Health Plan Deductibles Triple in 10 Years
The evidence continues to pile up: workers are having a very hard time affording their high-deductible health plans, which have gone from rare to covering nearly a third of U.S. workers.
Between 2008 and 2018, the deductibles in employer health plans more than tripled – growing much faster than earnings. Workers’ full insurance coverage doesn’t kick in until they pay the deductibles, which now exceed $3,000 for individuals and $5,000 for families in the highest-deductible plans. Add to that a 50 percent hike in premiums during that time.
Some 156 million people get health insurance through work, and they’re largely grateful to have it. They blame rising medical costs on insurers and pharmaceutical companies – and not their employers and healthcare providers – a new Kaiser Family Foundation survey said.
One in four said medical bills or copayments for drugs and doctor visits are severely straining their budgets, and the Commonwealth Fund, another healthcare researcher, estimates that the typical worker spent about 12 percent of his income on deductibles and premiums in 2017, compared with 8 percent in 2008 – the figure is closer to 15 percent in Louisiana and Mississippi.
The solution is often to forgo or postpone care. And the higher an employee’s deductible – no surprise – “the more likely they are to experience problems affording care or putting off care due to cost,” Kaiser said. Inadequate medical care is especially dangerous for people with chronic conditions.
One argument in favor of high-deductible plans is that they force patients to be smarter consumers. But Kaiser finds that they aren’t much more likely to shop around for lower-cost tests or physicians than patients with smaller deductibles.
Many people in the high-deductible plans said they wouldn’t have enough money in their bank account to pay the full deductible. Here’s a sample of what people say they are giving up to pay for medical care:
- “Me not eating so my kids can.”
- “Allowing my health to deteriorate because [care] is too expensive.”
- “Take money out of my 401k and personal savings account.”
- “Cancelled 25th wedding anniversary plans.”
Something has to give.
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About 15 years ago, I attended a conference on labor relations challenges of the future. Several speakers representing large employers and manufactures said that the U.S. needed to move toward universal health coverage as the financial cost for employers was becoming totally unsustainable.
Well, that obviously never happened, and instead – like pensions – we’ve transferred all the risk onto individuals who are ill-prepared to manage this. Aside from the cost, individuals have no buying power in the marketplace. The idea that they will be better consumers than large employers who can make deals is absurd.
How bad will it have to get, or will everyone just try to hold on and pray they get to the Medicare finish line?
The basic problem is that our health care costs in this country are too high. The average cost of an employer-based family health plan is now $20,000. This is money that the employer cannot spend on higher salaries or other benefits. One way they are trying to hold the line is by increasing deductibles and co-pays – and this clearly hits lower-paid employees hardest. Many behave like the uninsured – skipping visits, trying to stretch medication. Grossly unfair. Read my book: Prescription for Bankruptcy.
The basic problem is that our health care costs in this country are too high. The average cost of an employer-based family health plan is now $20,000. This is money that the employer cannot spend on higher salaries or other benefits. One way they are trying to hold the line is by increasing deductibles and co-pays – and this clearly hits lower-paid employees hardest. Many behave like the uninsured – skipping visits, trying to stretch medication. Grossly unfair. Read my book: Prescription for Bankruptcy.
The gist of this article, as usual, is to imply without stating outright that some sort of government “universal” plan is an obvious solution to the problems described. So, let’s take a look at the Swedish model where healthcare is indeed offered to everyone. Of course, nothing is actually “free” as someone ultimately pays for everything. In Sweden, unlike the US, there is a regressive tax wherein lower income taxpayers pay a higher share of their income as opposed to wealthier Swedes. In fact, Swedish corporations pay little to no taxes because the system relies heavily on a VAT which taxes spending. Poorer people spend more of their income to live, so they pay more in taxes than individuals who can save and invest some of their income. Medical utilization is lower in Sweden than in the US because Swedes routinely wait 90 days to see a family doctor, longer for a specialist or procedure. They have no choice! Retirees in Sweden rely on government pensions which are by law linked to their stock market. In good economic times, pensions rise but in recessions they get a double whammy of falling income and higher taxes. Again, they have no choice! It is a system which by necessity penalizes poorer citizens and rewards more successful citizens. Most Swedes view their social safety net as a cycle of poverty that once you enter you cannot escape. Retirees and the poor in countries like Sweden suffer economic burdens more than they do in the US. No one can point to any country with a universal healthcare scheme where the problems posed in this article have been solved.
Numerous inaccuracies, including the fact that Swedish taxes are progressive: the marginal tax in practice varies between 7% on incomes just above 18,800 kronor to 60.1% on incomes above 675,700 kronor. You are correct that while Swedish care is first-class, waits are excessive. I have traveled the world discussing health care, and while everyone has gripes, NO ONE wants to change to a U.S. system where you are one serious illness away from bankruptcy.
