Healthy Policy

Goodbye, and, Health Insurance: A Primer

After my Uninsured primer earlier this week, I had a few requests to compile a profile on those with insurance.  This is also my last day blogging, so I figured a round up of my favorite health policy issue is appropriate.

Insurance has seen substantial changes and shifts in the last five years, and these are due to the explosive growth of health spending.  As costs rise ever further, employees are hurting.  The pain is dual -- due to delayed treatment for illness or lost coverage for various procedures, as well as a hole in the pocketbook that's become meteor-sized.

The basic facts:

• The average annual cost for insurance in 2004 was $3,695 for individuals and $9,950 for families.

• Employer-sponsored premiums are growing at an immense rate: 8.2% in 2000, 10.9% in 2001, 12.9% in 2002, 13.9% in 2003.

• The average monthly premium for individuals from 1988 to 2004 has increased from $8 to $47, for families it has increased from $52 to $222.  While that increase seems significant, the percent contribution has hardly gone up : in 1988 the $8 contribution was 11% of the total premium cost; today the $47 is 16% of total premium cost.  And for families the 1988 amount was 28%; the current amount is 29%.  The stats essentially tell us that while the percent employees are contributing has remained steady, the total cost has increased greatly to both the employee and employer. 

• The number of employers providing health insurance has dropped 9% in five years; from 69% in 2000 to 60% in 2005. 

• For those who have to pay them, annual deductible size has greatly increased as well.  For individuals they've increased by 60% in five years to $414, for families they've increased 67% to $861. 

• The dollar amount of co-pays is increasing as well; for HMO participants the number paying at least $20 for office visits has increased from 1% in 1998 to 22% in 2004.

• The major problem with affordable health insurance right now is the total health spending increase, which is making premiums cost more and more every year.  And as health expenditures are estimated to be $2.16 trillion in 2006, and are projected to rise to over $4 trillion in 2015, it's showing no signs of slowing. Per person health spending is $7,110 this year and is projected to increase to $12,320 by 2015.  And unless you predict your wages will double during that time, be prepared to shell out more and more.
 

• Although many policy analysts encourage greater cost sharing in the form of higher deductibles and copays, the average insured person already pays 34% of their health costs out of pocket.  Don't count on greater cost sharing to reign in the expected increase to solve our spending crisis.  Americans can only afford so much more out of pocket without forgoing care altogether, which creates crises in worker productivity and absenteeism.

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So there you have it.  The major driver of higher premiums and employee contributions to health care is the increased cost of care itself.  And while employees are putting ever more money away into their insurance premiums, they're paying no greater proportion of the total cost than they were in 1988.  It's just gotten that much more expensive.  With only 60% of employers now providing health care, we can only expect to see more cost sharing and dropped coverage, because costs are not slowing.  In fact, they're expected to almost double in just nine years. 

And that's why I started on the health policy venture in the first place -- these statistics are frightening.  Health care has become a beast, and the United States is unsure how to restrain it from eating its weight in income every day. 

But as the richest country in the world, surely every one of our citizens deserves comprehensive, affordable, and quality health care.  And while I'm leaving blogging, rest assured I'll be out there working and thinking about the ways to tame the beast, everyday. 

Evidence

And if you want to know why the things I discussed in my last post make me so angry, it's because arugments like those keep us from doing anything about this:

The percentage of moderate-income U.S. adults who do not have health insurance during any part of the year increased to 41% in 2005, up from 28% in 2001, according to a study by the Commonwealth FundAP/Houston Chronicle reports (Agovino, AP/Houston Chronicle, 4/25). For the study, researchers surveyed 4,350 adults, focusing on those ages 19 to 64, using 25-minute telephone interviews between August 2005 and January 2006. According to the study, 41% of adults with annual incomes between $20,000 and $40,000 did not have health insurance for at least part of 2005, compared with 35% in 2003 and 28% in 2001. In addition, the study finds that 18% of adults with annual incomes between $35,000 and $60,000 were uninsured for part of 2005, up from 16% in 2003 and 13% in 2001 (Whitehouse, Dow Jones Newswires, 4/26).

It's getting worse, and instead of coming up with workable, real solutions for reform, we're arguing over waiting lists in Canada. 

More on McGuire

There's new developments related to yesterday's post on United Health Group's CEO, William McGuire (a good discussion is getting going in the comments, as well). 

