A survey by a small business trade association in California found that 91% of respondents rated health care cost and availability as their chief concern, outweighing workers comp, energy costs, and governmental regulations. Only 2% of the 430 respondents said health care was a low priority.
Amazingly, 44% don’t require any employee contribution for insurance. It could be that this 44% primarily includes businesses where all employees are family members.
Equally amazing, fully 52% supported a Canadian-style single payer system; 90% also support purchasing pools for smaller employers.
11% of the respondents offer HSA-based health insurance.
What does this mean for you?
Even more evidence that likely voters want the health insurance mess solved.

I am no economist. Some will likely howl in agreement, others knowingly nod their heads while tapping out their pipes so as to not get ash on their tweeds (them are the economists). I do know a good bit about health insurance, health care, and the rather messy intersection of the two. With that disclaimer/caveat, here goes my take on an esoteric economic theory.
Jason Shafrin’s post on Baumol’s cost disease was picked up by Kate Steadman for the latest Health Wonk Review – as a few other bloggers and commentors on Managed Care Matters had been bludgeoning me with this economic term, I figured I better find out what it is. So, here’s the definition.
Basically, it holds that when there is little or no growth in productivity the result is that unit costs tend to inflate. As docs and nurses can’t increase productivity as fast as it increases in other industries, prices have to go up faster to make up for that differential.
OK – I’m not sure I agree w Jason’s underlying premise – which seems to be predicated on clinician time as the key determiner of health care cost. What about technology adoption rates, the rise in pharmaceutical utilization and pricing, the aging population’s increased demand for services, etc. While I will grant that labor costs are a major driver of hospital expenses (see California’s minimum nurse staffing headaches), and hospital costs are one of the biggest influences on total medical expense, there are so many other factors that one cannot attribute the sickness of our system to one single factor.
I’d also point out that physician cost inflation has held relatively steady at about 7.7% for several years (although costs jumped last year due to higher Medicare utilization by docs) , while Rx and hospital costs have varied widely. And, as physician expense is s relatively small part of the overall health care cost equation, I don’t see how Baumol’s cost disease is the over-riding factor here.
That said, I certainly agree with Jason’s conclusion that health care costs will continue to grow as a percentage of individuals’ expenditures.

I don’t see how consumer directed health care as presently conceived is going to work (“work” defined as significantly reduce health care cost inflation). Among other problems with the concept, most of the dollars are spent by folks with chronic or very expensive acute conditions that have costs far above their deductibles eliminating any incentive for these folks to worry about costs.
But I’ll suspend logic for the moment to consider another issue. If consumer-directed health care is going to work, consumers will have to know what their health status is, what their health status means in terms of potential morbidity, and what health care (for those conditions) might cost them. Then, if they want to be “educated consumers,” they will need to have current, accurate information on the costs and outcomes of health care providers in their geographic area who treat their specific conditions (or potential conditions).
The first two aren’t too tough, at least on a population basis. Health risk appraisals have done a pretty good job of forecasting future health conditions…for the general population. And epidemiology has evolved into a reasonably accurate science for prediction of population-based morbidity and associated trends.
The last two are also not too tough, again on a population basis (seeing a trend here?). Case-mix adjusting physician outcomes can produce a fairly accurate picture of individual physician and/or facility outcomes. If you have a large enough sample size and if the diagnoses and other data are accurate, consistent, and complete. Rather big ifs…
(I apologize in advance for denigrating the rather significant issues inherent in case-mix assessment and analysis and ignoring the wide variation in practice patterns across specialties, geography, and physician. I’m making a huge generalization to make another point.)
The big breakdown is our individual uniqueness – we are each a population of one. And that’s where “consumerism” blows apart.
We each get treated as individuals, not as populations. We have unique combinations of co-morbidities, allergies, pre-existing conditions, quirks, differences, nuance, needs and fears. Some of us know a lot about medical stuff, and most of us don’t know much at all. And some patients think that “quality care” is getting in to see the doc within a couple of days, while others view it as a clean waiting room with lots of interesting magazines, and still others want a doc who is warm and smiles, while another group wants to see case-mix adjusted statistics on outcomes.
This “a plus b plus c plus d…” is what makes each patient unique, a population of one.
And docs have to treat individuals, not populations. So, each patient gets treated a little differently.
Patients need to take responsibility for their health, and play an active role in their care. No debate there. But in an increasingly specialized world, with physicians unable to keep up with the growing library of medical knowledge, individual expertise getting deeper and narrower and an educational system which is hard-pressed to adequately educate many Americans on some rather basic subjects, it is not only irresponsible but incredibly naïve to expect or demand individuals have all the knowledge and experience required to effectively “manage” their own health care.
The bright-eyed, textbook-quoting academics and theoreticians citing both obscure economic theory and Adam Smith see consumerism as the cure for health care’s ills. Boy are they clueless.
Oscar Wilde’s oft-quoted ” …a cynic is one who knows the price of everything and the value of nothing” also applies to these “health care economists.”

