Tuesday, February 07, 2006

The Bills beat the Bucks.

I promised a few days ago that I would be coming up with a comprehensive post on why a national health care plan that covers 100% of the population would be an improvement over what we have now. I wanted to wait until I had some facts in order. Well, the facts are now in order.

What we have now is a system where about 46 million Americans (a number which in itself represents a 10% increase over what it was just four years ago) lack insurance. This doesn't mean that none of them get sick, or that they don't eventually end up in emergency rooms or elsewhere in the system. What it means is that when they can't pay, the health care providers (hospitals or doctors) make up the loss by charging more for the rest of us. That is why even the pro-employer institute, National Business Group on Health acknowledges that the costs of health care, up 50% in the past five years, has become an unmanageable burden on employers who provide it. So not providing health insurance to so many people ultimately does not save you, if you are one of those lucky enough to have insurance, a dime; it instead only makes you pay it through your employee health insurance, while also hurting your employer.

Moreover, this is squarely hitting the middle class. The poor are largely covered by Medicaid, and when they are not, well there is an old saying that you can't get blood out of a turnip, and one way or another the cost of treating them gets shifted to people who do have insurance, as described in the paragraph above. The wealthy probably have insurance, or maybe they don't, but either way are not paying much more for healthcare than the middle class in actual dollars. In percentages, it is a lot less. Now, overall, health care was costing the U.S. 15.3% of our Gross Domestic Product in 2003 (source: Pear, R. "U.S. Health Care Spending Reaches All-Time High: 15% of GDP." The New York Times, 9 January 2004,) although it is likely higher now, and is projected to continue its double digit annual rate of growth for the foreseeable future if nothing is done.

Now, let's sit back and calmly look at the costs of the present system for the average family (median household income $44,473). The combined cost of healthcare premiums (whether paid by the wage earners in the family or their employers) in 2006 will be $14,500 ( Simmons, H. E. and M. A. Goldberg. Charting the Cost of Inaction. National Coalition on Health Care, May 2003.); this is up significantly from 2004, when we find a combined cost of $12,611 (The annual premium that a health insurer charges an employer for a health plan covering a family of four averaged $9,950, or $829 a month in 2004. Workers contributed $2,661, or 10 percent more than they spent in 2003.-- source: The Henry J. Kaiser Family Foundation. Employee Health Benefits: 2004 Annual Survey. 2004. 09 September 2004. ) I know that right now, my employer and I combine for about $1250 per month in medical and dental premiums. My employer pays premiums for me and I pay them for my wife and kids. Of course, what my employer pays might as well be money that I pay since if they didn't have to pay it, then they could pay me the same amount of money.

Now, in addition to these, all of the insurers require the payment of deductibles and co-pays. Even if everyone in our average family stays well (a big if) over the course of a year, these things add up. If we assume, say, a total of ten doctor visits per year for the whole family (assume a $10 co-pay), resulting in ten prescriptions (these vary wildly but an average of $20 each is probably reasonable-- in our family prescriptions varied from $4.63 to over $100 this year-- and all told they totaled well over $1000), and a $200 per person deductible for a family of four, we get $100 in co-pays, $200 in prescriptions, and $800 for deductibles, and probably about 20% if you have any ER visits-- if we assume one, this is likely to be a couple of hundred dollars (your share). That adds up to $1300 Not bad, and much less than our own family medical bills last year, but this assumes a very optimistic scenario. If, on the other hand, something catastrophic happens (and people do have accidents when they least expect them) and you have an insurer that like most charges you, say, 20% of the bill, you could easily end up (as we did last year) with thousands of dollars in bills.