The Wall Street Journal is reporting that McGuire has called for a suspension of his and other executives' compensation packages.  Despite its unprecedented  nature, this is a noteworthy move as the vast majority of McGuire's compensation package exists in stock options (an estimated $1.6 billion). 

But there's more to the story.  Because of UHG's lax restrictions on when CEO's can choose to receive stock options, it appears that McGuire greatly increased the value of his compensation package.  In fact, a statistical analysis by WSJ found that the chances of McGuire's options attaining their current value, if new options packages were chosen at random, was approximately two hundred million to one. 

The SEC is looking into it, and there's another lawsuit in Minnesota from allegedly wronged shareholders.

Apparently I'm not the only one feeling a bit uncomfortable with that level of compensation...

United Health Group and You

It's anecdotes like these that make me seriously question if profit should be in the health care industry at all.

When William McGuire switched careers in 1986, he was so restless that a pay cut of more than 30% didn't faze him. Health maintenance organizations were booming, and Dr. McGuire wanted to help run one. So he jettisoned a six-figure income as a pulmonologist in favor of an HMO management job that paid about $70,000 a year.

Savvy move. Today, the 58-year-old Dr. McGuire is chief executive officer of UnitedHealth Group Inc., one of the nation's largest health-care companies. He draws $8 million a year in salary plus bonus, enjoying perks such as personal use of the company jet. He also has amassed one of the largest stock-options fortunes of all time.

Unrealized gains on Dr. McGuire's options totaled $1.6 billion, according to UnitedHealth's proxy statement released this month. Even celebrated CEOs such as General Electric Co.'s Jack Welch or International Business Machines Corp.'s Louis Gerstner never were granted so much during their time at the top.

Dr. McGuire's story shows how an elite group of companies is getting rich from the nation's fraying health-care system. Many of them aren't discovering drugs or treating patients. They're middlemen who process the paperwork, fill the pill bottles and otherwise connect the pieces of a $2 trillion industry.

What's come of this $8 million a year, plus an estimated $1.6 billion in stock options?  Think how many extra people could be covered a year with that $1.6 billion.  Especially when the company also did this:

The Arizona Department of Insurance on Friday ordered United Healthcare to pay civil penalties totaling $364,750 — the largest fine in the department's history — for violations of state insurance laws. State regulators said United Healthcare illegally denied more than 63,000 claims by doctors without receiving all of the information needed to accept or deny a claim. The company also failed to follow state laws for promptly notifying doctors and patients about about decisions and appeals, the state said. United also violated a 2002 agreement to correct previous violations, the state said.
 

And the fact that they're doing this while the rest of us see our premiums rise 10%/year (if our employers don't drop coverage, that is):

The "risk" business has been a particular gold mine for UnitedHealth and its rivals in recent years. As health-care inflation eased, insurers still raised premiums at double-digit rates. UnitedHealth's stock price tripled between January 2003 and January 2006, helped by acquisitions, although it has fallen back somewhat since the beginning of this year. UnitedHealth's net income in 2005 totaled $3.3 billion, nearly four times the figure in 2001.

No, this all makes me quite angry, and really puts to question insurer's claims that health care costs are rising so quickly that they can't keep up with them. 

This is the kind of money I'd expect to see from an oil CEO (who are doing similarly well right now).  But in health care, this kind of profit is disgusting.  We have 45 15 (sorry quoted the percent on accident) million uninsured people in this country, we have a health care industry trying it darndest to shift costs to consumers with health savings accounts and high deductible plans, and we have insurance CEO's valued over a billion dollars for their efforts.  Not hospital groups, or entire organizations, but individuals. 

Is this the kind of system that fits with our ideals?  If health care is an expensive necessity, one that we join together to ensure for everyone, should health insurers be making these kinds of profits?

Employees take GM/Ford for all they can

So those plans to cut retiree health benefits?  They're backfiring:

The auto industry's efforts to rein in employee health costs is drawing an expensive reaction, as union workers and their spouses hurry to Michigan doctors for knee replacements and other elective procedures before they lose their comprehensive medical benefits.

Hospitals, doctors and insurers have all noticed a surge in demand for elective surgery since last year when Rick Wagoner, the chief executive of General Motors, led a public relations campaign to prepare auto workers for health care cutbacks, and  Delphi, the G.M. parts supplier, filed for bankruptcy protection. Hip, knee and shoulder replacements at the Henry Ford Health System were "up 20 percent in the second half of last year and remain strong," said Robert Riney, chief operating officer of the system, the largest hospital group in the Detroit area.

