The U.S. health care system is unique to the rest of the world. And for the most part, our health system represents the best the world has to offer, but in some respects it is woefully lacking. One of the first things that catches your eye about the U.S. health care system is that it is big. The Centers for Medicare and Medicaid Services have recently reported that the total U.S. health expenditures for 2006 exceeded $2.1 trillion, or looked at from another perspective, more than $7,000 for every American man, woman and child.
Currently, health-care spending in the US accounts for about 16% of our Gross Domestic Product and is projected to exceed 20% in seven short years. And with over 11 million employees, health care is clearly our largest economic sector.
Not only are our health care expenditures large but they continue to get larger, typically outstripping increases in most other areas. For the past few years, the health care costs grew at twice the rate of the Consumer Price Index, and that was considered by many as a good sign. The recent past has shown double-digit increases that were anywhere from three to four times the general CPI increases.
The Good
In general, health insurance in the U.S. is provided through several major private and public funding sources. As a result, the majority of Americans have health insurance through either their own, their spouses or a parent’s employment. The most current statistics showed employer-sponsored health insurance covered 174 million people or about 60% of the population in 2004. Insurance that was purchased directly by the individual accounted for 27 million or about 9% of the population.
There are several government provided health insurance options available to you as citizens. The largest of these is Medicare, with about 40 million enrollees or about 14% of the population. For the most part, the majority of these individuals or 84% are elderly individuals age 65 or over. The next largest government-sponsored health program is Medicaid. This coverage is primarily associated with the State Children’s Health Insurance Program (SCHIP).
Medicaid and SCHIP total about 37.5 million low income individuals or about 13% of the total population. This group is primarily made up of children, pregnant women, the elderly and some disabled individuals. Finally the smallest portion of government related health coverage was for military and veterans coverage. This insurance is provided to about 10 million people or about 4% of the population.
The Bad
One of the most troubling aspects of health care in the U.S. is the cost. In fact, we spend more on health care than any other country in the world. Our per capita, or per person spending was about $6,697 in 2005. The next highest country was reported as Canada with a per capita spending of $3,326.
Despite the costs, we are frequently victims of poor health care. This can include medical, medication and lab errors that occur so where along the health care treatment path. The U. S. along with the Australians are the most likely to report some type of medical error, with about 20 percent of patients saying they had experienced at least one error over the past year. And for those patients with chronic diseases, the rates are typically much higher.
While many have voiced concern about the number and size of medical malpractice claims, studies have shown that our high rates of lawsuits are due to our high rate of medical errors. As such the crisis is not just in the court room, but also on the operating tables.
The Ugly
Of course what’s missing from the above noted numbers is the amount of uninsured individuals in America. This figure is currently estimated at 47 million and growing. There are a number of surprising statistics with regards to the uninsured in the U.S. For example, the uninsured are more likely to be white than any other race since they comprising about half of the insured population. However, the uninsured are disproportionately Hispanic, to a significant degree, since they represent about 14% of US residents but make up about 30% of the uninsured numbers.
While there are a variety of reasons for this, research has shown that one of the primary reasons is that Hispanics are more likely to be employed in jobs that do not offer health insurance such as construction or agriculture. Additionally, it should be noted that the vast majority, currently about 79% of the uninsureds, are U.S. citizens. Again, however, a disproportionate percentage of the uninsured are noncitizens. While noncitizens are only 7% of the population, they account for over 21% of the uninsured.
One of the other surprising statistics with regards to the uninsured has to do with how many of them have jobs. The vast majority of the uninsureds are working individuals or the children of those the work. For example, in 2004 almost half of the uninsureds (over 46%), work full-time and another 28% worked part-time for all or part of the year. However, it now appears that many of the uninsureds worked for employers that did not offer coverage or if the employers did offer coverage, they either were not eligible or did not accept the offer. Most of the time coverage was declined because of being too costly.
An additional consideration with regards to employment was that the uninsured are more likely to work at smaller firms than larger ones. Those employers with less than 100 employees and their children comprise almost half of the uninsured, 46% to be exact. Small firms, particularly those with fewer than 10 workers, are much less likely to offer any type of health insurance. The small firms only account for 52% of those that offer coverage compared to 99% of firms with more than 200 employees.
So the statistics confirm that about 47 million Americans have no health coverage, but what do they do when they need health care? This is really the most troubling aspect of the rising rates of uninsured. Research suggests that there are overriding consequences from not having health insurance. Among the most alarming consequences are lower quality of life, and the increase in both morbidity and mortality and to add insult to injury, higher financial burdens.
Several years ago, the Institute of Medicine (IOM) provided details that an estimated 18,000 uninsured Americans died in 2000 because they were uninsured. Obviously, since the original report was published in 2002, the number of uninsured has continued to increase. In a new study were the IOM revisited their original study, they indicated that 137,000 people had died from 2000 to 2006 because they lacked health insurance.
Of that number, they estimate that 22,000 died in 2006 alone. Based on the IOM study they believed that nationally, there is a 25% higher mortality rate among uninsured. Just to put these numbers in context, annual deaths from diabetes last year was 17,500; stroke was 19,000 last year, and HIV/AID was 14,100. Additionally, the annual number of deaths due to homicide was 19,700.
And since uninsureds lack needed coverage at the time of any health care admission, they are typically required to pay cash. But even more damaging, is the fact that US hospitals have been charging uninsured patient about 2 1/2 times more than those with health coverage. The majority of this difference is due to the fact that they lack the negotiating power of most health insurer.
And based on statistics as noted in the May/June 2007 issue of Health Affairs this difference has been rising steadily since 1984, however it has increased more swiftly since year 2000. Despite a growing concern voiced by patient groups and lawmakers about these types of markups, the pricing disparities have steadily worsened.
