Trade-Offs Getting Tougher: Problems Paying Medical Bills Increase for U.S. Families, 2003-2007

By Peter J. Cunningham
Center for Studying Health System Change
September 2008
About 57 million Americans were in families with problems paying medical bills in 2007–an increase of 14 million people since 2003, according to a new national study by the Center for Studying Health System Change (HSC). Problems paying medical bills increased for both nonelderly insured and uninsured people. Although the rate of medical bill problems is much higher for uninsured people, most people with medical bill problems–42.5 million–had insurance coverage. About 2.2 million people with medical bill problems were in families that filed for bankruptcy as a result of their medical bills, and a much larger number reported other financial consequences, such as problems paying for other necessities and having to borrow money. The increase in medical bill problems–especially among insured people–is the main reason why more people reported unmet medical needs because of cost in 2007 than in 2003.
http://www.hschange.org/CONTENT/1017/

And…

Health Benefits In 2008: Premiums Moderately Higher, While Enrollment In Consumer-Directed Plans Rises In Small Firms

By Gary Claxton, Jon R. Gabel, et al
Health Affairs
September 24, 2008
Average annual premiums in 2008 are $4,704 for single coverage and $12,680 for family coverage. These amounts are about 5 percent higher than premiums were last year. Enrollment in high-deductible health plans with a savings option increased to 8 percent of covered workers, up from 5 percent in 2007. Deductibles in preferred provider organizations, the plan type with the largest enrollment, increased from 2007 levels.
http://content.healthaffairs.org/cgi/content/full/hlthaff.27.6.w492/DC1

And…

Studies Show Strain of Medical Bills

By Reed Abelson
The New York Times
September 24, 2008
Even as Washington and Wall Street debate the best way to avert an economic meltdown, increasing numbers of Americans are struggling with another financial crisis: the growing burden of unpaid medical bills.
Two studies released Wednesday morning provide further evidence of the toll health care is increasingly placing on working families, even for those who have health insurance. And as employees are paying more medical expenses out of their own pockets, they are having a harder time coming up with the money.
While policy analysts acknowledge that finding any new money to expand coverage may prove difficult, some also say the terms of the debate may be changing as policy makers and the public rethink their positions on the need for regulation and the role of the government in industry — including the health care system.
“We can now imagine a government takeover that we could not imagine before,” (said Len Nichols, a health economist at the New America Foundation).
http://www.nytimes.com/2008/09/25/business/25health.html?_r=1&hp&oref=slogin

The bad (but not unexpected) news is that there is no relief from the unrelenting increases in health care costs for individuals and their families. But there is one number that should alarm all of us: 42.5 million people WITH INSURANCE COVERAGE have medical bill problems in spite of their coverage.
Whereas most advocacy efforts for reform have been directed towards expanding health care coverage to include more individuals, the proposals have included compromises designed to make health insurance more affordable. These compromises, involving fewer benefits and greater cost sharing, have made health care LESS affordable. Just ask those 42.5 million insured individuals who have medical bill problems.
It is time for us to get past the process of trying to bring everyone under the private insurance umbrella that leaks like a sieve. We need to adopt a financing system that is effective in preventing individuals with health care needs from having to face the additional burden of medical debt.
The private insurance industry covers primarily the relatively healthy: the healthy workforce, their healthy families, and the healthy sector of the individual insurance market. But some of these healthy individuals do develop significant medical problems, and for tens of millions of them, the private plans have not prevented medical debt. Shouldn’t that be the purpose of health insurance?
A government takeover of health care financing could provide us with the coverage that actually would work: a single payer system that would enable each of us to access the health care that we need, without exposing us to the additional burden of medical debt. If the government can serve as responsible stewards of our mortgage markets, surely they can become responsible stewards of our health care financing.

By Peter J. Cunningham
Center for Studying Health System Change
September 2008

About 57 million Americans were in families with problems paying medical bills in 2007–an increase of 14 million people since 2003, according to a new national study by the Center for Studying Health System Change (HSC). Problems paying medical bills increased for both nonelderly insured and uninsured people. Although the rate of medical bill problems is much higher for uninsured people, most people with medical bill problems–42.5 million–had insurance coverage. About 2.2 million people with medical bill problems were in families that filed for bankruptcy as a result of their medical bills, and a much larger number reported other financial consequences, such as problems paying for other necessities and having to borrow money. The increase in medical bill problems–especially among insured people–is the main reason why more people reported unmet medical needs because of cost in 2007 than in 2003.

http://www.hschange.org/CONTENT/1017/

And…

Health Benefits In 2008: Premiums Moderately Higher, While Enrollment In Consumer-Directed Plans Rises In Small Firms