On the other hand, it remains much cheaper than covering all these workers' benefits for the long term.  And in some weird way, it probably gives the auto industry a sense that they've fulfilled some obligations, if they're able to say,"Listen, we paid for x number of joint replacements and elective procedures before dropping coverage.  And they've got Medicare."

Walmart to extend insurance

Maybe they think their new banking scheme will pay for this:

Wal-Mart Stores said today it will relax eligibility requirements for part-time employees who want health insurance, allowing an additional 150,000 workers to gain coverage if they choose.

Until now, the employees have had to work for Wal-Mart for two years to qualify for employer-sponsored insurance. Beginning next month, they will have to work at the company for one. The coverage also will extend to their children.

This addresses part of the problem -- relaxing eligibility rules to one year of employment is fairly significant, and the monthly premiums are quite affordable: purportedly $23 per month, with the option to extend coverage to children for an extra $15 per month. 

But there's a catch: the plans have a $1,000 deductible for individuals, and up to a $3,o00 deductible for families. 

Uwe Reinhardt is well known for discussing health savings accounts in the context of a waitress who makes $30,000 dollars a year.  But let's take your average Wal-Mart employee, makes significantly less than our $30,000 dollar a year waitress.

The average Wal-Mart worker makes $8.23 an hour and typically works less than 24 hours a week. The average Wal-Mart employee working 40 hours a week would earn only $17,118 a year, but a more realistic annual wage for a Wal-Mart worker is about $10,000.

A single parent Wal-Mart employee working part time and electing family coverage would have an annual deductible equal to over 30% of their income.  Let's keep in mind, as well, that a $3,000 family deductible is on the lower end of HDHP/HSA style deductibles, which can run up to $10,000.  (That really makes HDHPs seem like the solution for low income workers, no?)

It's great that Wal-Mart is taking the leap and offering more coverage, and surely some will take advantage of it and enjoy the benefits they deserve.  But when a large percentage of workers elect not to sign up (because they can't afford it), I hope Wal-Mart doesn't claim,"they just don't want it."

Messing with Texas

Texas is seeing some unintended consequences:

The number of children enrolled in Texas' SCHIP program fell by more than 9,000 in the beginning of April, marking the fourth straight month of decreased enrollment, state officials announced on Tuesday, the AP/Austin American-Statesman reports. More than 30,000 children have left the program since Dec. 1, 2005, according to the Texas Health and Human Services Commission. About 292,700 children -- the lowest number of beneficiaries since 2001 -- are currently enrolled in the program, according to the AP/American-Statesman. More than half of the children who left the program in the beginning of April were cut because their families did not pay a new enrollment fee of up to $50. The fee, which the state began collecting this year, is based on a family's income and is intended to replace monthly premiums. Families must renew their SCHIP coverage every six months (Austin, AP/Austin American-Statesman, 4/12). According to the Houston Chronicle, the enrollment drop comes "as officials announced a $3 million program to educate families on how to keep their children insured." The state Health and Human Services Commission in May is launching a campaign to explain new application requirements, including proof of income and new enrollment and renewal fees. The enrollment drop "has alarmed children's advocates because Texas has the highest rate of uninsured children in the nation," with about 25% of children without coverage.

This is really unfortunate.  I tend to think it's a bad idea to make people renew coverage every six months, as well.  It's hard enough to get them to sign up in the first place.

And as the rate of the uninsured has been rising, the drop-outs don't reflect a rash of children now with health insurance  from another location. 

Also, it says that children were cut who didn't pay the $50 fee.  I'll bet most of those families had no idea/paid no attention to the fact that this was going on. 

Aetna is going to kick some diseased butt

Good news for public health advocates:

Aetna officials on Wednesday announced plans to expand the number of disease management programs offered by the company from six to 30, the Hartford Courant reports. Aetna currently offers disease management programs for asthma, chronic heart failure, coronary artery disease, diabetes, end-stage renal disease and lower back pain. Under the expansion, Aetna will begin to offer disease management programs for conditions such as cancer, HIV, hypertension, migraines, peptic ulcers, rheumatoid arthritis, sickle cell disease and stroke. Aetna will group the disease management programs into categories such as pulmonary, orthopedic, oncology, "neuro" and gastrointestinal under the name Aetna Health Connections.

