The issue of health and medical care in the US is quite
exhaustive in that there are many factors and sides to the issue. We will attempt only to highlight some of the
more important factors and their impact on the US middle class.
In the U.S., health care is considered a free
market. Consequently, a major factor
behind the high costs is that the US is unique among industrialized nations,
does not generally regulate or intervene in medical pricing, except for Medicare and Medicaid. While
other health care is deliver on a private fee-for-service basis in other
countries, as does much of the American health care system, they set rates as
if health care were a public utility.
Just think that in today’s health care industry, the
consumer rarely sees the cost of a medical procedure or operation and even the
doctor is not aware of what a hospital will charge the patient for his/her
services. In fact, because of the
provisions of the 2010 Affordable Health Care Act, American’s are just now
being made aware of what the cost of hospitalization and medical procedures are
costing. This information became
available publically in 2013 and the variations in rates are amazingly
divergent. [1]
Once upon a time health care in the US was affordable and
easily accessible. The US middle class had little problem obtaining health and
medical care, either for emergencies, preventive care, or long term medical. About
1985, health care expenses and their accompanying premiums started to
skyrocket. Employers and policy holders experienced
higher and higher annual premiums and soon companies required their employees
to share this expense. When a company or organization found they could no
longer afford insurance, the burden fell 100% on the employee. Those who could
not afford the premium and opted out; simultaneously higher premiums were
charged because there were too few to spread the costs.
And what happens to
those without medical insurance. There are, of course, several possibilities:
they remain healthy, have a few sick days, no accidents, and live a long life.
But, equally so, they have a heart attack, or cancer, or a bad accident, all of
which may cost a lot and require long-term recovery. Most likely these people will lose their
assets and go bankrupt. And then there are those who are turned away from
treatment because they cannot pay. According to a 2008 Urban Institute
published report Uninsured
and Dying from It, “estimates of insurance coverage, 137,000 people
died from 2000 through 2006 because they lacked health insurance, including
22,000 people in 2006.”
At the same time these costs exploded, policies became
more limited in coverage and benefits were being cut back and access too many
medical procedures became more difficult. Often the private health insurance
providers would deny beneficiaries to a medical specialist or a procedure for
because it was not covered by the policy.
Before a doctor could perform
surgery or other procedures, the clinic or hospital is required to obtain
authorization from the insurer except in the case of Medicare.
None-the-less, according to the Economist “America’s hospitals are the most expensive
part of the world’s most expensive health system (see Graphic 1). They
accounted for $851 billion, or 31%, of American health spending in 2011. If
they were a country, they would be the world’s 16th-largest economy,” 20%
of America’s GNP.[2]
To keep premiums somewhat affordable, higher deductibles
were offered. Twelve percent of policies now carry a $4,000 annual deductible. In 2010,
about 10% of people covered by their employer had a deductible of at least
$2,000, according to the Kaiser Family Foundation survey compared with just 5%
of covered workers in 2008.[3]
These high deductibles are forcing many from seeking medical help or skip important
preventive tests such as cancer.
But to be fair, costs were escalating partly due to advances
technology and medical procedures.
Additionally, patient lives could be saved when before it was thought to
be impossible. Trauma victims, premature births, cancer and heart attack
patients and the very elderly could be saved.
Then there is the growing problem for all Americans and
that is obesity. This is not only a growing health threat but also a negative
impact on health care and costs.
And, there is the fact that many American’s are living
longer (see Part 1 Demographics section) a large factor in increasing health
and medical costs.
Meanwhile costs for prescriptions, dental, mental and
vision care were also climbing causing additional burdens on the middle class. Once again as premiums continue to rise
reflecting additional costs, this expense is being placed more and more on the
wage earner.
To view details health and medical trends on the middle
class click on the downloadable PDF file below.
The Dots…Selected Health and Medical Trends in the US:
1980-2010
1.
Medical expenses and medical insurance
reflecting these expenses continue to climb
·
In
September 2009 the US Census reported that health care spending increased from
9.5% of personal consumption in 1980 to 16.3% in 2010, nearly 50 million
Americans without adequate health coverage[4].
·
Between
1980 and 2010 costs of medical increased care well beyond the rate of inflation
from 9.5% to 16.5% of personal consumption. (Bureau of Economic Analysis)
·
The
leading journal on health public affairs Health Affairs in its November 2008 published article on Tracking Health
Care Costs published the following chart
annual percentage in increases in health care spending and percent change in
GDP during 1995-2006 provides an idea of the increases seen in health care.
·
Between 1991 and 1994 spending for all services
dropped from 6.9% to 2.1%
 |
|
Table 1
Annual % change in health care spending 1995-2006
|
·
Cost of required surgery in the US is many times
more expensive than any other nation according to the Economist
in its edition dated June 29, 2013.
