Healthcare – Costs Gone Rogue

I am perpetually surprised at how few union and government workers or employees with company coverage actually know how much healthcare insurance actually costs. As practicing lawyer, I know exactly how much the checks I write to my healthcare carrier are, and even with Medicare, the costs are way above what anyone who has employer-provided care I have ever spoken with believes. When I ask folks what they think they would have to pay if they did not have employer coverage, most under estimate single coverage by half and family coverage by two thirds. What do you think Congressmen and women would do if they weren’t provided with one of the best healthcare plans in the nation… if they had to buy their own coverage in the open market?

“In 2011, according to an annual survey by the Kaiser Family Foundation, premiums for employer-sponsored health insurance averaged $5,430 a year for single coverage and $15,070 for family coverage. The employee’s share of the premium averaged $920 for individual coverage and more than four times as much, $4,130, for family coverage.” New York Times, August 11^th.

And while the Affordable Care Act (“Obamacare”) mandates administrative cost reductions as a percentage of total expenditures in private health insurance plans, the reality is that the legislation was otherwise “committee compromised” to eliminate anything else that made the industry more competitive. Pharmaceutical providers made sure that Americans could not import cheaper prescription meds from Canada under the guise – and boy was it a guise – of purity control, and the insurance carriers traded off the administrative cost reduction in exchange for a mandate that people use their services (or face fines) and the rejection of a low-cost competitor that was originally supposed to be created by the government. The folks in the medical insurance industry and pharmaceutical business apparently don’t like competition.

The United States has the highest healthcare costs of any nation on earth, and among developed nations among the highest percentage of persons without coverage. The notion of healthcare bankruptcy is virtually unknown in any other developed country. Thus, for those with the money to pay for it, we have the best healthcare system on earth… but for a huge number of Americans, particularly as states now struggle with whether they want to participate in the Medicaid enhancements (which the recent Supreme Court decision seems to have made optional), they are stuck with less-than-mediocrity.

To compound the misery, the Internal Revenue Service is looking at new ways to limit subsidies in the Affordable Care Act that provide greater access to the system to so many. “Under the law, most Americans will be required to have health insurance starting in 2014. Low- and middle-income people can get tax credits and other subsidies to help pay their premiums, unless they have access to affordable coverage from an employer.

“The law specifies that employer-sponsored insurance is not affordable if a worker’s share of the premium is more than 9.5 percent of the worker’s household income. The I.R.S. says this calculation should be based solely on the cost of individual coverage for the employee, what the worker would pay for ‘self-only coverage.’ … Critics say the administration should also take account of the costs of covering a spouse and children because family coverage typically costs much more. [Looking at the Kaiser numbers noted above, under the I.R.S. proposal, such costs would be deemed affordable for a family making $35,000 a year, even though the family would have to spend 12 percent of its income for full coverage under the employer’s plan.” NY Times.

We’ve lost jobs because it costs too much for employers to provide healthcare insurance to their workers, and the new legislation is intended to widen access to health insurance by spreading the burden across society. But because the competitive variables overwhelming favor the private sector, there are limits as to how cost efficient the system can ever be. Conservative opponents say mandating such insurance is a job killer, but most of the “more-than-minimum-wage” jobs out there already have an insurance component, especially where larger employers, government or unions are involved. Yet these national healthcare opponents are dead set against increasing the competitive factors that would cut costs significantly.

Canada went through the same process when it slowly moved its government-provided universal healthcare system into place, one that has much more coverage than the Affordable Care Act. They faced the same arguments, and the politicians who pushed the legislation were swept out of office because they fomented this new policy. Yet today, Canadians would no more give up their healthcare system than they would accept banning ice hockey from their nation. It is now viewed as one of their most basic and embedded rights. Oh, and Canada has used this highly cost-effective system to lure U.S. employers to their country, paying the same basic wage rates to workers with the same basic skills most visible in the automotive industry that has heavily migrated employer costs above in the Kaiser study… but the costs in Canada represent a small fraction of those numbers. We seem to be losing jobs because our healthcare system is still too expensive.

I’m Peter Dekom, and whether it is from a lack of empathy for the plight or others or a failure to understand global healthcare numbers, Americans really need to understand that we cannot afford a system that costs this much… and is getting more expensive.