By Gary Claxton, Jon R. Gabel, et al
Health Affairs
September 24, 2008

Average annual premiums in 2008 are $4,704 for single coverage and $12,680 for family coverage. These amounts are about 5 percent higher than premiums were last year. Enrollment in high-deductible health plans with a savings option increased to 8 percent of covered workers, up from 5 percent in 2007. Deductibles in preferred provider organizations, the plan type with the largest enrollment, increased from 2007 levels.

http://content.healthaffairs.org/cgi/content/full/hlthaff.27.6.w492/DC1

And…

Studies Show Strain of Medical Bills

By Reed Abelson
The New York Times
September 24, 2008

Even as Washington and Wall Street debate the best way to avert an economic meltdown, increasing numbers of Americans are struggling with another financial crisis: the growing burden of unpaid medical bills.

Two studies released Wednesday morning provide further evidence of the toll health care is increasingly placing on working families, even for those who have health insurance. And as employees are paying more medical expenses out of their own pockets, they are having a harder time coming up with the money.

While policy analysts acknowledge that finding any new money to expand coverage may prove difficult, some also say the terms of the debate may be changing as policy makers and the public rethink their positions on the need for regulation and the role of the government in industry — including the health care system.

“We can now imagine a government takeover that we could not imagine before,” (said Len Nichols, a health economist at the New America Foundation).

http://www.nytimes.com/2008/09/25/business/25health.html?_r=1&hp&oref=slogin

Comment:

By Don McCanne, MD

The bad (but not unexpected) news is that there is no relief from the unrelenting increases in health care costs for individuals and their families. But there is one number that should alarm all of us: 42.5 million people WITH INSURANCE COVERAGE have medical bill problems in spite of their coverage.

Whereas most advocacy efforts for reform have been directed towards expanding health care coverage to include more individuals, the proposals have included compromises designed to make health insurance more affordable. These compromises, involving fewer benefits and greater cost sharing, have made health care LESS affordable. Just ask those 42.5 million insured individuals who have medical bill problems.

It is time for us to get past the process of trying to bring everyone under the private insurance umbrella that leaks like a sieve. We need to adopt a financing system that is effective in preventing individuals with health care needs from having to face the additional burden of medical debt.

The private insurance industry covers primarily the relatively healthy: the healthy workforce, their healthy families, and the healthy sector of the individual insurance market. But some of these healthy individuals do develop significant medical problems, and for tens of millions of them, the private plans have not prevented medical debt. Shouldn’t that be the purpose of health insurance?

A government takeover of health care financing could provide us with the coverage that actually would work: a single payer system that would enable each of us to access the health care that we need, without exposing us to the additional burden of medical debt. If the government can serve as responsible stewards of our mortgage markets, surely they can become responsible stewards of our health care financing.

A.M. Best Revises Rating Outlook of U.S. Life/Health Companies to Negative

MarketWatch
September 18, 2008
Although fundamentals for the vast majority of life/health companies are currently sound, uncertainty continues to be widespread in terms of the future direction of the economy, real estate values, interest rates, equity markets–both domestically and globally–and liquidity. All of these factors have had an impact on life/health insurers’ balance sheet strength and operating performance.
As the federal government takes unprecedented steps to promote stability in financial markets and limit damage to the broader economy, A.M. Best notes both the political uncertainty of the upcoming Presidential election as well as the enhanced regulatory scrutiny that currently pervades the life/health industry. These issues are most prevalent across health insurance product lines, which are influenced significantly by regulation at both the federal and state levels. As a result, A.M. Best has revised the rating outlook on the health insurance industry to negative.
With employers dropping coverage, and politicians and regulators seeking ways to provide coverage for the uninsured, the individual medical market has become ultra competitive. A.M. Best has similar concerns with the small group medical market as large, national managed care companies compete despite low profit margins.
Moreover, the current economic environment is placing additional pressures on the managed care sector. The commercial market has been extremely competitive for some time with limited growth potential. Layoffs and bankruptcies will impact commercial enrollment, while cost factors could pressure employees to drop coverage. Many publicly traded managed care companies have increased their financial leverage over the past year mainly for share repurchase and acquisitions (with goodwill), all of which increase balance sheet risk. While A.M. Best acknowledges that managed care companies tend to have more liquid and conservative investment portfolios due to the short-tailed nature of the claims, the issues that have emerged on Wall Street, and in the real estate market, are expected to result in writedowns of certain investments.
http://www.marketwatch.com/news/story/am-best-revises-rating-outlook/story.aspx?guid=%7B4190EA15-8E83-466A-8FD1-5C44D3E63F4A%7D&dist=hppr

