Why health care eats more of US pay­checks ev­ery year

Kuwait Times - - HEALTH & SCIENCE -

Mil­lions of Amer­i­cans are find­ing out this month that the price of their health in­sur­ance is go­ing up next year - as it did this year, last year, and most of the years be­fore that. And it’s not just that the price is go­ing up, it’s that it goes up faster than wages and in­fla­tion, eat­ing away at our abil­ity to pay for other things we want (beer, tele­vi­sions, va­ca­tions) or need (rent, heat, food). Does it have to be this way? Why does health care grow so much faster than al­most any other spend­ing cat­e­gory so con­sis­tently? And will it ever stop?

“At some point it’s not go­ing to be worth it to have less food, less travel in or­der to spend money on health care,” said Louise Sheiner, a health economist at the Brook­ings In­sti­tu­tion. “That’s what re­ally stops it.” In­sur­ance pre­mi­ums, which re­flect spend­ing on medicines, doc­tor vis­its, tests and hospi­tal stays, have climbed 213 per­cent since 1999 for fam­ily cov­er­age pur­chased through an em­ployer, ac­cord­ing to the Kaiser Fam­ily Foun­da­tion, which stud­ies health care. Wages, by com­par­i­son, have risen 60 per­cent, while in­fla­tion is up 44 per­cent. Here’s why the price of health care doesn’t grow like, say, the price of dish­wash­ers or blue jeans - and why that’s un­likely to change any­time soon.

It’s hard to shop for health care

In­sur­ers and em­ploy­ers have been try­ing for years to make pa­tients bet­ter health care shop­pers and force doc­tors and hos­pi­tals to com­pete on price. They’ve raised de­ductibles or out-of-pocket costs on cov­er­age and given tools to pa­tients so they can com­pare prices and qual­ity.

The idea is that pa­tients be­come more mo­ti­vated to price shop when they first have to pay sev­eral hun­dred dol­lars to­ward the bill due to a high de­ductible. Many see this push as a key to curb­ing health care spend­ing, since in­sur­ance tends to hide the full cost of care from the pa­tient. This can work ... for small stuff, said Renya Spak of the ben­e­fits con­sul­tant Mercer.

Pa­tients will shop if they need an MRI exam on their shoul­der. But Spak isn’t con­vinced it will do much for things like surg­eries, when the in­surer or em­ployer will wind up cov­er­ing much of the bill any­way and the best deal might in­volve travel away from fam­ily. “It’s not hu­man na­ture to be ra­tio­nal thinkers about health care cost de­ci­sions,” she added. “It will never be just like buy­ing a lawn­mower.” Con­sumers also pri­or­i­tize health care pur­chases over other buy­ing de­ci­sions, es­pe­cially if they have ba­sics like food and shel­ter cov­ered. You’ll have back surgery to al­le­vi­ate chronic pain be­fore you take that long-awaited trip to Paris. “What good is a bet­ter house if you are too sick to en­joy it?” said Charles Roehrig, an economist and vice pres­i­dent of the non­profit Al­tarum In­sti­tute’s Cen­ter for Sus­tain­able Health Spend­ing.

Tech­nol­ogy doesn’t help

A car­maker can knock down the cost of mak­ing a ve­hi­cle by re­plac­ing auto work­ers with robots in parts of the assem­bly line. Treat­ment ad­vances in health care are geared more to­ward mak­ing some­thing more ef­fec­tive, not cheaper, noted Paul Fron­stin, an economist with the Em­ployee Ben­e­fit Re­search In­sti­tute.

A de­vice maker may come up with a new hip that im­proves a pa­tient’s qual­ity of life, but it’s likely more ex­pen­sive and the surgery might re­quire the same num­ber of doc­tors and nurses or more. A drug­maker might pro­duce a new treat­ment that dra­mat­i­cally im­proves a con­di­tion but it may come with a bill of more than $50,000 in the mean­time. De­vice and drug­mak­ers have been pro­duc­ing a steady stream of new prod­ucts for con­sumers, and in­sur­ers that pay the bills have a lim­ited abil­ity to keep prices for those de­vices and drugs down. “Ev­ery year, it’s kind of like Christ­mas, they de­liver all this new stuff and of course they de­liver it at high prices and in­sur­ance cov­ers it,” said Mark Pauly, a health economist with the Uni­ver­sity of Penn­syl­va­nia’s Whar­ton School.

How it adds up

Peo­ple with cov­er­age through their em­ploy­ers should ex­pect pre­mium hikes of 5 per­cent or 6 per­cent next year, de­pend­ing on where the em­ployee lives and what ad­just­ments a com­pany makes. That’s dou­ble the fore­cast for in­fla­tion next year. And the ris­ing rates may keep them from get­ting a raise, too. Em­ploy­ers of­ten pay most of the bill for em­ployee cov­er­age, leav­ing them less money to in­crease salaries when rates rise.

Cus­tomers shop­ping on the Af­ford­able Care Act’s pub­lic in­sur­ance ex­changes will see pre­mium hikes of 20 per­cent or more in many mar­kets, though those in­creases aren’t just be­cause of ris­ing health care spend­ing. The ex­changes have seen wild price swings in part be­cause in­sur­ers are still try­ing to bal­ance out claims they pay in this rel­a­tively new cov­er­age. All told, health care costs, in­clud­ing the in­sur­ance bill and money paid out of pocket, made up 7.8 per­cent of the av­er­age con­sumer’s to­tal ex­penses in 2015, up from 5.7 per­cent in 2006, ac­cord­ing to the Bu­reau of La­bor Sta­tis­tics. Mean­while, much big­ger por­tions of per­sonal bud­gets like hous­ing, food and trans­porta­tion all slipped.

— AP

WASH­ING­TON: In this Oct 24, 2016 file photo, the Health­Care.gov 2017 web site home page is seen on a lap­top.

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