That number was based on out-of-pocket health-care costs as a proportion of income.
“Overall, the study finds a startling 60 percent increase in the number of underinsured working age adults over the past four years,” said study co-author Cathy Schoen, a senior vice president at The Commonwealth Fund. “A jump up to 25 million underinsured in 2007, compared to only 16 million in 2003.”
Approximately 42 percent of adults aged 19 to 64 years old — 75 million people — were either underinsured or didn’t have health insurance in 2007. That represents an increase of 33 percent since 2003, when the last survey was done, Schoen said.
People who are underinsured are people who have health insurance but spend 10 percent or more of their income on out-of-pocket medical expenses. For people below 200 percent of the federal poverty level, being underinsured means spending more than 5 percent of income on out-of-pocket medical costs.
Being underinsured also means paying deductibles of 5 percent or more of family income.
The researchers found that people who were underinsured were more likely to go without needed health care and have problems paying medical bills, compared with people who have adequate health insurance.
In fact, 53 percent of the underinsured and 68 percent of those without health insurance had to forgo needed medical care, such as not seeing a doctor when sick, not filling prescriptions, and not getting recommended diagnostic tests or treatments. “The underinsured look a lot like the uninsured,” Schoen said.
Among the underinsured, 45 percent reported having difficulty paying bills, being contacted by collection agencies for unpaid bills, and curtailing their way of life to pay their medical bills, compared with 21 percent of people with adequate health insurance.
Also, underinsured people were more likely to have insurance plans that limit payments. They were also more likely to have high deductibles. For example, one quarter of underinsured people had deductibles of $1,000 or more, the report found.
However, premiums for the underinsured were similar to or higher than those paid by people with adequate insurance, the researchers found.
“Today in the United States you can have health insurance all year long but still go into medical debt or face bankruptcy when you get sick,” Schoen said. “This erosion of insurance protection is putting patients, families and the nation’s health and economic security at risk.”
Kim Bailey, a senior policy analyst at Families USA, a health-care advocacy group, said she thinks the trend toward greater out-of-pocket costs for health care is likely to continue.
“It is clear that American families are facing a growing burden of out-of-pocket costs, and this is consistent with a decay in the comprehensiveness of health benefits being offered,” she said.
Bailey noted that between 2000 and 2007, the average family premium for employer-sponsored insurance rose more than 90 percent. “We are getting to a place were a number of people are feeling the squeeze,” she said. “This report highlights the thinning of benefits on higher income people and that is new. That indicates to me that a call for change is likely to be strengthened.”
Another expert said the new report probably underestimates the problem of underinsurance.
“There are a whole lot of ways to be underinsured that the report does not capture,” said Dr. Steffie Woolhandler, an associate professor of medicine at Harvard Medical School and co-founder of Physicians for a National Health Program.
The deductible is only a fraction of the total amount one has to pay out-of-pocket, Woolhandler said. “In addition to the deductible, there are issues such as co-insurance and the issue of uncovered services, which are not part of the deductible,” she said.
Woolhandler also noted that many people lose their job and their health insurance when they become disabled. “At least 25 percent of employers terminate employment the day you become disabled,” she said.
Senate Finance summit missed the message
Letters to the Editor
A Cure for Our System
The Washington Post
June 19, 2008
While I welcome the heightened attention of policymakers, including Federal Reserve Chairman Ben S. Bernanke, to our failing health-care system [Business, June 17], I was struck by how few real “prescriptions for change” emerged from the Senate Finance Committee’s health reform “summit” Monday.
All of the reforms mentioned, including what is being offered by Sen. Ron Wyden (D-Ore.), keep the for-profit private insurance industry at the center of our system — and yet that industry is the main problem.
Private insurers profit by enrolling the healthy, screening out the sick and denying claims. They burden us with wasteful administrative costs, including outlandish executive salaries. We simply can’t afford this fragmented, inefficient system anymore.
What’s needed is an orderly transition to national health insurance, the kind of social insurance that most other industrialized nations take for granted. This “single-payer” approach has a track record of delivering better-quality care at lower cost. People end up living longer and are healthier. They go to the doctors of their choice, and everyone, without exception, has access to comprehensive care.