Now, conservatives will say, that at least we don't pay taxes for medical care. Ah, but we do. We pay taxes for Medicare and Medicaid. And those go to pay for two relatively higher risk groups, who would be included in any national health care system (thereby allowing both programs to be eliminated in the process). Fiscal 2005 expenditures on the two programs were over $600 billion. I couldn't find a line by line analysis of the President's newest budget proposal (if anyone gives me one I will link it here), but if we assume that the figure for the two programs is very near this, and then consider the President's budget proposal of $2.77 trillion out today, the programs together represent 21.6% of the budget. I found the average U.S. income tax bill from the website of a Republican congressman. It is $9,445. This means that if we multiply the two figures together, our average family pays just over $2,000 for medicare and medicaid.

But that is not all. Between car insurance and homeowners insurance, Americans have to pay additional premiums (I'll estimate this at $50 per month, or $600 per year) for additional medical coverage to cover the cost of medical care for someone who you might accidentally hit with your car, or who your dog bites, even if you are a very safe driver and you don't own a dog.

Now, let's add this up:

$12,611 + $1300 + $2000 + $600 = $16,511 (I am being generous here and using the 2003 figure instead of the projected 2006 figure for premiums; if I use the later figure then we are well over $18,000. Now, divide $16,511 by our "income" of $54423 ($44473 + $9950 since your employer could include in your paycheck what they are now paying in premiums) to get that health care is costing our average family: 30.3%. And this still doesn't include the higher costs you pay because of other businesses who have to charge more for their product in order to foot the bill for health care costs for their employees (for example, if you buy a Ford or GM car, over $1000 of the cost goes directly to pay for health care insurance, which for example, Toyota doesn't have to pay. I blogged on that when when GM announced layoffs and again when Ford announced layoffs.)

Why did I use averages so much? Because an average is a middle. Some are more, some are less. Conservatives can claim that some middle class people pay less than this. That is true. But some also pay more. I know that given our own household structure and expenses, our health care costs this year were more than this. I could use our own situation to model it, but that would be anecdotal, while the averages are statistical.

Now, if we had national health care what would it cost? Well, despite our spending over 15% of our GDP on it, if you read the NYT article referenced above, you will find that other countries were much more successful:

Health care spending accounted for 10.9 percent of the GDP in Switzerland, 10.7 percent in Germany, 9.7 percent in Canada and 9.5 percent in France, according to the Organization for Economic Cooperation and Development.

Of course in those countries, healthcare providers (including pharmaceutical companies) have to negotiate their prices (and they make a profit, or they wouldn't operate there) instead of jacking them up to 'sky is the limit' levels as they can and do here.

But let's even assume that we remain at 15% of our GDP. Isn't this a lot cheaper than the 30% you pay now? And I will even give conservatives a bone: Canada mostly finances their system with a 7% national retail sales tax. Now, I don't in general like NRST, since it is a very regressive tax, especially as some Republicans propose to use it to replace the graduated income tax. However, if this was what I needed to quit paying 30% for health care, that would be a good trade off.

And quality? Conservatives are always pointing out how much better our system is. Well, for starters, that isn't true. Check the numbers yourself on the most fundamental measure that there is to consider how good the health care system is, the ultimate 'bottom line:' the people in the countries I mentioned earlier live longer than we do. (if you're looking for the United States, you'll have to scroll all the way down to #48 on the list, just barely above Cuba.) Waiting lines? A problem in Canada, agreed. But then I had a friend who lived here in the U.S. who needed 'immediate' knee replacement surgery, and had to wait six months for it. And not even such a big problem in some other countries.

Further, conservatives fall into the trap of assuming that single payor (as in the Canadian system) is the only type of national health care system that there is. But that is not true. I have a friend from Australia, and she explained that there they have a two tier system-- the government can and will cover everyone, no questions asked, but they do have a private system complete with insurance companies and if you don't want to wait your turn in the government system, then you can hire a private doctor to treat you more quickly. And some people do. But there, as in Canada or in the United States, the system is prioritized. If you enter the ER during a heart attack, no one will tell you to take a number or make an appointment. You will be treated immediately.

Just that in the United States, unlike Canada or Australia, if you had one heart attack, then be sure you stay calm and take an aspirin before you open the bill from the hospital, or you may have another one.

18 comments:

dorsano said...