When the economy goes South, and unemployment rates increase, publicly financed programs face budget constraints because of the decline in tax revenues. Think of our public education system. Publicly financed health programs (over half of all health care spending today) face similar constraints.
So we should look at the stability of the financing of health care through private health plans. This report from A.M. Best indicates that market volatility will have a negative impact on the participation in their health insurance products and on the insurers’ return on their investments.
A shift away from large employer coverage and towards individual and small group insurance products has made these markets “ultra competitive,” resulting in narrower profit margins. It is ironic that increased competition is considered to be a threat to the insurers’ business model. At the same time “enhanced regulatory scrutiny” is also a threat. It seems that the health insurance industry will have difficulties no matter whether free market or government regulation policies prevail.
In addition, a significant portion of insurers’ profits comes from their investments that have nothing to do with health care. As their investment revenues decline they must make up the difference by increasing the spread between their revenues and costs. Since their high administrative costs are relatively fixed, they must turn to increases in premiums and decreases in benefits paid. The decrease in benefits is accomplished by reducing the health benefits which are covered, and by increasing cost-sharing by the patients. Underinsurance is already a major problem, and it will expand further under current trends.
Any financial crisis would impact both publicly and privately financed programs, but the private investor-owned programs are more severely impacted. Looking at the current financial crisis, it’s clear that only our government has the capability and resources to ensure health security for all of us… forever.

MarketWatch
September 18, 2008

Although fundamentals for the vast majority of life/health companies are currently sound, uncertainty continues to be widespread in terms of the future direction of the economy, real estate values, interest rates, equity markets–both domestically and globally–and liquidity. All of these factors have had an impact on life/health insurers’ balance sheet strength and operating performance.

As the federal government takes unprecedented steps to promote stability in financial markets and limit damage to the broader economy, A.M. Best notes both the political uncertainty of the upcoming Presidential election as well as the enhanced regulatory scrutiny that currently pervades the life/health industry. These issues are most prevalent across health insurance product lines, which are influenced significantly by regulation at both the federal and state levels. As a result, A.M. Best has revised the rating outlook on the health insurance industry to negative.

With employers dropping coverage, and politicians and regulators seeking ways to provide coverage for the uninsured, the individual medical market has become ultra competitive. A.M. Best has similar concerns with the small group medical market as large, national managed care companies compete despite low profit margins.

Moreover, the current economic environment is placing additional pressures on the managed care sector. The commercial market has been extremely competitive for some time with limited growth potential. Layoffs and bankruptcies will impact commercial enrollment, while cost factors could pressure employees to drop coverage. Many publicly traded managed care companies have increased their financial leverage over the past year mainly for share repurchase and acquisitions (with goodwill), all of which increase balance sheet risk. While A.M. Best acknowledges that managed care companies tend to have more liquid and conservative investment portfolios due to the short-tailed nature of the claims, the issues that have emerged on Wall Street, and in the real estate market, are expected to result in writedowns of certain investments.

http://www.marketwatch.com/news/story/am-best-revises-rating-outlook/story.aspx?guid=%7B4190EA15-8E83-466A-8FD1-5C44D3E63F4A%7D&dist=hppr

Comment:

By Don McCanne, MD

When the economy goes South, and unemployment rates increase, publicly financed programs face budget constraints because of the decline in tax revenues. Think of our public education system. Publicly financed health programs (over half of all health care spending today) face similar constraints.

So we should look at the stability of the financing of health care through private health plans. This report from A.M. Best indicates that market volatility will have a negative impact on the participation in their health insurance products and on the insurers’ return on their investments.

A shift away from large employer coverage and towards individual and small group insurance products has made these markets “ultra competitive,” resulting in narrower profit margins. It is ironic that increased competition is considered to be a threat to the insurers’ business model. At the same time “enhanced regulatory scrutiny” is also a threat. It seems that the health insurance industry will have difficulties no matter whether free market or government regulation policies prevail.

In addition, a significant portion of insurers’ profits comes from their investments that have nothing to do with health care. As their investment revenues decline they must make up the difference by increasing the spread between their revenues and costs. Since their high administrative costs are relatively fixed, they must turn to increases in premiums and decreases in benefits paid. The decrease in benefits is accomplished by reducing the health benefits which are covered, and by increasing cost-sharing by the patients. Underinsurance is already a major problem, and it will expand further under current trends.

Any financial crisis would impact both publicly and privately financed programs, but the private investor-owned programs are more severely impacted. Looking at the current financial crisis, it’s clear that only our government has the capability and resources to ensure health security for all of us… forever.