And you thought Part D was all serious stuff…
Thanks to Helen of kingknight.com for the tip!

If businesses and politicians think the 45 million uninsured are not their problem, they are wrong. Really wrong. The uninsured get health care, they just don’t pay for it – taxpayers, employers, and those of us with health insurance do. And they get a lot of care – around $100 billion worth.
Out of that $100 billion, three-quarters is covered by cost-shifting to those patients with insurance, and one-quarter is self-paid. And because upwards of 30% of the uninsured who are admitted to hospitals are there for avoidable conditions and 18,000 die prematurely each year, the economic costs in terms of excess care and forgone productivity are immense.
There are overt taxes and hidden taxes – and the uninsured represent a $100 billion hidden tax, borne by employers who offer health insurance, employees who pay part of their premiums, and taxpayers.
The next time someone says we can’t afford to cover the uninsured, tell them we already are, and we are paying way more than we would if they had insurance.
What does this mean for you?
Higher taxes and premiums due to lack of political will.

Yes, there are ways for employers to keep health care inflation under control. And yes, some insurers are better positioned to help manage expense over the long term. Some employers have been able to hold health care cost increases under 3% for two years or more. That is an amazing result, especially in a period where many employers have seen double-digit premium jumps. How do they do it? Do they fire sick employees? Only hire Olympic athletes? Are they the early adopters of consumer-directed health plans (CDHPs)?
No no and no. Rather, these employers are not the ones relying largely on CDHPs, engaging in significant cost-shifting to employees, slashing benefits or limiting eligibility. According to one of the sponsors of a study on high-performing employee health plans:
“merely increasing employee accountability or sharing costs with employees does not reduce overall cost increases. In fact, the degree to which organizations have adopted programs that share more costs and financial risks with employees was found to be almost completely unrelated to performance.
“Employers should not focus on employee accountability alone,” said (Helen) Darling. “When used in combination with promoting quality care, health management, use of data and appropriate use of care, companies are able to achieve significantly lower cost trends.”
Of all the health plans, managed care firms, and insurers out there, Aetna looks to be the best positioned to provide employers with the tools they need to identify the right docs, pay them fairly (although this is, at best, a work in progress), and educate consumers about appropriate health benefit, and health care, decisions.

Continue reading How companies reduce health care inflation

Alcoa, one of the nation’s leading industrial companies and a giant in the aluminum sector, is entering union negotiations that look to feature, you guessed it, health care costs as the key issue. The company is now paying the entire health care bill for hourly workers, a practice that is fast going the way of the dinosaur.
No surprises so far – old industrial firm overpays thru rich benefits, now struggling, asks for givebacks…
What’s different about this story is the union leader is asking Alcoa to work with the union to push for national health care, noting that all the other countries in which Alcoa operates have some form of national system.
Labor is starting to get it.

Kate Steadman at HealthyPolicy highlights the recent news that Wendy’s has terminated its traditional health plans, adopted an HSA-only program, and seen its health care costs increase.
There are also several insightful comments following the post.

If you think your medical costs have gone up a lot since 2000, consider that health care costs have increased by 69% for the US military through 2004. Included in this figure are costs associated with Congress’ 2000 decision to enhance health care for retirees over 65 and their dependents, estimated at $6.5 billion (on an accrual basis) for FY 2004.

Into the lexicon of politically charged rhetoric comes a new definition for Health Savings Accounts – “the mother of all tax shelters.” This tagline, created by Prof. Paul Caron of the University of Cincinnati (one of the nation’s leading tax law experts, and a fellow blogger), describes the incentives and benefits created by HSAs, which allow individuals to save as much as $10,500 tax-free annually to cover health expenses.
And the benefits are not just the deductibility of the HSA investments. There is also tax-free earnings growth, untaxed withdrawals for expenses not covered by insurance, and no time limit or requirement for drawing down the accounts. While this all sounds great, there is one rather awkward problem.
HSAs disproportionably favor the rich. The wealthy are the ones who gain the most benefit from the higher deduction and can most easily afford the combined insurance/HSA plans. According to a CPA quoted in a recent Bloomberg News article, “To them, it’s just a savings account. But for a client with diabetes, his out-of-pocket medical costs are going to be the maximum (the client’s expenses are so high that they will exceed the deductible and any costs above the deductible will be covered by insurance). There really are no savings.”
The CPA’s anecdotal finding has been supported by a recent GAO study of federal employees which found that HSA adopters tend to be wealthier than the average Federal employee due to the accounts’ aspects that “uniquely attract higher-income individuals with the means to pay higher deductibles and the desire to accrue tax-free savings.” (43% of HSA adopters had incomes above $75,000; 23% of all FEHBP enrollees had salaries at that level or above)
This may partially explain the rather modest enrollment projections for HSAs; the Bush administration estimates that only about 10% of privately insured individuals will be covered by HSA plans by 2010.
What does this mean for you?
HSAs are a great tax break (leaving aside the question of how we can afford more tax breaks despite ballooning deficits) but don’t address health care cost drivers.