Won't Universal Coverage Raise My Taxes?

Currently, about 64% of our health care system is financed by public money: federal and state taxes, property taxes and tax subsidies. These funds pay for Medicare, Medicaid, the VA, coverage for public employees (including teachers), elected officials, military personnel, etc. There are also hefty tax subsidies to employers to help pay for their employees’ health insurance.


About 17% of heath care is financed by all of us individually through out-of-pocket payments, such as co-pays, deductibles, the uninsured paying directly for care, people paying privately for premiums, etc.

Private employers pay 19% of health care costs.

A universal public system would be financed this way: The public financing already funneled to Medicare and Medicaid would be retained. The difference, or the gap between current public funding and what we would need for a universal health care system, would be financed by a payroll tax on employers (about 7%) and an income tax on individuals (about 2%). The payroll tax would replace all other employer expenses for employees’ health care.

Eli Blake said...

Exactly, Dorsano. The way things are now, a middle class working family pays their own health care bill AND someone else's.

Zelle Brennan said...

There is also an opportunity cost that is difficult to factor in, that has been evident in labor negotiations where contracts reflect the necessity to favor health care cost increases versus cost of living/raises. It is difficult to answer the question of how much an employee MIGHT be making had they not been forced to choose in bargaining. An example where I am are the teacher's unions that have seen fewer step increases because the employer districts have been eating rising costs to provide insurance. (not to mention the effects on education, in this example)It becomes a matter of passing on the cost, or keeping salaries stagnant despite increases in costs like housing.(people forget that the housing bubble has hurt young people and first time buyers, and subsequently fewer enjoy the write offs as well)

Good point that single payer is not the only model one can look at. There are many others. And solutions to address the crticisms.

To touch on the equity/justice issue a bit more, YES we have medicaid but the reimbursement rate is so ridiculously low that it presents a real hardship for low income individuals to FIND care (couple that with transportation barriers, etc.) In our county, one part time psychiatrist accepts medicaid for adults. The wait can be as long as three months! Solution? the ER, needless suffering, and- higher costs. I have referred clients to practitioners as far as 70 miles from their homes.

Its ridiculous to have the systems we have, as they function currently, they are wasteful, inadequate, and unjust. If we could only get past the ignorance hurdle.

Eli Blake said...

Zelle:

Good point about medicaid undefunding things. I know that a few years ago that was a complaint in Phoenix hospitals, that medicaid was only paying for 11% of ER costs. And like I said, the costs don't just go away or be absorbed by the hospital, they jack up everyone who can pay's bill in order to cover the loss.

What some on the right don't understand (especially those who want to eliminate any government subsidies for health care) is that when they preach about how everyone should simply pay their own health costs, there will be people who simply don't have the money to afford it. And unlike, say, a car dealer who can tell a person who has no means to pay that they can't buy a car, or even the electric company who can pull the plug on their electricity if they don't pay, the health care provider has to provide service. Not only is it the law, but I doubt if anyone would find it acceptable to live in a society in which people who couldn't pay their bills were locked out of hospitals and left to drop dead and rot on the street. But that is essentially the Libertarian Utopia.

dorsano said...

Eli - I'm off topic (sort of) but check this out.

Pam alerted me.

EAPrez said...

Interesting and well laid out argument. I'd suggest an asprin a day to help prevent a heart attack!!!!! Here is a website you might find interesting Eli http://www.statehealthfacts.org/cgi-bin/healthfacts.cgi?action=compare&category=Medicaid+%26+SCHIP&welcome=1

EAPrez said...

crap it doesn't wrap...start here
http://www.statehealthfacts.org/cgi-bin/healthfacts.cgi?

Zelle Brennan said...

The 'libertarian utopia' is frought with exceptions, paradox..public health questions, even if we could agree that there is no room for 'providing for the general welfare' etc. by government, the implications of a system devoid of any safety net would be staggering, TB being a great example because of the fact that there is the public health threat-- but also the vested interest (because of drug resistance)in compliance. Neglect on the one hand constitutes harm on the other no matter where you stand on the spectrum politically.