Better Care at Lower Cost for Every American

By John McCain
Contingencies
September/October 2008
We can no longer afford to promise more than we can deliver. Nor can we risk misdiagnosing the problem and devising a cure that might harm the patient.
The problem is not that most Americans lack adequate health insurance. The vast majority of Americans have private insurance, and our government spends billions each year to provide even more.
Fundamental health care reform must begin with restoring control to individuals and their families as health care consumers and patients and making them the central focus of our health care system.
Opening up the health insurance market to more vigorous nationwide competition, as we have done over the last decade in banking, would provide more choices of innovative products less burdened by the worst excesses of state-based regulation.
http://www.contingencies.org/septoct08/mccain.pdf

Let there be no doubt about John McCain’s plans for health care in America: Just as reducing the burden of government regulation of real estate lending has allowed more individuals to achieve the American dream of owning their own homes, reducing regulatory oversight of private insurers will make health care more affordable for all of us.
Many people made a lot of money in home loans while the regulators turned their backs. Of course, those people have walked away with their siphoned-off money in hand, and left us with a market that has destroyed the finances of individuals and shattered their dreams of home ownership. The magnitude of the crisis is so great that the government had to step in and use our tax dollars to prevent the collapse of the economy.
John McCain now wants the regulators to turn their backs on the private insurance industry. By selling us insurance products that are affordable, many people will make a lot of money. When those underinsurance products fail to protect us from financial hardship whenever we need heath care, our personal finances will collapse, and the financing of the health care industry will be disrupted, resulting in the impending collapse of the health care delivery system. By then, those who profited will have walked away with their siphoned-off money in hand, leaving us with a health care crisis that only the government will be able to repair, using our tax dollars to prevent the collapse of our health care system.
Just as a robust deregulated market in sub-prime lending and mortgage-backed securities was not the solution to expand home ownership to more Americans, a robust deregulated market in private health underinsurance plans can never make health care affordable for those who need it.
Barack Obama understands that if private insurance plans are to fulfill their function of making health care affordable, then the market must be tightly regulated, and underinsurance products must be prohibited. He also understands that private plans that actually work are no longer affordable for the majority of Americans. That is why he decided against mandating universal health care coverage; you can’t buy a plan if you don’t have the money to pay for it.
Neither a market of deregulated private plans nor a market of tightly-regulated private plans will work. Continuing to rely on the private insurance market will compound the crisis in health care financing, eventually forcing a government buyout of the system. Instead of waiting for more pain, suffering, financial hardship, and even death, let’s adopt a system that actually would make health care affordable for all of us: a single payer national health program.
Isn’t prevention better than a salvage operation?

By John McCain
Contingencies
September/October 2008

We can no longer afford to promise more than we can deliver. Nor can we risk misdiagnosing the problem and devising a cure that might harm the patient.

The problem is not that most Americans lack adequate health insurance. The vast majority of Americans have private insurance, and our government spends billions each year to provide even more.

Fundamental health care reform must begin with restoring control to individuals and their families as health care consumers and patients and making them the central focus of our health care system.

Opening up the health insurance market to more vigorous nationwide competition, as we have done over the last decade in banking, would provide more choices of innovative products less burdened by the worst excesses of state-based regulation.

http://www.contingencies.org/septoct08/mccain.pdf

Comment:

By Don McCanne, MD

Let there be no doubt about John McCain’s plans for health care in America: Just as reducing the burden of government regulation of real estate lending has allowed more individuals to achieve the American dream of owning their own homes, reducing regulatory oversight of private insurers will make health care more affordable for all of us.

Many people made a lot of money in home loans while the regulators turned their backs. Of course, those people have walked away with their siphoned-off money in hand, and left us with a market that has destroyed the finances of individuals and shattered their dreams of home ownership. The magnitude of the crisis is so great that the government had to step in and use our tax dollars to prevent the collapse of the economy.

John McCain now wants the regulators to turn their backs on the private insurance industry. By selling us insurance products that are affordable, many people will make a lot of money. When those underinsurance products fail to protect us from financial hardship whenever we need heath care, our personal finances will collapse, and the financing of the health care industry will be disrupted, resulting in the impending collapse of the health care delivery system. By then, those who profited will have walked away with their siphoned-off money in hand, leaving us with a health care crisis that only the government will be able to repair, using our tax dollars to prevent the collapse of our health care system.

Just as a robust deregulated market in sub-prime lending and mortgage-backed securities was not the solution to expand home ownership to more Americans, a robust deregulated market in private health underinsurance plans can never make health care affordable for those who need it.

