Short Takes On News & Events

Health Cost Bite To Family Budgets Sinks Deeper

By Jay Hancock

December 12th, 2012, 8:10 AM

Medical costs aren’t just breaking government budgets. The price of commercial health insurance has risen five times faster than family incomes since 2003 even as the financial security it offers has shrunk, says a new Commonwealth Fund report that underscores how medicine is consuming bigger and bigger parts of the private economy.

“Wherever you live in the United States, health insurance is expensive, and for many middle- as well as low-income families it is becoming ever less affordable,” said Cathy Schoen, Commonwealth Fund senior vice president. “Workers are paying more for less financial protection when they get sick.”

The average total cost of family health insurance — employer and employees’ shares — hit $15,022 last year, up 62 percent since 2003, while the median family income rose only 11 percent during the same period, the report said. If that trend continues, premiums for family coverage will come close to $25,000 by 2020.

And because employers are passing a bigger share of costs to workers, the overall premium increase doesn’t reflect the full growth of the consumer burden. The average employee paid $3,962 in premiums for a family plan in 2011 — up 74 percent from 2003. Deductibles more than doubled in the same period, meaning out-of-pocket costs soared, too.

In 2003 about half of workers had to pay an average deductible of about $1,000 for a family plan, the study said. In 2011, 78 percent of workers had deductibles averaging more than $2,000. Average deductibles were higher at small employers — $3,329 for a family plan in 2011.

Soaring premium costs for employers have often translated into skimpy cash raises for workers, leaving them little wherewithal to absorb higher out-of-pocket expenses.

In most states average total health insurance premiums are now 20 percent or more of median family incomes, the report found. In some low-income states — West Virginia, New Mexico, South Carolina and Texas — the portion exceeded 25 percent.

Overall health cost increases have decelerated in recent years with the economic slowdown and as the Affordable Care Act, which contains measures to restrain expenses, comes closer to implementation. But that doesn’t mean employers won’t continue to shift medical costs to workers. “The question is whether consumers will benefit from these trends” of smaller cost increases, said Commonwealth Fund President Karen Davis.

11 Responses to “Health Cost Bite To Family Budgets Sinks Deeper”

  1. larry says:

    This article is the best evidence I’ve read for a universal single-payer system. Insurance companies and providers have colluded to make profits their top priority while putting the consumer at the bottom. The sooner profit driven insurance companies and greedy providers are eliminated from the system, the better.

  2. helen says:

    Larry – and all – let all your elected representatives, state and local know what you believe, what you want, and let them know very frequently. If they are to try for change they need the cover of ‘my constituents want this’ in order to buck what their party leadership – and the lobbyists – tell them to believe and to vote.

  3. LIMAPIE says:

    I always come to this site for informative truth.
    One cannot listen to nightly news any more to hear
    fact.
    Thank you for your time and effort.

  4. Josephine Disparti says:

    Individuals like me with Medicare insurance are feeling the health cost bite as well. I too pay more than 25% of my retirement income on insurance premiums. I am aware from volunteer work that many low and middle income elderly individuals are feeling not only the cost bite but they are being forced into inadequate, private managed care plans that put them at higher health risk. We need to challeng the current proposals to cut Medicare and get serious about implementing a universal single payer system.

  5. James says:

    If there was ever a more convincing report to justify the need for a universal, single-payer healthcare system, I’d sure like to know. It is well past time that Americans asked the question, “What is the marginal benefit of private, for-profit health insurance?” That is, what exactly is the additional advantage of private insurance, compared to a public program like Medicare, that justifies the enormous and steadily increasing premiums charged by for-profit insurers?

  6. Tom p. says:

    Even with its many faults and even with the fraud that has always persisted, Medicare has no equal when it comes to efficiency and effectiveness. Some studies show that Medicare is at least four times as efficient and effective as the best private insurer in the healthcare market. The problem with going to a public option in the 2014 healthcare exchanges, much less going to a single payer system, is the that the private insurers have a very potent lobby in Washington. Medicare has no lobby. The best advocate for Medicare are the subscribers. Sadly, Medicare subscribers do not say much. They think it will never end. They will probably say more once Republicans implement a voucher system. All it will take is a Republican controlled Congress and a Republican President. If that happens, you can say goodbye to Medicare. As usual, seniors will say nothing until it’s way too late.