Drug resistant diseases do not know how to discern their hosts by socioeconomic indicators. It's in the best interests of the elite in society to manage epidemiology. And compliance, treatment issues.

I don't know that people realize how much is spent now, because the financial argument is the one I hear the most. Against higher 'taxes'. Our taxes are pretty high given their correspondence to standard of living and mortality rates.

dorsano said...

In my experience, there's little that can be done in the way of discussion to change the mind of an economic libertarian - it's sort of like talking to a fundamentalist.

It's not until something happens that affects them personally that they begin to change or become open to seeing the world differently - sort of like Scrouge I suppose.

There are people, who defend the GOP out of party loyalty with libertarian talking points - those I encourage to take back their party.

Anonymous said...

War is an ugly thing, but not the ugliest of things. The decayed and degraded state of moral and patriotic feeling which thinks that nothing is worth war is much worse. The person who has nothing for which he is willing to fight, nothing which is more important than his own personal safety, is a miserable creature and has no chance of being free unless made and kept so by the exertions of better men than himself.
-John Stuart Mills

Eli Blake said...

anonymous:

Not sure exactly what that has to do with the cost of health coverage, but as far as war is concerned:

There are things which are worth fighting for. And no one questions that we are in Afghanistan because we are fighting a just war (though it could have been managed better and made a higher priority). So yes, there are some things which are worth fighting for.

However, we are also stuck in another war, one which was not worth fighting, and which the best outcome we can hope for is a 'stable' Islamic Republic which is an Iranian ally, between Iran and Syria.

And it is for a withdrawal, from that foolish and costly war, which IS worth fighting for, and many of us are fighting for that.

Emily Carson said...

No one is suggesting that we let people die and rot on the street if they can't pay the bill at the emergency room. I think your mischaracterization of people who think that the government won't do as good a job of running health care as private industry is unfair.

We know that hospitals will always lose money treating people who can't pay them, and pass on the costs. But how is it better to have the government in the middle, doing the same thing?
Yes, there are problems with the present system, and yes, those problems have been allowed to grow (if you hadn't noticed, we've been fighting a war).

But what you are proposing is worse. It's socialism. Socialism takes away choices, and with no choice, you have no freedom. In America we have freedom, even the freedom to make bad choices. I've made at least one-- I smoke. And sooner or later I will pay for it, financially as well as in other ways. But why should you have to pay higher taxes to cover the cost of lung cancer I am giving myself?

I'm even willing to grant that health care is such a huge issue that there is a place for government in it. But not running it.

Eddie81 said...

emily carson -- Thank you!

There are many ways we can modify our current system without destroying it. Lets give some of thise options a chance before we go the way of Europe.

EAPrez said...

The costs the hospitals pass on to the rest of us are disproportionately passed on to those who are least able to pay. Say someone needs an MRI - MRI costs $1300 - for someone with insurance the negotiated rate as the preferred provider the cost may be only $800. For the uninsured the cost remains $1300.
I will never understand the phoney argument about 'choice' in healthcare. If you are in an employers plan you still have to seek care within the network or pay more or all out of pocket to see who you want. Even in a PPO vs an HMO although you don't need a referral you still need to stay in plan. Your choices are limited by your health insurance carrier unless you want to pay yourself so thats a phoney argument started by the right when they wanted to shoot down a plan before they knew the details of the proposal. Another 'fear' based argument not grounded in reality.

Eddie81 said...

eaprez,

I don't konw about your health plan...mine allows lots of choice. Over 400 PCPs. When I had to get an MRI last year I had my choice of 4 hospitals. After a few minutes with my PCP, we decided on the one further away by 15 miles but where I was in-and-out in less than an hour. That would never happen in Canada!

Eli Blake said...

