Stinkin’ Thinkin’ Part 2 Health Costs: More Cost Burden on the Employee
Stanley Feld M.D., FACP, MACE
Sound Bytes are deceiving. The Republican Party’s Presidential candidate, Republican Party politicians, and Republican policy wonks have often quoted reports that health care costs are expected to ease slightly for employers in 2009. There is deception in this fact. The overall decrease in healthcare costs for businesses is the result of its shifting the burden of costs to their employees. The result is a decrease in cost for the employers nationally. Therefore the sound byte is inaccurate. The cost of healthcare actually will rise 5.7% for the employers. This represents a decrease from last years rise of 6.1%. The direct costs to the consumer increases 29% next year. Once again, the devil is in the details. We can not rely on sound bytes. The healthcare insurance industry triumphs again. The result will be an increase in healthcare insurance industry net profits.
“Mercer, the consulting firm, expects employers’ health benefit costs to rise 5.7 percent in 2009, based on preliminary results of a survey. Increases have hovered at about 6 percent a year since 2005.”
If you are on your company’s health plan, you might want to brace yourself for higher deductibles, as well as higher co-payments. You will experience out of pocket premium costs as employers try to decrease overhead. You might be forced to join a Health Savings Account (HSA). It would be a good thing if the plan was a Medical Savings Account (MSA). MSA’s provide incentives for consumers to spend money they own wisely and take care of their healthcare needs. The employer provides the insurance not the consumer. In the present HSA the money is put in an account to pay to the insurance company or to pay deductibles. In the ideal MSA the consumer has the money not spent or well spent in a tax free trust savings account to be used at retirement. This is what I mean by combining innovation with incentive the get a healthcare policy to work for the benefit of all. They can not be separated.
Businesses also say they intend to improve their health and wellness programs so that their employees don’t stay sick as long and — in the best-case situation — don’t become sick in the first place.
“Mercer survey of 1317 employer sponsors. If they make no changes to their healthcare plans the cost would grow nearly 8% on average in 2009.Small employers (those with 10–499 employees) would see an even higher increase, of about 10 percent. However, the majority of respondents say they will take action to lower their actual cost. Well over half (59 percent) of employers taking action to reduce their 2009 cost increase will raise deductibles, co-payments, coinsurance or employee out-of-pocket spending limits. Employee cost-sharing has risen sharply over the past five years: Between 2003 and 2007, the median family deductible for in-network services in a PPO (the type of plan offered by the most employers) rose from $1,000 to $1,500. “
What does all this mean in the present Presidential campaign? Why are healthcare insurance premiums increasing when the provider reimbursement is decreasing? Why is the burden of the cost of healthcare insurance shifting to patients away from the government and the employers? President Bush and a McCain presidency’s goal is to shift the burden of healthcare costs to the employee. Is this going to improve the uninsured problem? No! It will make it worse.
It looks like the healthcare insurance industry is killing the goose that lays its golden egg. It looks like John McCain wants to help the healthcare insurance industry accomplish this feat without either of them realizing it. It will happen at the expense of the consumer until the consumer cannot tolerate it any more.
It also looks like John McCain’s policy of more of the same is helping Barack Obama and the Democratic Party justify universal healthcare coverage by a single party payer. An equally disasterous strategy. Where are the principles that have made America great? All politicians should be forced to read Adam Smith’s “Wealth of Nations“.
Dick Swersy’s comment on my blog about the Nobel Prize winning technique to repair the healthcare system is noteworthy. Mechanism Design to Repair the Healthcare is the art and science of designing rules of a game to achieve a specific outcome, even though each participant may be self-interested. This is done by setting up a structure in which each player has an incentive to behave as the designer intends. The game will then implement the desired outcome. The strength of such a result depends on the solution concepts used in the game.
Mechanism designers commonly try to achieve the following basic outcomes: truthfulness, individual rationality, budget balance, and social welfare. However, it is impossible to guarantee optimal results for all four outcomes simultaneously in many situations, particularly in markets where buyers can also be sellers. Significant research in mechanism design must decide on making trade-offs between these qualities and vested interests. The most desirable outcome in the healthcare system should be sustaining patients’ welfare and physicians’ incentives for innovations in care. These goals will strengthen our healthcare system not weaken it.
Our Presidential candidates are not thinking of these goal as they formulate programs to sustain the goals of the secondary stakeholders. How can you create affordable insurance when coverage decreases, deductibles increase, and the price decreases are defined by increasing the price 5.7% vs. 6.1% a year. It is a charade designed to fool Americans. The charade works because Americans are not paying attention to what is going on. We will complain when it is too late.
“America is at its most powerful and most influential when it is combing innovation and inspiration, wealth building and dignity building, the quest for big profits and the tackling of big problems. When we do just one, we are less than the sum of our parts. When we do both, we are greater than the sum of our parts- much greater” Thomas Friedman
Our Presidential candidate are way off base. It is up to the people to pay attention and force politicians to stop their Stinkin Thinkin.
The opinions expressed in the blog “Repairing The Healthcare S
ystem” are, mine and mine alone.