Yesterday we examined the health insurance industry’s role in the current reform process. Today we’ll look at the recession’s impact on reform initiatives.
There are two obvious effects of the recession – fewer folks with insurance, and lower revenues for providers. The latter has been well-publicized, with physicians seeing fewer patients; Hospitals are also suffering.
Colorado, hospitals delivered 29.2 percent more charity care in the first half of 2008 than in the same period in 2007, bad debt was up 6 percent and in total uncompensated care grew by 18.7 percent.
Hospitals in Pennsylvania saw a 12% increase in uncompensated care in 2007, and it is a safe bet that there was an even greater rise in 2008.
Minnesota‘s hospitals saw uncompensated care almost double, a change that contributed to a decline in overall facility profitability from a 4.8% return in Q3 2007 to a loss of 2.5% in Q3 2008.
And that’s not even getting into the states with real problems – New York, for example.
There is a direct link between higher rates of uninsurance the financial fortunes of providers. But there’s also a more subtle issue – the increase in the number of individuals and families with high deductible plans is likely as big a factor in the problem as the number of uninsured.
Although the high deductible plan members ostensibly have insurance, in reality they don’t have coverage unless they have funded their deductible accounts. And it appears that many, if not a majority, have no money in those accounts. As a result, providers aren’t getting paid because their patients don’t have the money.
This will get worse. I projected there would be over 50 million uninsured by the end of this year, and the latest data indicates that may be slightly low – Health Affairs is looking for 52 million to be without coverage in 2010.
This vicious cycle is accelerating. There are fewer workers with coverage who still need care, providers are looking to recoup lost revenue by cost-shifting to those patients with insurance, thereby driving up costs for the payers left in the game.
One study reports insureds are paying more for their health insurance. “That so-called “hidden health tax” in 2009 was $1,017 for a family policy and $368 for an individual…The uninsured who sought treatment in 2008 received about $116 billion in care, the study said. Of that, they paid for about 37 percent of the costs and government programs and charities paid for another 26 percent.”
The rest, about $42.7 billion, was uncompensated care that was passed on to the insured in the form of higher prices for their care.
While I (and others whose opinions I respect) have issues with some aspects of the report, the overall picture for providers is grim. The current system is fragile at best. Providers’ reimbursement is directly tied to the fortunes of the business community, and when that community drops insurance, the impact is broad and deep.
One solution adopted by creative folks looking for care is to head south – to Mexico.
But for the rest of us – prospective and current patients and providers alike, the recession provides a stark reminder of the fragility of the US health care system and its dependence on employment-based health insurance.
What does this mean?
Two things. First, providers’ financial difficulties may well force them to make concessions they otherwise wouldn’t even consider. The current situation is bleak, but the outlook long term is worse if we don’t solve the health care problem – and providers are terrified of the what-if scenario. They may just be scared enough to bend far enough to get something meaningful passed. That’s a big ‘maybe’.
Second, I’ve said, and still say, that the reform package that eventually passes (if one does, (which is still suspect) will build off the current employment-based system. The recession won’t change that, but may result in Congress drafting legislation that provides a much stronger safety net/alternative coverage vehicle for employers and their workers who can’t/won’t pay for coverage via the employer market.
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In this same vein, what do you think, Joe, of Obama’s letter to Baucus and Kennedy on Wednesday where Obama said he would support MedPAC reform that would seem to establish something along the lines of Daschle’s “healthcare Fed.”
Since Medicare drives pricing for services, and commercial reimbursement contracts are often merely written as a percentage of Medicare, wouldn’t getting Medicare pricing out of the hands of Congress — and therefore the lobbyists — be a huge step in the right direction toward meaningful cost containment?
Under the proposed MedPAC reform, MedPAC, or some independent panel thereof, would establish Medicare prices, and send them to Congress for a simple up-or-down vote, no filibusters allowed.
Sounds pretty peachy to me, and the public hasn’t a clue what it means, so there’d be little opposition. Imagine Limbaugh trying to explain why everyone should fear MedPAC reform. Better to have everyone pecking at some shiny object like a parallel government-run plan, while the real reform is happening somewhere else.
Your comment that often those on high deductible plans can’t pay the deductible is ‘spot on’. Our 6-doc physician practice in FL has had 2 or 3 such patients this year. As a former HMO manager, my strategy was to call the insurance company and report the insured. To my chagrin, I discovered the insurance companies don’t really care. So, my doctors have not only provided the care, they have helped the patient reach their deductible so that some other doctor will get paid for the care they provide.