The other major point regarding health care for uninsureds is what venue is typically used when services are required. For the most part, uninsureds receive care from health care “safety nets.” These safety nets are at the core of providers which includes public hospitals, academic medical centers, community health centers and clinics, as well as local health departments. Many times services are provided to the uninsureds that greatly reduced or negligible fees.
The cost of uncompensated care provided to uninsureds was estimated at $34 billion in 2005. And, research has shown that the public sector financed up to 85% of these costs. In addition to those figures, doctors provided an additional estimated 5.1 billion in charity or pro bono work. For many uninsureds community health centers and public clinics served as the key “safety net” function by providing services to community residence.
One area that is getting a lot of attention recently has been how hospital emergency rooms interact with uninsureds. In that regard, the Emergency Medical Treatment and Labor Act is the only federal law that grants even a limited right to universal care for uninsureds. In order to participate in the Medicare program, hospitals must screen, and if medically necessary, stabilize patients who are presented at the emergency department for treatment.
As a result, hospitals are not allowed to deny care to uninsured patients although they can bill them for services rendered regardless of their ability to pay. It should be noted that hospitals do not receive funding to support these requirements under this legislation. And as a result they typically only collect $.10 on the dollar for services billed.
Hospital emergency departments have become overcrowded as a result of this legislation and have caused a negative impact on the quality of care received by all patients. And since uninsured patients have fewer alternative sources for care, they typically are disproportionately adversely affected.
Change in the Wind
We are on the eve of the presidential election in which health care promises to play a predominant role. All three of the major front runners; John McCain, Hillary Clinton and Barack Obama, all have very specific approaches to resolving the current ills in the health-care field. As would be expected, there are some very stark differences between the Republican candidate and the Democratic candidates.
John McCain’s approach to health care reform revolves around a central premise of providing access to affordable health care for all, by paying only for quality health care, and having insurance choices that are diverse and responsive to individual needs. Additionally, a keystone to his plan is encouraging health-care consumers to take personal responsibility for their overall health care. While McCain says he wants to cover more people, he has not explicitly embraced to goal of universal coverage.
McCain’s plan would remove the favorable tax treatment of employer-sponsored insurance and then would provide a tax credit to all individuals and families to increase incentives for personal insurance coverage. Additional features of the program are to promote insurance competition, and control cost through a variety of payment changes to providers, tort reform and other cost containment measures.
One of the novel ideas of McCain’s proposal is that he would promote competition within the insurance industry by allowing insurance to be sold across state lines. He would also encourage the use of multiple year insurance products to drive down the cost of insurance coverage.
Hillary Clinton’s health care proposal is to provide affordable, high-quality universal coverage through a mix of private and public insurance. Her approach for attaining this goal is that every American would be required to have health coverage with a variety of income related tax subsidies available to make coverage affordable. She would also require private and public plan options which would be available to individuals through a newly created health choice menu operated by the Federal Employee Health Benefit Program.
Coverage through employers and public programs such as Medicare would continue as currently available. A hallmark of her program is true universal coverage which would require all individuals to have health insurance coverage. Large employers would be required to provide an employee plan or contribute the cost of the coverage, while most small employers would not be required to offer or contribute to coverage cost but should be providing incentives to do so.
Obama’s program differs slightly from Clinton’s however, it still has a primary goal of affordable and high-quality universal coverage through mix of private and expanded public insurance. His program requires all children to have health insurance and employers to offer employee health benefits to their workers or contribute to the cost of new public programs. He would also create a new public plan as well as expand Medicare and SCHIP.
Much of Obama’s program is based on creating a National Health Insurance Exchange through which small businesses and individuals without access to other public programs or employer base coverage could enroll in new public plans or an approved private plans.
Both of the Democratic proposals would greatly strengthen the Medicaid and SCHIP safety net programs. In addition, both democratic candidates stressed coverage under new programs that would be portable. A review of the two candidates program shows many similarities but major differences in the scope of the coverage. Clinton wants to force all Americans to purchase health insurance by 2009, thus providing universal health coverage for all. Obama would prefer to achieve universal coverage without a mandate and then impose one, if needed.
Based on the information that has been provided by the individual candidates, particularly the Democrats, they are looking for major changes in the health care landscape in order to enact their universal coverage approach. Obviously this would take a significant national initiative to complete. However, with concerns for the uninsureds continuing to grow, some states have taken this matter into their own hands.
For example, three states; Vermont, Massachusetts, and Maine have already enacted state legislation that seeks to provide near universal coverage to state residents. In addition, 12 other states have proposed universal coverage legislation in the works. Included among the states are Washington, Oregon, California, New Mexico, Colorado, Kansas, Minnesota, Wisconsin, Illinois, Pennsylvania, New York and Connecticut. Advancements of these individual state initiatives will continue to move forward despite the national rhetoric on universal coverage.
Having noted all of the above potential solutions, we are still left with almost 47 million uninsured Americans. Medical tourism is one of the few viable alternatives to help U.S. citizens obtain needed medical care. In addition, it can also help employers to balance the costs of their employee benefit programs. So, will employers and insurance companies jump on the trend and start offering medical tourism programs?
Will employees take the “bait” put out by employers and insurance companies to go overseas for major surgery? Only time will tell, but I am one believer that Medical Tourism will be one of the largest trends in US healthcare and one of the few options that can actually help solve the American healthcare crisis.
Michael J. Moody, MBA, ARM, is the Managing Director of Strategic Risk Financing, Inc. in Orlando, FL. Over his 20+ years experience he has assisted midsized corporate clients in developing strategies for combating the increasing cost of employee health care. He specializes in establishing self-insured health programs and can be reached at mmoody1222@yahoo.com.