We need to get at the root of the problem and not be afraid to challenge the status quo.
Harvey Fernbach
College Park
The writer is a member of Physicians for a National Health Program.
Comment:
By Don McCanne, MD
The politicians in Washington are not in sync with the health care needs of the nation, but are tuned in to the concerns that the private insurance industry has about its own role in the future of health care financing. They seem to believe that all we need is more of the same: unaffordable private health plans that often fail to prevent financial hardship for those with significant health care needs. They are paralyzed by the meme that replacing our current system of financing health care with a system that would actually work is “not politically feasible.”
The politicians need to listen to the message of the protesters at the meeting of America’s Health Insurance Plans (AHIP) in San Francisco today (and in other cities throughout the nation).
People don’t want crummy, unaffordable private health plans. They want health care. Washington needs to listen to our meme: HEALTH CARE FOR ALL! SINGLE PAYER NATIONAL HEALTH INSURANCE!
State Assembly points the way forward on health care
Andrew D. Coates, MD
Poughkeepsie Journal
June 13, 2008
Supporters of national health insurance – a single-payer system of nonprofit, public financing that would guarantee quality health care to every one of us – were just getting used to being compared to Don Quixote.
Our critics smile at us and say that national health insurance a great idea, but they add a wink, for they believe the insurance companies are simply too rich and too powerful. The not-so-subtle message: give up and prepare for compromise with the private insurance industry.
Enter the New York State Assembly, not known as a den of starry-eyed idealists, with an overwhelming vote of support for single-payer health reform.
On May 27, the State Legislature’s lower house decisively adopted a resolution backing a federal proposal, H.R. 676, the “U.S. National Health Insurance Act,” sponsored by Rep. John Conyers of Michigan. The Congressional bill’s 90 co-sponsors include New York Representatives Yvette Clark, Eliot Engel, Maurice Hinchey, Carolyn Maloney, Michael McNulty, Gregory Meeks, Jerrold Nadler, Charles Rangel, Jose Serrano, Edolphus Towns and Anthony Weiner.
The chief sponsor of the May 27 resolution was Assemblyman Felix Ortiz (D-51, Brooklyn). The measure was also pushed by a coalition of labor groups, doctors and nurses, religious groups, anti-poverty and human rights organizations. A similar measure in support of H.R. 676 was adopted in 2007 by the Republican-led Rensselaer County Legislature.
Noting that approximately 2.6 million New Yorkers currently lack health insurance, that people who have insurance are often burdened with “unacceptable medical debt” that frequently leads to bankruptcy, and that all New Yorkers face “sometimes life-threatening delays in obtaining health care,” the N.Y. Assembly unambiguously declared itself in support of the single-payer approach. By calling for passage of a bill in the U.S. Congress, they acknowledge our need for a nationwide solution.
The single-payer model has accumulated new support because of the failure of compromise after compromise with private health insurers in state after state.
Massachusetts’ mandate model has reduced the percentage of uninsured through state-subsidies for private health insurance for low-income families but generated a spectacular deficit. The plan also failed to provide for an influx of new primary care patients and failed to eliminate excessive out-of-pocket costs including co-pays and deductibles. Further, the middle class uninsured who have been “mandated” to buy private health without a state subsidy (or else pay a fine) simply cannot afford the premiums.
Meanwhile the single payer model has already proved its effectiveness in country after country.
Taiwan recently adopted single payer. Like other nations that have national health insurance, health costs been brought under control. More striking, the new system has improved health outcomes. Significantly, disparities in the quality of care for the affluent vs. the poor have been lessened in Taiwan, with life expectancy among low-income people in rising most dramatically. (In contrast, life expectancy for American women in 1,000 U.S. counties, poor and rural areas, actually declined for the first time in our history during the 1990s.)
Single payer health financing delivers better care, better medical outcomes at a lower cost through a basic democratic method: by sharing health risks and needs across the whole public. In this era of evidence-based medicine, the evidence is in: single payer is the way to go.
The New York State Assembly’s action demonstrates that those who smile knowingly and call for compromise with the private insurance industry are seriously out of touch with popular opinion.