This makes me very happy.

Massachusetts Mandate

Apparently someone was listening to my post from Monday, as Massachusetts has taken the leap and mandated health insurance for all of its residents. Ok, kidding, I know it's been in the works for months.  But I'm thrilled to see a state take such a drastic step in solving insurance problems.

Gov. Mitt Romney (R) supports the proposal, which would require all uninsured adults in the state to purchase some kind of insurance policy by July 1, 2007, or face a fine. Their choices would be expanded to include a range of new and inexpensive policies -- ranging from about $250 per month to nearly free -- from private insurers subsidized by the state.

Romney said the bill, modeled on the state's policy of requiring auto insurance, is intended to end an era in which 550,000 people go without insurance and their hospital and doctor visits are paid for in part with public funds.

"We insist that everybody who drives a car has insurance," Romney said in an interview. "And cars are a lot less expensive than people."

The health insurance as compared to auto insurance is a common meme, although I take issue with the author's phrasing elsewhere in the article that goes, "[this is] the first state to tackle the problem of incomplete medical coverage by treating patients the same way it does cars."  You know, or it's the first state to open up real options to make sure everyone can afford health insurance.  They make it sound like patients are going to treated like automobiles going through factory assembly when put like that.

In any case, this is a huge first step, and it makes allowances like I laid out in my earlier post: opening up low-cost insurance to everyone, subsidies for those who can't afford insurance, and financial punishment for those who continue to go without insurance.

In Iowa they've started a program (Iowa Care) where the uninsured are given all the information for signing up for the low cost insurance whenever they go to the hospital.  I hope lawmakers will adopt similar tactics in MA to get as many people enrolled before the deadline as possible.

What's more; this is a major experiment.  It will demonstrate how affordable these programs are, what major flaws the program didn't for see, what major benefits the program brought, even how easy or difficult it is to get the chronically uninsured into insurance.  Everything that goes on under the program will be carefully watched by universal insurance advocates. 

I would, however, really like to see an EMR initiative along with this legislation, but I guess that's too many birds to kill at once.  Hopefully HIT pushes can be adopted in the next few years.

Also, Shadowfax has more.

Raising enrollment

Alright, done with the errands, onto the article.

California is one of the most generous states in terms of funding for getting the uninsured, particularly children, enrolled in health programs.  But Healthy Families, which is supposed to help fill in the gap between Medical (California's Medicaid program) and those who can afford insurance, has had a fairly low adoption rate. 

Take this stat from the LA Times article:   

About two-thirds of the uninsured children in California could, if only they'd apply, qualify for Medi-Cal or Healthy Families, according to the UCLA Center for Health Policy Research.

italics mine.  But that's exactly the problem.  Take a look at this chart with the income guidelines for Healthy Families eligibility.  They sure as hell don't make sense to me, let alone your average low-income worker (assuming they found this website period).  We haven't made it particularly easy for people to sign up, and in the place of an immediate punishment for not doing so, low adoption of programs is what you get.

This Health Affairs article is a great place to start if you want to learn more about the insane and illogical income requirements for Medicaid enrollment.  Authors Etheredge and Moore found that Medicaid  defines twenty-eight different categories of people and allows states to cover up to twenty-one optional eligibility groups.   And keep in mind that your average American has no conception of how Medicaid actually works -- the majority think that if you're poor and unemployed, you can go sign up.  Sure, if you're poor, pregnant, work x hours per week, have x children...

While a Medicaid overhaul is necessary and would make a huge difference in terms of getting people into health insurance, it's not politically favorable.  A call to remake our nations health system for the poor, with no mention of the plight everyone else faces with rising premiums, would not be greeted well. 

That's why I've always felt one of the key ways to proceed needs to be an insurance mandate.  Until people are fiscally punished for not enrolling in insurance, they will have a million reasons to remain uninsured.  Now, any mandate must be accompanied by a floor of care opened to everyone, whether that's an extension of FEBHP or a "Medicare for the rest" kind of arrangement; we have to offer a lower-cost option than many families have now.  But in the absence of a mandate that every citizen be enrolled in health insurance, we'll continue to see less than desirable enrollment rates in programs like Healthy Families.  Simplification of enrollment procedures would help, but there will always be a portion of families who won't enroll without more immediate disincentives.