·
In a medical system notorious for opaque
finances and inflated bills, nothing is more convoluted than hospital pricing,
economists say. Hospital charges represent about a third of the $2.7 trillion
annual United States health care bill, the biggest single segment, according to government
statistics, and are the largest driver of medical inflation, a new
study in The Journal of the
American Medical Association found.
·
A day spent as an inpatient at an American
hospital costs on average more than $4,000, five times the charge in many other
developed countries, according to the International Federation of Health
Plans, a global network of health insurance industries.
The most expensive hospitals charge more than $12,500 a day. And at many of
them, including California Pacific Medical Center, emergency rooms are profit
centers. That is why one of the simplest and oldest medical procedures —
closing a wound with a needle and thread — typically leads to bills of at least
$1,500 and often much more.[5]
 |
|
Graphic 1: Comparison of average
costs per patient per day in 2012
|
- Increase in medical insurance is beyond affordability for most middle class families and small business
 |
|
Graphic 2: Health
Care Spending Trends 1980-2010
|
2.
Between
1999 and 2009 numbers of Americans going without medical and health insurance
rose from 38 million to 50 million (see chart 1 below). In 2010 this stood at
50.7 million according to the US census bureau. The percentage of Americans
uninsured in 2010 was 16.7%. The US Census Bureau
also reported in 2011
·
The percentage of people covered by
private health insurance has been decreasing since 2001.
·
In 2010, the percentage of people
without health insurance, 16.3 percent, the number of uninsured people
increased to 49.9 million in 2010 from 49.0 million in 2009.
·
The percentage of people with health
insurance in 2010 increased to 256.2 million in 2010 from 255.3 million in
2009.
·
However, the percentage of people
covered by private health insurance decreased in 2010 to 64.0 percent, while
the number of people covered by private health insurance was 195.9 million.
·
The percentage and number of people
covered by government health insurance increased to 31.0 percent and 95.0
million in 2010 from 30.6 percent and 93.2 million in 2009.
·
The percentage of people covered by
employment-based health insurance decreased to 55.3 percent in 2010 from 56.1
percent in 2009. The number of people covered by employment-based health
insurance decreased to 169.3 million from 170.8 million.
·
The percentage and number of people
covered by Medicaid in 2010, 15.9 percent and 48.6 million. The percentage and
number of people covered by Medicare increased in 2010 to 14.5 percent and 44.3
million.
·
In 2010, 9.8 percent of children under
age 18 (7.3 million) were without health insurance, not statistically different
from the 2009 estimates. The uninsured rate for children in poverty (15.4
percent) was greater than the rate for all children (9.8 percent).
·
The rate and number of uninsured for
non-Hispanic Whites in 2010 were 11.7 percent and 23.1 million, not
statistically different from 2009. The uninsured rate and the number of
uninsured Blacks were 20.8 percent and 8.1 million, not statistically different
from 2009.
·
The percentage of uninsured Hispanics
decreased to 30.7 percent in 2010 from 31.6 percent in 2009. The number of
uninsured Hispanics in 2010 (15.3 million) was not statistically different from
2009.
·
In
2010, 31% of Americans relied on the government for health insurance, up from
24.2% in 1999 according to the Kaiser Family Foundation.
 |
|
Graphic3: Trends in
Growing Uninsured Population 1999-2009
|
·
Partly due to significant increases in health
care insurance
·
Partly due to the downturn of the national
economy
4.
According to the American Journal of Medicine
"Illness or medical bills contributed to 62.1% of all bankruptcies in
2007."[6] This percentage was based
on recent homeowners not all debtors showing the full impact of this statistic
on the middle class. The study concluded that "Middle-class families
frequently collapse under the strain of a health care system that treats
physical wounds, but often inflicts fiscal ones."
5.
Obesity has become a major growing health and problem for
all Americans. This is not only a growing health threat but also causing more
expenses in health care and medical costs.
·
According to Health Affairs In 1998 the medical costs of
obesity were estimated to be as high as $78.5 billion, with roughly half
financed by Medicare and Medicaid.
·
Health Affairs researchers also determined that the increased
prevalence of obesity is responsible for almost $40 billion of increased
medical spending through 2006, including $7 billion in Medicare prescription
drug costs. We estimate that the medical costs of obesity could have risen to
$147 billion per year by 2008.
· This same report determined that estimates for all
payers combined range between $420 (inpatient) and $568 (prescription drugs). In percentage terms, the
increases for all payers combined range from 27 percent (non-inpatient) to 80
percent (prescription drugs) from 1998 to 2006
 |
|
Graphic 4: Uninsured
Rate Trends 2000-2010
|
6.
On July 30, 1965, President Lyndon B.
Johnson signed into law the Social Security Act Amendments, popularly known as
the Medicare bill.
It established Medicare, a health insurance program for the elderly, and
Medicaid, a health insurance for the poor.
·
Medicare has served as the principal medical
insurance program for senior citizens in the US allowing them to maintain their
middle class economic status.