An exaggeration? Consider this: over 430 labor organizations, including 33 state chapters of the AFL-CIO, have endorsed H.R. 676. The Capital District Area Labor Federation and the Troy Area Labor Council have also endorsed H.R. 676. These organizations have also helped organize local participation in an upcoming nationwide day of protest: “Healthcare YES! Insurance companies NO!” They will rally, with other groups, outside of the 90 State St. office of the New York Health Plan Association on Thursday, June 19th at 5 p.m.
Some 59 percent of doctors now support national health insurance, up from 49 percent only five years ago. In Minnesota, New Hampshire, Massachusetts and New York, when polled, nearly two-thirds of physicians and surgeons support single payer.
Last December an Associated Press poll showed strong public support – 65 percent – in favor of “a universal health insurance program in which everyone is covered under a program like Medicare that is run by the government and financed by taxpayers.”
These figures, and the Assembly’s resolution on H.R. 676, give further expression to a gathering, unstoppable movement for fundamental health care reform, confirming Victor Hugo’s estimate that “there is nothing more powerful than an idea whose time has come.”
Minor tweaks in our deeply flawed system simply aren’t enough. The private health insurance industry, which skims off such a big share of each health care dollar in administrative costs, marketing, outsized profit-taking, and outlandish CEO salaries, has outlived its usefulness. It’s time to move on.
We should be proud that our Assembly has helped point the way forward. Let’s make this a banner year for moving toward a more effective and compassionate health care system: single payer.
Andrew D. Coates, M.D., practices and teaches medicine in Albany and is secretary of the Capital District (N.Y.) chapter of Physicians for a National Health Program (www.pnhp.org).
Paying More, Getting Less
How much is the sick U.S. health care system costing you?
By Joel A. Harrison
Dollars and Sense magazine
May/June 2008 issue
http://dollarsandsense.org/archives/2008/0508harrison.html
By any measure, the United States spends an enormous amount of money on health care. Here are a few of those measures. In 2006, U.S. health care spending exceeded 16% of the nation’s GDP. To put U.S. spending into perspective: the United States spent 15.3% of GDP on health care in 2004, while Canada spent 9.9%, France 10.7%, Germany 10.9%, Sweden 9.1%, and the United Kingdom 8.7%. Or consider per capita spending: the United States spent $6,037 per person in 2004, compared to Canada at $3,161, France at $3,191, Germany at $3,169, and the U.K. at $2,560.
By now the high overall cost of health care in the United States is broadly recognized. And many Americans are acutely aware of how much they pay for their own care. Those without health insurance face sky-high doctor and hospital bills and ever more aggressive collection tactics–when they receive care at all. Those who are fortunate enough to have insurance experience steep annual premium hikes along with rising deductibles and co-pays, and, all too often, a well-founded fear of losing their coverage should they lose a job or have a serious illness in the family.
Still, Americans may well underestimate the degree to which they subsidize the current U.S. health care system out of their own pockets. And almost no one recognizes that even people without health insurance pay substantial sums into the system today. If more people understood the full size of the health care bill that they as individuals are already paying–and for a system that provides seriously inadequate care to millions of Americans–then the corporate opponents of a universal single-payer system might find it far more difficult to frighten the public about the costs of that system. In other words, to recognize the advantages of a single-payer system, we have to understand how the United States funds health care and health research and how much it actually costs us today.
Paying through the Taxman
The U.S. health care system is typically characterized as a largely private-sector system, so it may come as a surprise that more than 60% of the $2 trillion annual U.S. health care bill is paid through taxes, according to a 2002 analysis published in Health Affairs by Harvard Medical School associate professors Steffie Woolhandler and David Himmelstein. Tax dollars pay for Medicare and Medicaid, for the Veterans Administration and the Indian Health Service. Tax dollars pay for health coverage for federal, state, and municipal government employees and their families, as well as for many employees of private companies working on government contracts. Less visible but no less important, the tax deduction for employer-paid health insurance, along with other health care-related tax deductions, also represents a form of government spending on health care. It makes little difference whether the government gives taxpayers (or their employers) a deduction for their health care spending, on the one hand, or collects their taxes then pays for their health care, either directly or via a voucher, on the other. Moreover, tax dollars also pay for critical elements of the health care system apart from direct care–Medicare funds much of the expensive equipment hospitals use, for instance, along with all medical residencies.