Barack Obama understands that if private insurance plans are to fulfill their function of making health care affordable, then the market must be tightly regulated, and underinsurance products must be prohibited. He also understands that private plans that actually work are no longer affordable for the majority of Americans. That is why he decided against mandating universal health care coverage; you can’t buy a plan if you don’t have the money to pay for it.

Neither a market of deregulated private plans nor a market of tightly-regulated private plans will work. Continuing to rely on the private insurance market will compound the crisis in health care financing, eventually forcing a government buyout of the system. Instead of waiting for more pain, suffering, financial hardship, and even death, let’s adopt a system that actually would make health care affordable for all of us: a single payer national health program.

Isn’t prevention better than a salvage operation?

Health care reform must art with a plan to simplify

By William R. Brody, MD, PhD, president of the Johns Hopkins University
San Francisco Chronicle
September 18, 2008
I favor community-rated health insurance – that is, one big pool to spread and share risk with no cherry picking allowed.
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/09/17/EDA112VONV.DTL

There could not be a more explicit endorsement of social insurance, especially significant since it comes from one of the nation’s more important health care leaders. Once we all agree that we need one big risk pool to spread and share risk, the remaining efforts in health care reform would be limited to working out the details of the mechanics of funding and administering that pool.
That is not to say that it will be easy. We will still be debating whether or not we will dismiss the private insurance industry and replace it with a single payer universal health program. If we continue to use the private insurance industry, it will require massive transformation into a model similar to the European plans using non-profit private insurers, a change that investor-owned insurers surely will resist to the death of their corporations (what a pleasant fantasy). Instead of trying to totally change the mission and structure of U.S.-style insurers, it would be easier to replace them with our own public Medicare-like model.
Once we accept the concept of a single, equitable risk pool for everyone, then we can all move forward with the comparatively simple task of crafting the mechanics of the financing system. We really can do it.

By William R. Brody, MD, PhD, president of the Johns Hopkins University
San Francisco Chronicle
September 18, 2008

I favor community-rated health insurance – that is, one big pool to spread and share risk with no cherry picking allowed.

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/09/17/EDA112VONV.DTL

Comment:

By Don McCanne, MD

There could not be a more explicit endorsement of social insurance, especially significant since it comes from one of the nation’s more important health care leaders. Once we all agree that we need one big risk pool to spread and share risk, the remaining efforts in health care reform would be limited to working out the details of the mechanics of funding and administering that pool.

That is not to say that it will be easy. We will still be debating whether or not we will dismiss the private insurance industry and replace it with a single payer universal health program. If we continue to use the private insurance industry, it will require massive transformation into a model similar to the European plans using non-profit private insurers, a change that investor-owned insurers surely will resist to the death of their corporations (what a pleasant fantasy). Instead of trying to totally change the mission and structure of U.S.-style insurers, it would be easier to replace them with our own public Medicare-like model.

Once we accept the concept of a single, equitable risk pool for everyone, then we can all move forward with the comparatively simple task of crafting the mechanics of the financing system. We really can do it.

Covering the Uninsured: Options for Reform

Kaiser Family Foundation
September 17, 2008
Options for Covering the Uninsured
1. Build on the current system:
Strengthen the employer-based system
Expand public coverage by building on Medicaid and SCHIP
Create new group insurance options for individuals and businesses
2. Revise the sponsorship and financing of health coverage through the tax system
3. Adopt a single-payer plan
http://www.kff.org/uninsured/h08_7813.cfm

Listening to the national dialogue on health financing reform, you would think that we have only two options: 1) Don’t start from scratch with a better program, but build on the current system (Obama), or 2) Reform the tax code to shift incentives for purchasing insurance from employers to individuals (McCain). Replacing our dysfunctional financing system with a single payer national health program, if even mentioned, is immediately dismissed from the dialogue.
As an example, yesterday Health Affairs released three new articles commenting on the reform proposals. An excellent article by Buchmueller et al explained why the McCain proposal would be relatively ineffective in expanding coverage to more individuals and would likely result in a deterioration of the effectiveness of health plans. An article by Antos et al explained why the Obama proposal will fail to slow the escalation in health care costs, besides falling short on universal coverage.
The third Health Affairs article should have been on how single payer would control costs while providing comprehensive coverage for everyone. It wasn’t. Instead it was an article by Mark “Moral Hazard” Pauly describing a compromise model incorporating features of the McCain and Obama plans. Although the Buchmueller and Antos articles were covered extensively by the media, I couldn’t help but notice that the Pauly article was ignored, and quite appropriately so.
Kaiser Family Foundation is precisely right. There are three options for reform. We know that only one of them will work: single payer. A discussion of the McCain and Obama plans is not complete without including an explanation of the effectiveness of single payer. It’s our job to be sure that it is included.