Emily:

You may not be suggesting that people die and rot in the streets, and you are at least admitting that there is a place for government. However, note that I called this a 'Libertarian utopia.' Since you admit that government may be involved at least, you are not taking a Libertarian position. But I have heard Libertarians say that people should be kicked out of the hospital even if they die, if they don't have the money to pay. Now, you might respond that Libertarians are a fringe party that is lucky if they get a whole percent of the vote in an election, but they control some institutions very close to the center of power, including the Cato Institute, which has advised the President on a number of economic matters including related to health care (as well as the failed Social Security plan from last year). You seem not as far to the right as Libertarians just by acknowledging that there even is a role for government.

As far as costs and taxes, you appear not to have read all the way through my post. Mostly, it was dedicated to analyzing costs, and then to arguing why socialized medicine would cost less. This was not, except for a sentence or two at the end, a value judgement about socialized medicine, but rather a discussion centered on cost.

And on the topic of cost (whether the state pays for your future cancer treatments or your private insurer does) there are at least three reasons to argue why socialized medicine will be cheaper:

1. It is already, in countries that have it.

2. We always hear about 'risk pools' and why larger risk pools cause insurers to be able to lower their rates. Well, what 'risk pool' is larger than 100% of everybody? Also, by wielding this plan, the government can negotiate lower prices (as they do in every other country; I know people who go to Mexico and buy the same drugs they would buy in the U.S. for a fraction of the cost).

3. Private enterprise makes a profit. Now, there is nothing intrinsically wrong with making a profit, and I expect that part of what I pay for anything will go into the profits of whoever I am buying it from, but that is still an additional cost which is present in our health care system and absent in most other countries.'

Eddie, I happen to know that EAPrez works as a plan coordinator (not sure of the exact job title). She knows what she is talking about. Your plan may be one of the better ones, I know with my plan I've had to change doctors at least once because of insurance complications, and don't even get me talking about prescriptions they don't cover.

EAPrez said...

Yeah you have choices - in the book the insurance company provides you. If you change jobs like lots of people do the doc you currently see may not be in your new plan. You can still see him if you want - but you will pay for it either entirely OR a higher percentage out of your own pocket. Why do you make the assumption that in a Universal plan that you won't have a wide range of choices? Why? Because that's the message the Clinton haters put out there trying to discredit something that hadn't even been presented yet. They shot it down so it wasn't even debated. Why is that? I think one only needs to look at all the revelations we've had about our officials in the pockets of the lobbyists to figure that out. They weren't afraid of a BAD idea. They were afraid of a good idea and the money they would potentially loose control of. The health care system is only good for those who have great insurance. For those who have minimal benefits or none at all the system is a nightmare. Good care shouldn't be dependent upon who makes the most money. WHEN the next big pandemic hits our country - and it WILL - your insurance isn't going to help you. The system is broken.

dorsano said...

Emily Carson said... Yes, there are problems with the present system, and yes, those problems have been allowed to grow (if you hadn't noticed, we've been fighting a war).

I know there's a war on - what makes you think I wouldn't know that? I tried to stop this war before it became a war.

Who started the war Iraq? And what were you doing before it became a war? Why didn't you try to stop it?

We know that hospitals will always lose money treating people who can't pay them, and pass on the costs. But how is it better to have the government in the middle, doing the same thing?

How is it better to have insurance beaurecrats in the middle doing the same thing?

The President is going around the country and telling everyone that we need to sign on the his "Health Savings Accounts" because they take the insurance companies out of the doctor patient relationship.

Health Savings Accounts don't actually take the insurance companies out of the doctor/patient relationship - but does that surprise you? This president will use ANY argument that appeals to common sense - even if his policies contradict it.

How blind are you?

Here are the FACTS Emily - Medicare costs 3% or less of premiums to adminster. Managed care plans cost 15% of premiums at a minimum to administer.

Medicare is NOT government care - Medicare is a FEE FOR SERVICE program.

Hospitals - not run by the government - charge the government a fee for preforming a service

The government pays.

HMO's charge YOU a FEE above and BEYOND what your doctor charges because they think that they know better than you and your doctor about what kind of care you need