Health Care’s Forgotten Crisis, Part 1

Richard Eskow

The real healthcare battle in this country isn’t the one being fought over the bill everyone now calls “Obamacare.” In fact, it’s not a battle between Republicans and Democrats at all. The real battle is the one millions of Americans face every day as they struggle to pay medical bills that now average nearly $10,000 per year – if they’re “lucky.”

The United States is now the only developed nation on Earth where the average family with insurance pays more for health care than it does for groceries. That includes both the family share of premiums and out-of-pocket costs for medical treatment. In fact, those out-of-pockets costs alone exceed a family’s average yearly cost for gasoline, according to a new study.

That study found that the average household medical bill for a family of four with “good” PPO coverage is nearly now $9,144 per year. That’s a crippling and unsustainable expense for most family budgets, a burden which is crippling the economy and ruining lives.

This struggle seems to have been forgotten in all the back-and-forth over Obamacare. Who’s fighting for these American households as they wage their losing battle against health care costs?

The wrong argument.

Certainly not the Republicans. They’ve offered no alternative vision except that of unrestrained greed, a ‘free-market’ health care jungle red in tooth and claw.

For their part, too many Democrats and liberals have concentrated on defending the Affordable Care Act. Sure, that bill has some good features: It’s a good thing that young people can now access their parents’ health care coverage until they’re twenty-six, and that people with pre-existing conditions are no longer excluded from coverage, and we should say so. And the ACA may help to slow the rate of health care cost increases.

But those costs are already unacceptably – and unsustainably – high. Medical costs are a heavy burden for many people. More attention must be paid to outlining the vision of a better health system which improves life for all Americans.

Premature exhilaration.

Many of the ACA bill’s defenders took a victory lap over last week’s rate announcement from California’s health exchanges. “Obamacare Will Be A Debacle — For Republicans,” wrote Paul Krugman. California’s rates were “very good news” for the law, wrote Ezra Klein and Evan SoltasMatt Yglesias said California’s results were “evidence” that “fundamentally (the bill’s) implementation is going to work out great, and people are going to love it.”

But on closer examination, California’s new figures don’t live up to these claims. As more Americans struggle with healthcare costs, arguing about Obamacare does or doesn’t do is likely to backfire politically.

It will certainly leave our core problems unaddressed.

Our medical bills are too high – and rising.

How big is today’s household tab? The Milliman actuarial firm has just releases its annual cost survey, the “Milliman index.” It shows the average family of four with point-of-service (PPO) health coverage – coverage that’s significantly better than the “gold” plan in California’s health exchange – pays $9,144 in medical costs. That includes the family share of the premiums, plus copays and deductibles.

Milliman found that the family’s cost for healthcare increased 6.3 percent in one year. That’s a reduction in the rate of increases, which has been well over 7 percent for the last four years.[1] But it’s no reason for celebration, especially since real wages for all but the top 1 percent actually declined over the same period.

Our “Milliman family” is paying $2,000 more for healthcare this year than it did four years ago. Even if the ACA caused household medical costs to stop rising altogether – something nobody is predicting – we’d be frozen at today’s household costs, a level which is indefensible and unsustainable.

It’s indefensible because people are paying so much less for healthcare in other countries, and it’s unsustainable because it’s stifling economic growth.

Even the insured aren’t really insured.

Milliman’s figures are averages. Some families pay less and some pay much more. For those that pay more, medical costs can be devastating. That’s one reason why a 2007 paper co-authored by Professor (now Senator) Elizabeth Warren showed that nearly half of the people who go bankrupt do so because of medical expenses, and that most of them had health insurance at the time.

Insurance is meant to protect people from catastrophic financial loss. That’s its fundamental purpose, the test which shows whether or not It’s doing its job. Health insurance in this country fails this fundamental test, leaving millions of Americans at risk for medically-caused bankruptcy.

We won’t solve that problem by providing more people with the same kind of insurance.

California’s results aren’t as significant as some may think.

That’s one of the reasons why last week’s celebrations seem misplaced. They were inspired by the premiums which private insurers offered to the California exchange, which came in at lower-than-expected rates. That’s good news, but it’s being oversold. Here’s why:

  1. California is a rarity among health care markets. Most don’t have the kind of competition which kept California’s rates relatively low this year. Most health markets are highly concentrated, as either monopolies or duopolies. In Birmingham, Alabama, for example, Blue Cross of Alabama has a 90 percent market share – and that’s not unusual. Competition won’t help in most parts of the country the way it has in California.
  2. Out-of-pocket costs for Americans will still be extremely high. And the Affordable Care Act won’t reduce them, merely (and hopefully) slow the rate of cost increases.
  3. Many states are refusing to even set up their exchanges for political reasons.
  4. The ACA was designed to limit the exchanges to a small number of Americans, most of whom will continue to struggle under the cost burdens outlined in the Milliman report.

How “covered” is California?

Sarah Kliff reports that it would cost a 21 year old in Los Angeles earning $17,000 “nothing” for the “bare-boned” bronze plan, but fails to mention that it will cost the taxpayer a very real “something” – for a plan which leaves that young person at extreme financial risk. (The “bronze” plan is far weaker than the one provided to our “Milliman family.”)

How would our family would fare under the new rates? I went to the California exchange, “Covered California,” to find out.[2]

The median income for a family of four in California is $77,896. Plugging that figure into the California exchange’s rate calculator, along with the ages of Milliman’s sample family, yielded an estimated adjusted premium of $617 per month – or $7,404 per year – for a “silver” plan, the only option the calculator offered. That represents the share of the premium which our “Milliman family” would pay.

