The Atlanta Journal-Constitution
Senator is mostly correct about health costs, what patients pay directly for care
Amid the Senate’s efforts to pass a new health bill, U.S. Sen. Ron Johnson, R-Wis., has been adamant that spending on health care must come down.
We examined whether he’s right about the big drop in the percentage of health care costs paid directly by the people served.
The structure of American health care has changed plenty over the decades. According to a May 2008 article in the American Medical Association Journal of Ethics, in the early 1900s, “Health care was virtually unregulated and health insurance, nonexistent. Physicians practiced and treated patients in their homes. The few hospitals that existed provided minimal therapeutic care. Both physicians and hospitals were unregulated. When patients saw a physician, they paid their modest fees out-of-pocket; they were more concerned about the wages they would lose if illness kept them out of work than about the cost of their medical care.”
In 1929, the first Blue Cross plans were established to provide pre-paid hospital care, and in the 1930s, Blue Shield Plans begin providing reimbursement for physician services, according to a history of the program.
Things changed more in the 1940s — the era Johnson cited — as the population moved from rural to urban areas and medical care shifted even more from homes to medical facilities. World War II played a major role in the expansion of health insurance as employers began to boost health insurance benefits to attract workers. After the war, labor unions also played a role, negotiating for better fringe benefits including health insurance.
Johnson spokesman Ben Voelkel said in an email that the senator was referring to the total of health consumption expenditures and pointed us to a 1971 report: “National Health Expenditures, 1929-70” by Dorothy P. Rice and Barbara S. Cooper. According to that report, what is now called out-of-pocket spending for 1949 was at 67.7 percent. That’s the 68 cents on every dollar Johnson cited.
Figures for 1960 and onward are on the website of The Centers for Medicare and Medicaid Services. A spreadsheet, “National Health Expenditures by type of service and source of funds, CY 19602015,” shows that for 2015 the
share of health care expenditures paid out pocket was at 11.1 percent.
Some argue health insurance itself has helped drive up costs. Conservative analysts contend that people have little incentive to care about health care costs because someone else — an insurance company, employer or the government — is paying the bill. This is why some support increasing use of health savings accounts along with high-deductible health plans, to give people an incentive to shop for the best health care at the lowest cost.
William S. Custer, associate professor and director of the Center for Health Services Research at Georgia State University, said there is some evidence that health insurance drives up health care costs but the major driver of the increase has been new technology.
In testimony before the U.S. Senate Committee on the Budget on Jan. 31, 2008, Congressional Budget Office Director Peter R. Orszag agreed. “Most analysts agree that the most important factor driving the long-term growth of health care costs has been the emergence, adoption and widespread diffusion of new medical technologies and services by the U.S. health care system,” Orszag told the committee.
Custer said that in 1958 per capita health expenditures were $134, or 2 percent of median family income. In 2015, per capita health expenditures were $9,990, or 18 percent of median family income.
Our rating
The numbers Johnson cited track with studies and official statistics. But Johnson is comparing two vastly different eras in health care, including one from a period when fewer people were covered by health insurance and thus paid for costs from their own pocket.
We rate his claim Mostly True.