  7. larry says:

    To get a public option included in the 2014 healthcare exchanges, you would need both chambers of Congress controlled by Democrats and a Democrat President. Republicans will not accept any plan that hurts the insurance companies because it is those very same insurance companies that keep funding Republican re-election campaigns. It is not about what is best for the American people, it is about political hacks finding the money necessary to keep them in the Congress. There is only one way that we will ever get to single-payer healthcare. That is when it finally collapses under its own weight. The article above shows strong evidence that the healthcare foundations are beginning to serious stress fractures. When you have over 50 million Americans uninsured and another estimated 25 million underinsured, that is one quarter of the population being supported by the rest of us. As more and more Americans join the ranks of the uninsured and the underinsured each year, the current model can’t be sustained for very long. It will collapse. Then , and only then, will Congress be forced to do something. That “something” will be a single-payer healthcare system that’s very similar to the healthcare systems we see in the rest of the industrialized world. Sadly, many Americans will die while Congress continues to keep their collective heads buried in the sand.

  8. cathy says:

    Don’t forget those of us now in the “high risk pools” where, at least in my case, insurance cost is more or less equal to the retail cost of all meds Our insurance costs nearly 40% of a household income just below median; with copays medical costs are 50% of our income.

    I understand that in the system as a whole pharma is not considered to be a big cost center, This amazes me given how hard they’ve worked since 2002 to reprice medications by “value” instead of cost, to repackage and rebrand medications to prevent generics from entering the market (e.g. “twinned” formulations like Caduet), and to keep from daylight research studies that suggest that specific (expensive, new) meds are not effective or have dangerous side effects.

    Single payer, absolutely. Any profit-based exchange system has incentives to find ways to “robo-reject” profiles like mine to become someone else’s high-priced “high risk.”

  9. larry says:

    Cathy,

    Good news! You only need to hang on for another 12 months! When the healthcare exchanges open up on 1/1/2014, you will probably get some deserved relief. Under the Affordable Care Act (ACA), you will probably qualify for new health insurance subsidies based upon your family income. For example, say a family of four had income of $46,100, which is 200 percent of the FPL. Assume that the annual premium for their state exchange’s benchmark silver insurance plan was $10,000 a year. This family would have to pay 6.3 percent of its income, or $2,904.30, of this premium and would receive a tax credit for the difference: $7,095.70. While I don’t know if that applies to your situation, you can see by this example that middle-class families will see some relief from what they now pay under the Republican plan, which is to repeal Obamacare and go back to the iron fisted control of the health insurance industry. Oh, by the way, you may be asking how can the government possibly pay for these new subsidies? That’s easy! On 1/1/2014, virtually everyone will need to buy health insurance. Initially, an estimated 30 million new insurance subscribers are expected to overwhelm the health insurance market. Insurance companies will initially experience a windfall. However, they can only keep 20 percent of the premiums that they collect for administrative costs. Under the ACA, insurance companies must spend 80 cents of every premium dollar they collect on healthcare for their subscribers, or they must rebate the difference back to their subscribers.

  10. Brad H says:

    Just a couple of sobering thoughts for all the “single payer” advocates here…..Larry wants the “greedy” insurers and “greedy” providers gone. The insurers aren’t angels, but they have shareholders (likely some of us on this site) that do require results! If you get rid of all the “greedy” providers who will be left to treat everyone? The “non-greedy” providers? I’ve yet to find any of these types. Private insurance increases have been driven in large part due to the federal cuts to medicaid/medicare. When $700B is pulled out of these programs that DOES NOT mean $700B worth of care will not be provided. The care is still provided but the “greedy” providers are reimbursed less. They look to make this shortfall up by dramatically increasing the reimbursements they receive under private insurance payers.

    The US spends over $2T a year on healthcare. The US takes in approximately $2T in tax revenues per year as well. IF the US takes over healthcare (single payer) does everyone have an appetite for at least doubling all tax revenue the federal government takes in??

    Once in control of healthcare, the govt will still be responisble for spending, budgets, deficits, etc. With a responsibility to balance spending, revenues and decrease deficits – what do you think will happen to financing for healthcare? Care will have to be rationed, hospitals will close, quality of care will decrease, and many will go without as dollars for this are not unlimited!! Single payer is not a silver bullet – there is no silver bullet to this.

    As opposed to advocating for “single payer” govt run healthcare which will yet again put another entitlement program under the control of the govt and the financing squarely on the backs of our children and grandchildren, why don’t you start advocating for personal responsibility! Live a healthy life, plan for your own future. If that includes spending more for healthcare than your neighbor, so be it. This “fairness” mentality is bunk. Not all things in life are “fair.”

  11. Brad H says:

    Cathy – Sorry, I am missing the “good news” here. Can you explain it to us? In your example, this family gets insurance that we know costs $10,000 a year, but because of this wonderful bill they only have to pay $2,900 a year for it. Where does the other $7,100 come from?

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