·
Those not eligible for Medicare could easily
see their entire life savings, retirement accounts and other assets used for
health services and in many cases go bankrupt.
7.
On
March 23, 2010, President Obama signed the Affordable Care Act into law,
putting in place comprehensive reforms that improve access to affordable health
coverage for everyone and end a number of insurance company practices. In many cases these practices made it very
difficult for the US middle class to maintain their health or obtain adequate
medical care.
·
End to Pre-Existing
Condition Discrimination: Insurance companies can no longer deny
coverage to children because of a
pre-existing condition like asthma and diabetes, providing peace of mind for
parents of the more than 17.6 million children with pre-existing conditions.
Starting in 2014, no American can be discriminated against due to a
pre-existing condition.
·
End to Limits on
Care: In the past, some people with cancer or
other chronic illnesses ran out of insurance coverage because their health care
expenses reached a dollar limit imposed by their insurance company. Under the
health care law, insurers can no longer impose lifetime dollar limits on
essential health benefits and annual limits are being phased out by 2014. More
than 105 million Americans no longer have lifetime limits thanks to the new
law.
·
End to Coverage
Cancellations: Insurance companies can no longer drop your
coverage when you get sick due to a mistake you made on your application.
·
Additionally,
o
Annual physicals or
preventive care will not require a payment of a deductible
o
A cap has been placed on
administrative costs and overhead not to exceed 20%
8.
Medical costs for
prescription drugs, vision and dental care contributed to the overall increase
in US medical care. The graphic below shows costs rises of various plans
from 2003-2011.
 |
|
Table 2 Trends in
raising costs of Dental, Drug and Vision Plans 2003-2011
|
·
Pharmaceuticals increases
have been greater than most other medical expenses as seen in the chart below
covering 1997-2007. According to Health Affairs
Journal of January/February 2009
o
This
is partly due to 300-400 new “blockbuster” drugs coming on the market during
this period, each selling in excess of $1billion per year.
o
Spending
on blockbusters increased from about 12 % of all sales in 1996 to almost half
of all sales in 2006, accounting for three-quarters of prescription drug
spending growth over the same time period.
9. US Childbirth Cost: Consider this - the US has one of the
highest rates of both infant and maternal death among industrialized nations Graphic
4 below (see also Part 8: International Comparisons), despite having the most
expensive pre and post natal care and delivery costs in the world. Poor and
uninsured women and those whose insurance does not cover childbirth have
trouble getting or paying for prenatal care contributes to these high rates.
·
Some
social factors drive up the expenses. Mothers are now older than ever before,
and therefore more likely to require or request more expensive prenatal
testing.
· Obstetricians face the highest malpractice risks among
physicians and pay hundreds of thousands of dollars a year for insurance,
fostering a “more is safer” attitude
|
Graphic 4: Comparison of Average 2012 Childbirth
Costs (source: http://www.nytimes.com/2013/07/01/health/american-way-of-birth-costliest-in-the-world.html?ref=elisabethrosenthal)
|
10.
Long-term Care for the Elderly:
·
As
more baby boomers retire and become more dependent on Medicare there will be a
growing need for long-term care for the elderly.
·
Home-health-care
spending by Medicare beneficiaries, for example, climbed 129% to $19 billion
from 2000 to 2010, according to a March 2012 report to Congress by the Medicare
Payment Advisory Commission.[7]
·
For
example, according to 2013 Genworth’s Cost of Care Survey in 2008 the median annual rate for a private
nursing home room was $67,525, compared with the 2013 median annual rate of
$83,950.
11.
Where
do we go from here?
·
The
prescription to slow raising insurance premiums and contain medical and health
costs has been the adoption of the Affordable Health Care Act in 2010,
otherwise known as “Obamacare.” The US Supreme Court 2012 decision upheld the
law’s constitutionality.
·
However,
the Supreme Court gave states the right to opt out of one piece of the plan, a
federally financed expansion of Medicaid. Consequently, at least 14 states
especially those lead by conservative governors and legislatures have taken
this option leaving their middle class and working poor without accessibility
to affordable health care (see US map on the following page).
“With fourteen states opting
out, we estimate that 3.6 million fewer people would be insured, federal
transfer payments to those states could fall by $8.4 billion, and state
spending on uncompensated care could increase by $1 billion in 2016, compared
to what would be expected if all states participated in the expansion. These
effects were only partially mitigated by alternative options we considered. We
conclude that in terms of coverage, cost, and federal payments, states would do
best to expand Medicaid.”
·
If that is not enough, the
US House of Representatives has voted at least 37 times to repeal the
Affordable Health Care Act knowing full well that this activity is
unproductive.
 |
| Graphic 5: Percent of those under 65 without health insurance by state in 2010 (source: http://www.economist.com/blogs/graphicdetail/2012/08/daily-chart-12 |
[1]
See The $2.7 Trillion Medical Bill, By
Elisabeth Rosenthal | Published: June 1, 2013 NYTimes
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