All told, then, tax dollars already pay for at least $1.2 trillion in annual U.S. health care expenses. Since federal, state, and local governments collected approximately $3.5 trillion in taxes of all kinds–income, sales, property, corporate–in 2006, that means that more than one third of the aggregate tax revenues collected in the United States that year went to pay for health care. (See Addendum below for information about how this estimate was calculated.)
Beyond their direct payments to health care providers and health insurance companies, then, Americans already make a sizeable annual payment into the health care system via taxes. How much does a typical household contribute to the country’s health care system altogether? Of course, households pay varying amounts in taxes depending on income and many other factors. Moreover, some households have no health insurance coverage; others do have coverage for which they may pay some or all of the premium cost. What I aim to do here is to estimate the average size of the health care cost burden for households at different income levels, both those with job-based health coverage and those with no coverage.
Note that the estimates in the table below do not include out-of-pocket expenses. For those with health insurance, these include co-pays, deductibles, and uncovered expenses (consider, for example, that even my high-end policy does not cover commonly used home medical equipment such as oxygen). For those without insurance, of course, out-of-pocket expenses include their full hospital, doctor, and pharmacy bills.
Chart of what Americans pay into the health care system today
The first row (“Share and Amount of Income Going to Health Care via Taxes Alone”) shows how much of the total tax burden on households at three income levels goes into the nation’s health care system. In other words, a family with an annual income of $50,000 that has no health insurance nonetheless contributes nearly 10% of its income to health care merely by paying typical income, payroll, sales, excise, and other taxes. A person who earns about $25,000 a year and has no health coverage already contributes over $2,400 a year to the system–enough for a healthy young adult to purchase a year’s worth of health insurance.
The next two rows add in, for individuals and for families, the cost of employer-based health insurance. So, a household at the $50,000 income level with family health insurance coverage is paying over a quarter of its income into the health care system.
How were these figures derived? The tax component of the figures represents 34.4% of the total tax burden (federal, state, and local) on households at the three income levels. Of course, estimating average combined federal, state, and local taxes paid by households at different income levels is not a simple matter. The most comprehensive such estimates come from the Tax Foundation, a conservative think tank. Other analysts, however, including the liberal Center on Budget and Policy Priorities, view the Tax Foundation’s figures as overestimating the total tax burden. The center has published its own estimates, based on figures from the Congressional Budget Office and Congress’s Joint Committee on Taxation. The figures in the table are based on the CBO’s numbers, which fall in between the Tax Foundation’s estimates and the JCT-based estimates. (Estimates based on the Tax Foundation and JCT figures, along with details of the analysis, can be found at www.dollarsandsense.org.) It is worth noting that using the Tax Foundation’s numbers, which show a larger share of income going to taxes at every income level, would have made the story even worse. For a family with health insurance earning $50,000 a year, for instance, the share of income going into health care would have been 28.7% rather than 26.4%.
For insurance premiums: in 2007, the average annual premiums for health insurance policies offered through employers were $4,479 for individuals and $12,106 for families, according to the Kaiser Family Foundation’s annual survey of health benefits. Of course, some employers pay all or a large share of that premium while others pay half or less, leaving much of the premium cost to the worker. Either way, however, the full premium cost represents a bite taken out of the worker’s total “wage packet”–the cost of wages plus benefits. This becomes evident when premiums go up: workers either see their own premium payments rise directly, or else face cuts or stagnation in their wages and non-health benefits. For that reason, economists typically view the entire premium as a cost imposed on the worker regardless of variations in employer contribution.
These figures are not meant to be exact, but do offer reasonable estimates of how much U.S. families are actually paying into the country’s health care system today. Again, they do not include out-of-pocket expenses, which averaged 13.2% of all health care expenditures in 2005. Moreover, they do not include the risk of bankruptcy that health care costs impose: 50% of consumer bankruptcies in the United States stem from medical bills, including a surprising number among households that do have some kind of health coverage. Nor do they include the approximately 20% of auto insurance premiums or the 40% of workers’ compensation premiums that pay for medical expenses.