I grew up in Sweden and was fortunate to move to the US while younger. I am Generation X, and everyone I know my age in Sweden has much fear and angst over growing old in Sweden. We see many of our parents’ generation with insufficient income and no real access to basic healthcare. Swedes have an unusual national psyche in which they have no problem waiting in lines for everything. They take pride in personal suffering as long as their neighbors are in the same situation. It’s indeed strange, but it would be entirely unacceptable in the US. Certainly no one in Sweden considers their system as having “world class healthcare.” That is a myth peculiar to US intellectuals. Most working-class Europeans I know recognize that the best healthcare is in the US and that it is unavailable to them. Meanwhile, the elite politicians and rich of Europe travel to The Mayo Clinic when they need life-saving care.
Thanks for setting us straight
So the fact is at $3.7 TRILLION per year is spent in the US on health care and is twice what any European country spends with no better outcomes. That is larger than the Federal Budget at $3.3 trillion; it has risen faster than the rate of inflation for 40 years. The politicians have said for 40 years we will solve it; they have no incentive to because taxpayers pay their benefits for them for life, even after they retire. Furthermore, the health care lobby on K street spends about $500 MILLION per year to buy votes. Would you take that ROI on $3.3 TRILLION? Any investor would with a smile.
Today’s “high” deductible health plan (to qualify for a Health Savings Account) is $1,350. That is substantially less, adjusted for health care inflation, than the $100 deductible generally in place 45 years ago when Congress passed ERISA (1974).
Out-of-pocket costs for medical services, for those with employer-sponsored coverage, are as low (as a percentage of medical spending) as they have ever been!!!! Per capita out-of-pocket costs have increased from $146 in 1974 to $1,124 in 2017 (according to Kaiser), however, the $1,124 is a much smaller percentage of per-capita medical spend in 2017 (10.5%) than the $146 in 1974 (33%).
See: Kaiser’s per capita out-of-pocket expenditures have grown since 1970
We scare them with “high” deductibles. We encourage them to over-insure because over 70% live payday to payday (American Payroll Association survey – Getting Paid in America).
Policymakers and members of Congress talk about Medicare for All, everyone can see any physician and have anything done they want with no copayment and no deductible, and no coinsurance, etc. But, did you know that if you are a Medicare beneficiary in 2019, and have a hospital stay, visit a doctor and incur Rx expenses, you will be called upon to satisfy the following deductibles: $1,364 (part A, Hospital Insurance), $185 (Part B, physician) and $415 (Rx) – total of $1,964!
Simply, people are not encouraged to “save up” for the day when they will have medical expenses. The Federal Reserve Board of Governors survey consistently shows 40% of Americans can’t come up with $400 to meet an unexpected expense.
Instead, members of Congress and policy makers lie. They suggest health care should be an entitlement – that someone else should/will pay. Who, the French? As with health reform, they assert that individuals should not have to pay in excess of 10% of their income for medical services. I clearly remember a focus group in a government-funded activity (Health Care That Works for All Americans). It was clear what the audience wanted – I will never forget: “I want the best health care YOUR money will buy!”
Think about it. Put your economist hat on. The cost of health care in the US is supposedly 18% of GDP, ~$3.65 Trillion in 2018. Using the income method, GDP = National Income + Indirect Business Taxes + Depreciation. National Income = Wages + Rental Income + Interest Income + Business Profits.
So, wages are substantially less than GDP. Actually, in 2018, wages and salaries were ~$9 Trillion (according to BEA) or 45% of our $20 trillion economy. In other words, health care costs of $3.65 trillion dollars > 40% of wages. How many of you have a 40% deduction from your wages!? So, we know that a significant portion of health care spend is already sourced with taxes.
Simply, workers are having a hard time paying their out-of-pocket medical expenses because they are not saving up. They are not saving up because policymakers and members of Congress lie to them, suggesting that others should, must pay so that they don’t have to prepare.
Stop lying, start preparing.
Today’s “high” deductible health plan (to qualify for a Health Savings Account) is $1,350. That is substantially less, adjusted for health care inflation, than the $100 deductible generally in place 45 years ago when Congress passed ERISA (1974).
Out-of-pocket costs for medical services, for those with employer-sponsored coverage, are as low (as a percentage of medical spending) as they have ever been!!!! Per capita out-of-pocket costs have increased from $146 in 1974 to $1,124 in 2017 (according to Kaiser), however, the $1,124 is a much smaller percentage of per-capita medical spend in 2017 (10.5%) than the $146 in 1974 (33%).
See: Kaiser’s per capita out-of-pocket expenditures have grown since 1970
We scare them with “high” deductibles. We encourage them to over-insure because over 70% live payday to payday (American Payroll Association survey – Getting Paid in America).