Our family’s $7,404 goes to a for-profit entity with a financial incentive not to provide health care. So does the Federal tax credit (or “tax expenditure,” in today’s parlance) for our family’s coverage, which the exchange estimates will be nearly four thousand dollars a year ($3,840).

That money, which comes from the pockets of struggling middle-class families and beleaguered taxpayers, goes directly into the coffers of Anthem, United, and other for-profit health corporations.

Out of pocket and out of luck.

Then the out-of-pocket expenses begin to add up. Remember, this calculation is for a “silver” plan. Milliman notes that all of the plans used in its calculations offer benefits that exceed the second-highest coverage level, the “gold” plan. (The exchange also offers a “platinum” plan.) This means that our California family will pay much more on average than the families in the Milliman study.

A California “silver” plan includes the following provisions, according to “Covered California”:

A medical deductible of $2000 which must be met before benefits are paid.

By contrast, a Kaiser Foundation survey found average deductibles of $754 for HMO plans, $632 for PPOs (like the one our beleaguered “Milliman family” joined), $1,092 for point of service or “POS” plans. The Kaiser survey showed that 42 percent of the “Milliman families” are enrolled in plans with deductibles of $500 per less.

A $45 copay for each visit to a primary care doctor, and a $60 copay for each emergency or specialist visit.

More than one in four people with employer insurance had no doctor copayments at all. Among the 73 percent who did, those copayments averaged $23 for primary care visits and $33 for specialists – not much more than half of California’s “silver” copayments.

A $250 copay for hospitalizations, surgeries, and other high-cost events.

This is essentially comparable to employer offerings.

A separate $250 deductible for brand-name medications, and a $50 copay per prescription.

Most people in employee plans do not have to meet a deductible before receiving prescription drug coverage – and the “silver” plan appears to require a separate deductible for medications.

Maximum out-of-pocket costs of $6,400 per individual and $12,800 per family.

By contrast, the Kaiser survey showed that average maximum out-of-pocket costs for families with employer coverage were $1,329 for HMOs, $1,770 for PPOs like the “Milliman family’s” plan, $2,163 for POS plans, and $3,924 for high-cost deductible plans.

No panacea.

Obamacare will ask households to pay between 9 and 10 percent of their income for health insurance premiums. Then they’ll have to pay the out-of-pockets costs – costs which, as this benefit comparison shows, will be much greater on average for a family of four than the Milliman figure of $3,600 per year.

That means there will be many more medically-cause bankruptcies among insured Americans in the years to come.

Costs won’t be the only problem for “Covered California” enrollees. They’ll face a shortage of providers, too. Blue Cross of California’s plan, for example, will only provide access to slightly over one-third of its providers.

Passing the buck.

Most Americans – 153 million of us, according to the latest census – receive health insurance through our employers, who are in the business of making profits rather than providing social benefits. The Milliman Index shows that the total average cost of medical care for our insured family of four, including the employer’s share, is now $22,000.

As these costs have soared, businesses have done exactly what you’d expect them to do: shift the cost back onto employees.

And in this jobless ‘recovery,’ employees have very little choice but to do their best to bear this added burden – even as wage stagnation has cut into their real earnings and median incomes have fallen.

Obamacare does very little to help these already insured but under-insured Americans.

It’s not evil. But it’s not enough.

The Republicans are so eager to inflict defeat on Obama and the Democrats that they’ve labeled the Affordable Care Act “socialistic,” even though the key elements of “Obamacare” were designed in a right-wing think tank and first implemented by a Republican Governor named Mitt Romney.

The Act’s GOP origins don’t make it sinister, of course. Its good features will help many families. We’ve also seen that the ACA can “bend the cost curve” in states like California, slowing the rate of cost increases as its supporters predicted.

The problem with the ACA isn’t that it’s evil. It’s that it’s inadequate. It doesn’t offer the fundamental reform that should form at the heart of a new public vision and which should frame all future debate over health care.

Moving the battle lines.

California’s results are good news – for California. But they should be placed in the right perspective. Healthcare costs will continue to be a huge burden for most Californians, inside and outside the exchange. [3]

Our energies would be better used focusing on the big problems, which remain unsolved, rather than trying to spin or exaggerate Obamacare’s accomplishments. Fighting a defensive battle makes that Act, originally a right-wing creation, the leftmost front on the battle for healthcare reform. That serves the right but leaves America’s households in the lurch.

What we need instead is a national conversation about truly transformative health care reform. Anything less is pre-emptive surrender to corporate America, and an abandonment of struggling families across the nation.

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(The rest of this series will compare US healthcare costs with those of other developed nations and discuss their implications for our entire economy; look at the short-term risks and pitfalls in our healthcare struggle; and review the practical, smart, humane solutions which should become the focus for future debate.)

FOOTNOTES:

[1]The Affordable Care Act isn’t likely to have helped with this slowdown, since its cost provisions had not yet taken effect.

[2] A parenthetical, but relevant, comment: The California exchange calls itself “Covered California,” a nondescript name which conceals its government origins. I couldn’t find any mention on its website of the fact that it is a government program which provides a public service, even on its “About Us” page.

Why not? Has the ideology of private-sector superiority overtaken the Act’s communication efforts? Reinforcing the subtle anti-government bias seems to have become a habit for both parties. That serves the right – and undermines public support for the ACA.

[3] It should also be noted that these figures are tentative. If young people fail to enroll at the optimistic levels which have been predicted, California’s rates will go up substantially.

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