Where Does All the Money Go?
After you’ve finished gasping in surprise at the share of your income that is already going into health care, you may wonder where all that money goes. One answer is that the United States has the most bureaucratic health care system in the world, including over 1,500 different companies, each offering multiple plans, each with its own marketing program and enrollment procedures, its own paperwork and policies, its CEO salaries, sales commissions, and other non-clinical costs–and, of course, if it is a for-profit company, its profits. Compared to the overhead costs of the single-payer approach, this fragmented system takes almost 25 cents more out of every health care dollar for expenses other than actually providing care.
Of the additional overhead in the current U.S. system, approximately half is borne by doctors’ offices and hospitals, which are forced to maintain large billing and negotiating staffs to deal with all the plans. By contrast, under Canada’s single-payer system (which is run by the provinces, not by the federal government), each medical specialty organization negotiates once a year with the nonprofit payer for each province to set fees, and doctors and hospitals need only bill that one payer.
Of course, the United States already has a universal, single-payer health care program: Medicare. Medicare, which serves the elderly and people with disabilities, operates with overhead costs equal to just 3% of total expenditures, compared to 15% to 25% overhead in private health programs. Since Medicare collects its revenue through the IRS, there is no need to collect from individuals, groups, or businesses. Some complexity remains–after all, Medicare must exist in the fragmented world that is American health care–but no matter how creative the opponents of single-payer get, there is no way they can show convincingly how the administrative costs of a single-payer system could come close to the current level.
Some opponents use current U.S. government expenditures for Medicare and Medicaid to arrive at frightening cost estimates for a universal single-payer health care system. They may use Medicare’s $8,568 per person, or $34,272 for a family of four (2006). But they fail to mention that Medicare covers a very atypical, high-cost slice of the U.S. population: senior citizens, regardless of pre-existing conditions, and people with disabilities, including diagnoses such as AIDS and end-stage renal disease. Or they use Medicaid costs–forgetting to mention that half of Medicaid dollars pay for nursing homes, while the other half of Medicaid provides basic health care coverage, primarily to children in low-income households, at a cost of only about $1,500 a year per child.
Getting What We’ve Already Paid For
Americans spend more than anyone else in the world on health care. Each health insurer adds its bureaucracy, profits, high corporate salaries, advertising, and sales commissions to the actual cost of providing care. Not only is this money lost to health care, but it pays for a system that often makes it more difficult and complicated to receive the care we’ve already paid for. Shareholders are the primary clients of for-profit insurance companies, not patients. Moreover, households’ actual costs as a percentage of their incomes are far higher today than most imagine. Even families with no health insurance contribute substantially to our health care system through taxes. Recognizing these hidden costs that U.S. households pay for health care today makes it far easier to see how a universal single-payer system–with all of its obvious advantages–can cost most Americans less than the one we have today.
Joel A. Harrison, PhD, MPH, lives in San Diego, where he does consulting in epidemiology and research design. He has worked in the areas of preventive medicine, infectious diseases, medical outcomes research, and evidence-based clinical practice guidelines. He has lived and studied in both Canada and Sweden.
ADDENDUM
A Tax Foundation report states, “In 2004 Americans paid a total of $3 trillion in total taxes.” The U.S. Bureau of Economic Analysis under its National Economic Accounts section gives the following numbers for U.S. Gross Domestic Product in billions of dollars: 2004 – $11,685.9 and 2006 – $13,194.7. Using the Tax Foundation tax estimates, the estimated tax percentage of GDP for 2004 was 25.67% ($3 trillion/$11.6859 trillion). The “$3.5 trillion” is a ballpark rounding estimate for total taxes for 2006 from multiplying 0.26 by the 2006 GDP.