Policymakers and members of Congress talk about Medicare for All, everyone can see any physician and have anything done they want with no copayment and no deductible, and no coinsurance, etc. But, did you know that if you are a Medicare beneficiary in 2019, and have a hospital stay, visit a doctor and incur Rx expenses, you will be called upon to satisfy the following deductibles: $1,364 (part A, Hospital Insurance), $185 (Part B, physician) and $415 (Rx) – total of $1,964!
Simply, people are not encouraged to “save up” for the day when they will have medical expenses. The Federal Reserve Board of Governors survey consistently shows 40% of Americans can’t come up with $400 to meet an unexpected expense.
Instead, members of Congress and policy makers lie. They suggest health care should be an entitlement – that someone else should/will pay. Who, the French? As with health reform, they assert that individuals should not have to pay in excess of 10% of their income for medical services. I clearly remember a focus group in a government-funded activity (Health Care That Works for All Americans). It was clear what the audience wanted – I will never forget: “I want the best health care YOUR money will buy!”
Think about it. Put your economist hat on. The cost of health care in the US is supposedly 18% of GDP, ~$3.65 Trillion in 2018. Using the income method, GDP = National Income + Indirect Business Taxes + Depreciation. National Income = Wages + Rental Income + Interest Income + Business Profits.
So, wages are substantially less than GDP. Actually, in 2018, wages and salaries were ~$9 Trillion (according to BEA) or 45% of our $20 trillion economy. In other words, health care costs of $3.65 trillion dollars > 40% of wages. How many of you have a 40% deduction from your wages!? So, we know that a significant portion of health care spend is already sourced with taxes.
Simply, workers are having a hard time paying their out-of-pocket medical expenses because they are not saving up. They are not saving up because policymakers and members of Congress lie to them, suggesting that others should, must pay so that they don’t have to prepare.
Stop lying, start preparing.
No one in a country with Universal Healthcare wants to trade places with us! I have relatives in England, and Canada. The Canadians won’t cross the border in to the USA without day coverage — they are so afraid of having an accident and being placed in an American hospital where they will be billed. Yes in Europe the taxes are higher BUT if healthcare and pensions are offered — these are two things people worry about the most — then you can adjust the rest of your income to live. In no other country can one lose their home or business to a greedy healthcare system. I was a former RN here in the USA and my husband was a surgeon. We know the system here in the USA and can speak about it with some knowledge.
I can see that in the future a company will want to provide a stipend to each employee and get away from the health care provision responsibility. Jettison that onto the workforce like the retirement obligation of yore. The only defined benefit pensions still provided are the ones that are taken out of the taxpayer pockets – politicians, teachers, police, firemen, etc.
It amazes me how quickly people assume that government will solve these problems when government involvement has already made these problems worse.
Like any other industry in America, a free market consumer-based system will spur competition, increase innovation, reduce costs…etc.
There is little incentive for a government based system to do any of these on a consistent basis. With private industry and free-market competition, there will always be an incentive to implement and advance health care.
The article talks about health care costs tripling over the last 10 years – wow, when was Obamacare presented as a reality with the election of a President willing to put it into operation? Ten years ago is no coincident.
Obamacare is a catastrophic failure! Based on what the Obama Administration promised it to be, it has failed on many different fronts and not the least of which is costs. The year before the ACA, my family high deductible health care plan cost $465/mo with a $3,000/year deductible. With the passage of Obamacare, my health care plans have changed on several occasions with my premiums going up dramatically year after year. I pay $2,000/mo for my health care compared to $465/mo. My deductible is $12,000/yr.
This is criminal. There are doctor shortages in my state because of the rising costs and lack of adequate compensation. Universal health care is exactly what our country doesn’t need. When you look at other countries like Canada, England….etc. and get beyond the political diatribes that people put up, you see stats showing much longer wait times, higher costs, and most of all – the ultimate and practical measure – survivability rates are much lower than in the United States. It is no accident that famous people, government people,…etc. from foreign countries come to the United States for their care.
If people in high deductible plans are whining they don’t have enough in their bank account to pay the deductible, they ain’t using it right. The plans come with an investment account you are supposed to contribute to for precisely that purpose.
Deductibles and other out-of-pocket healthcare expenses make paying for healthcare even more challenging, especially for older adults or those who are already retired. Though Medicare provides coverage, it may not be enough to most beneficiaries because it doesn’t cover everything. In addition, the deductibles, copays, and coinsurance they have to shoulder can build up over time and drown them out. Other than shouldering the out-of-pocket expenses, older adults 65 and over can opt to have additional health insurance, just like what Medigap or Medicare Supplement plan provides (which is another punch on their budget). Choices are limited, but we all need to make a way to cover the cost we need to pay.