Sources: Center on Budget and Policy Priorities, The Debate Over Tax Levels: How Much Does a Typical Family Pay?, March 11, 1998; Center on Budget and Policy Priorities, Tax Foundation Figures Do Not Represent Middle-Income Tax Burdens: Figures May Mislead Policymakers, Journalists, and the Public, April 13, 2006; Center on Budget and Policy Priorities, Clearing Up Confusion on the Cost of Covering Uninsured Children Eligible for Medicaid or SCHIP, March 13, 2007; Gary Claxton et al., “Health Benefits in 2007: Premium Increases Fall to an Eight-Year Low, While Offer Rates and Enrollment Remain Stable,” Health Affairs 26(5), 2007 [based on Employer Health Benefits 2007 Annual Survey by the Kaiser Family Foundation]; Congressional Research Service, U.S. Health Care Spending: Comparison with Other OECD Countries, September 17, 2007; Andres de Francisco and Stephen Matlin, eds., Monitoring Financial Flows for Health Research 2006 (Global Forum for Health Research, 2006); Tax Foundation, Who Pays America’s Tax Burden, and Who Gets the Most Government Spending?, March 2007; Public Citizen Congress Watch, Rx R&D Myths: The Case Against the Drug Industry’s R&D ‘Scare Card’, July 2001; Steffie Woolhandler et al., “Health Care Administration in the United States and Canada: Micromanagement, Macro Costs,” Int’l Journal of Health Services 34(1), 2004; Steffie Woolhandler and David Himmelstein, Paying for National Health Insurance–And Not Getting It, Health Affairs 21(4), July/August 2002.
Health Care: Go Canadian
The U.S. should adopt its northern neighbor's system of state-paid medical care for all its citizens. Pro or con?
Pro: Follow the Maple Leaf
by James Clancy, National Union of Public & General Employees (Ottawa)
Business Week
I find Top 10 lists are a useful way to quickly distill large and complicated issues down to the bare essentials. So here are my Top 10 reasons the U.S. should adopt Canada’s single-payer health-care system.
1. All Americans would have health insurance. This is the right thing to do because it reflects and promotes core values and notions of citizenship: equality, compassion, and social solidarity. Sickness doesn’t discriminate. Neither should health care.
2. Health would improve. On almost every critical measure (life expectancy, infant mortality, etc.), Canada rates higher than the U.S., and we’re among the best in the world.
3. It would cost less. Canada spends 9.8% of GDP on health care, while the U.S. spends more than 15%. A single-payer system is the less expensive way to go.
4. Patients would have more choice. In Canada, patients can choose whatever doctor, specialist, and hospital they want. Treatment decisions are left to patients and their doctors. No insurance companies meddle in our choices.
5. Quality of service would improve. In Canada, health providers never have to choose between their wealth and a patient’s health. Our system forbids that choice. The vast majority of Canadians are highly satisfied with the quality of care they receive. In Canada, patients rarely sue physicians.
6. It would reduce the bureaucracy. Patients in Canada show their health card and get care. Health providers bill the government directly and get paid. It’s that simple.
7. Fewer Americans would go bankrupt because of health-care costs. This is a major problem for many U.S. families. It rarely happens in Canada.
8. It would benefit business. Companies in Canada have a competitive advantage because they don’t have to provide basic health-care coverage for their workers.
9. It would diminish labor strife. Health care is incidental in labor negotiations in Canada. It’s a large and growing pitfall in contract negotiations in the U.S.
10. It would serve democracy. Most Americans want major, not incremental, health-care reform. Many Americans support a single-payer system. It is about responding to the wishes of the people.
A Cure for Our System
Harvey Fernbach, MD
Letters to the Editor
The Washington Post
June 19, 2008
While I welcome the heightened attention of policymakers, including Federal Reserve Chairman Ben S. Bernanke, to our failing health-care system [Business, June 17], I was struck by how few real “prescriptions for change” emerged from the Senate Finance Committee’s health reform “summit” Monday.
All of the reforms mentioned, including what is being offered by Sen. Ron Wyden (D-Ore.), keep the for-profit private insurance industry at the center of our system — and yet that industry is the main problem.
Private insurers profit by enrolling the healthy, screening out the sick and denying claims. They burden us with wasteful administrative costs, including outlandish executive salaries. We simply can’t afford this fragmented, inefficient system anymore.
What’s needed is an orderly transition to national health insurance, the kind of social insurance that most other industrialized nations take for granted. This “single-payer” approach has a track record of delivering better-quality care at lower cost. People end up living longer and are healthier. They go to the doctors of their choice, and everyone, without exception, has access to comprehensive care.
We need to get at the root of the problem and not be afraid to challenge the status quo.
Harvey Fernbach, MD
College Park
The writer is a member of Physicians for a National Health Program.
Health Care, the Massachusetts Way
The New York Times
Letters
Published: June 19, 2008
To the Editor:
Re “The Massachusetts Model” (editorial, June 16):
As a Massachusetts primary care physician, I dearly wish that your optimism for our state’s health care plan were well placed. My fear, however, is that any plan that does not eliminate the colossal waste of multiple competing private health insurers is doomed to failure.
Costs can never be contained while supporting bloated private bureaucracies and for-profit medicine. Most physicians now support single-payer, national health insurance (“Medicare for all”).
Alan Meyers
Boston, June 16, 2008
The writer is associate professor of pediatrics at Boston University School of Medicine and a founding member, Physicians for a National Health Program.
To the Editor:
You hail Massachusetts health reform as a promising model for the nation. But within the last year both the State Senate president and the executive director of the agency implementing the new law have publicly recognized that it will collapse if health care costs continue to rise by double digits, which they have.
No effective cost-control legislation is in sight. In Massachusetts we see history repeating itself: a large expansion of Medicaid in the mid-1990s added more than 300,000 residents to the rolls, cutting the uninsured population almost by half. A few short years of rising costs, however, were enough to erase those gains and place the state back to where it started.
Similar fates have befallen many “universal” state reforms hailed as models for the nation. Without eliminating the waste inherent in commercial health care systems and making comprehensive coverage a right, no country has ever been able to achieve universal health care.
We need a single-payer health care system that will be there for our children, not another unsustainable experiment with obvious math problems that won’t be there just a few years from now.
Benjamin Day
Executive Director
Mass-Care: The Massachusetts Campaign for Single Payer Health Care
Boston, June 17, 2008
Sen. Sheila Kuehl on the LAO report
LAO Confirms Single Payer Reduces Health Care Spending, Contains Annual Growth
by State Senator Sheila Kuehl
California Senator Sheila Kuehl
June 16, 2008
The new LAO report did not actually analyze SB 840
Although the LAO’s report clearly showed the kinds of savings a single payer plan would provide for the State, workers, employers and private individuals, it was not an assessment of SB 840. SB 840, now awaiting a hearing in the Assembly Appropriations Committee, does not contain details concerning taxes, premiums, expenses or other financial matters, but rather constructs a Blue Ribbon Panel, made up of statewide officers, to research and propose the actual funding mechanism and put it out for a vote of the people, along with the entire health insurance plan.
What the LAO found
The LAO study confirmed that a single payer health care system saves money and lowers the rate at which health care costs grow each year.
Generally, the LAO report agreed with the findings of the Lewin Group study of 2006 with regard to the impact of single payer on the growth in health care spending and found that Lewin’s projections for the legislation’s impact on health care spending were reasonable. Like Lewin, the LAO analysis identified substantial savings on administrative costs, bulk purchasing of drugs and durable medical equipment, and confirmed that it would lower the rate at which costs grow every year.
Need for Single Payer greater than ever
The main lesson of the Analyst’s report is that the people and employers of California are continuing to pay escalating healthcare costs while wages and payrolls are flatlining. Those costs are a drain on our already shaky economic outlook. SB 840 will bring stabilization to the healthcare crisis and, since the Blue Ribbon Panel will have flexibility to adjust the details of premium proposals, single payer is still our best answer.
Comment:
By Don McCanne, MD
When you hear criticisms of single payer based on this report, keep in mind the facts. The Legislative Analyst did not find any significant problems with the single payer model. It would provide all essential services for everyone while slowing increases in health care costs. What it did show is that delaying reform is increasing costs by tens of billions of dollars, and the failure to address our flat wage scales is creating the need to use even more progressive methods of financing health care.
Current proposals to use an expansion of private plans will fall short on universality and comprehensiveness, and will be even more expensive because of the failure to adopt the cost efficiencies of the single payer model.
The LAO study shows that the failure is not in the single payer model – it works – but the failure in containing costs is due to not yet having enacted the single payer model.
You think health care reform would cost a lot now. Just wait until it’s expensive.
Doctors to Join National Protests Against Private Health Insurers
For immediate release:
June 18, 2008
Contacts:
John Geyman, M.D., (360) 378-6264
Don McCanne, M.D., (949) 493-3714
Garrett Adams, M.D., (502) 895-8847
Doctors and medical students will join with nurses, patients, union members and health care reform activists at a rally tomorrow in San Francisco and 16 other cities, charging that the private health insurance industry is responsible for 47 million Americans being uninsured, half of all personal bankruptcies and at least 18,000 deaths each year.
The biggest rally is set to take place outside San Francisco’s Moscone Center, where delegates to the convention of America’s Health Insurance Plans (AHIP), the national trade association of the health insurance industry, will be listening to pro-industry figures like former Senators John Breaux and Bill Frist. About 35,000 insurance company executives are attending the meeting.
The physicians and others are calling for “guaranteed single-payer health care now,” a nonprofit, Medicare-like national health insurance program that is supported by 59 percent of doctors and about two-thirds of the general public. A bill in Congress, H.R. 676, embodies the single-payer approach and has 90 co-sponsors, more than any other health reform proposal.
“Private health insurance is obsolete,” said Dr. John Geyman, M.D., professor emeritus of family medicine at the University of Washington in Seattle and past president of Physicians for a National Health Program.
Geyman is the author of six books, including the forthcoming “Do Not Resuscitate: Why the Health Insurance Industry is Dying, and How We Must Replace It.”
Private health insurance has outlived its usefulness, he said, for the following reasons:
* it is much less efficient than public financing
* it fragments the risk pool by cherry-picking healthy patients
* it is the source of the epidemic of underinsurance
* administrative and overhead costs are excessive and insupportable
* profiteering is trumping patients’ needs
* insurance premiums are too costly for middle-class families
* the industry has excessive political clout and resists regulation
“While there is widespread consensus that the nation’s health care system is broken and in urgent need for reform, too little attention has been paid to the role of the private insurance industry in perpetuating our problems,” Geyman said.
“Over the past 40 years, private insurance has evolved from a not-for-profit activity into a $300-billion-a-year, for-profit, investor-owned industry. The six biggest insurers made over $10 billion in profits in 2006. They did so by enrolling healthy people, denying claims, and screening out the sick, who are increasingly being shunted into our beleaguered public safety net programs.”
“These for-profit companies have burdened our system with enormously wasteful administrative costs and skyrocketing CEO salaries, while leaving tens of millions uninsured and underinsured,” Geyman continued. “The risk pool has been badly fragmented among more than 1,300 private insurers, defeating the goal of insurance, which is to provide coverage by sharing risk across a broad population. Premium prices continue to climb at a double-digit rate alongside other health costs.”
“Thus, the average family premium for employer-based coverage was $11,500 in 2006, an increase of 87 percent from 2000,” he said. “At the rate we are going, health insurance premiums will consume almost one-third of average household income by 2010 and all of household income by 2025.”
“This clearly is not sustainable,” Geyman said. “What is urgently needed is a transition to single-payer national health insurance, coupled with our private delivery system. By moving to such a system, patients would regain their choice of physician and hospital. The administrative savings alone would be $350 billion a year, enough to cover all of the uninsured and underinsured. That is the only realistic path to guaranteeing truly universal and equitable care to everyone at an affordable cost.”
Physicians for a National Health Program (www.pnhp.org), a membership organization of over 15,000 physicians, supports a single-payer national health insurance program. PNHP is headquartered in Chicago and has chapters across the United States. To contact a physician-spokesperson in your area, contact info@pnhp.org or call (312) 782-6006. For additional resource materials these and related topics, visit www.pnhp.org/research.
The June 19 protests are scheduled to take place in San Francisco; Albany, N.Y.; Atlanta; Baltimore; Boston; Chicago; Harrisburg, Pa.; Indianapolis; Jacksonville, Fla.; Louisville, Ky.; Minnetonka, Minn.; Pittsburgh; Philadelphia; New York City; Newark, N.J.; Oklahoma City; San Antonio and St. Louis.
For more information on the San Francisco protest, see www.singlepayernow.net or call 415-695-7891.