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Escalating Health Care Costs

Americans are spending more on health care then ever before, more than most other industrial countries, and we are faced with still escalating future costs.

In light of the current economic downturn, Americans are talking about health care reform in ways that are connected to everyday “kitchen table” discussions. Each month as they pay their bills, they are worried about being able to afford health care for themselves and their families.

Health costs are rising at an unsustainable rate. A June 2009 report from consulting firm PricewaterhouseCoopers says that employers who offer health insurance to their workers could see a 9 percent increase in premiums in 2010. The report is described in an Associated Press (AP) article.

AP also reports on a survey commissioned by the Robert Wood Johnson Foundation. The survey shows that nearly half of those polled are worried about paying for care. Nearly one in four people said they feared losing coverage in the next year. See the foundation’s Consumer Confidence Index.

The Department of Health and Human Services released a report in February 2009 that says health care costs will top $8,000 per person in 2009. The report forecasts that costs “will reach $13,100 per person in 2018, accounting for $1 out of every $5 spent in the economy.”

According to Health Affairs, the Office of Actuary, Centers for Medicare and Medicaid Serives (CMS), projects health spending for 2009 at $2.5 trillion, or $8,160 per person. That’s about 17.5 percent of gross domestic product. CMS reported that the economic downturn has led to increased growth in public health care spending through programs such as Medicaid, while private health care spending is slowing as people lose their jobs and their insurance.

Health costs are outpacing income eight-fold. In March 2009, the Robert Wood Johnson Foundation released research showing that since 1994, average nationwide costs paid by an employee for an individual health insurance premium have risen nearly eight times faster than average U.S. incomes. In addition, 6 million more workers are uninsured today than 15 years ago.

Kaiser Family Foundation’s first tracking poll of 2009 shows that more than half of Americans say their families skimped on medical care because of cost in the past year, and worries about affordability and availability of care have increased. In the April KFF poll, six in ten people said their family put off medical care due to cost. The most common actions taken due to costs were substituting home remedies or over-the-counter drugs for doctors visits (42 percent) and skipping dental care or check ups (36 percent). Additionally, three in ten (29 percent) did not fill a prescription for medicine and two in ten (18 percent) cut pills in half or skipped doses.

American Workers and Businesses at Competitive Disadvantage

A report from the Business Roundtable issued in March 2009, Health Care Value Comparability Study, shows that the costs and performance of the U.S. health care system have put America’s companies and workers at a significant competitive disadvantage in the global marketplace.

Burden of Costs on Small Business

An April 2009 U.S. government report, Helping the Bottom Line, says that rising health insurance premiums are forcing many small businesses to drop health insurance for their employees or increase their out-of-pocket costs. Nearly one-third of the uninsured — 13 million people — are employees of firms with less than 100 workers. Much of the recent decline in employer-provided health insurance stems from small business. Nearly half of small business owners in a recent survey said that making health care more affordable is the idea Washington should address first.

Millions of Americans Suffer from Medical Debt

“In the face of the economic downturn, American families are confronting harsh financial realities--sluggish growth in wages and income, rising prices for gas and food, soaring health care costs, and loss of adequate health coverage. Many are struggling to pay their medical bills and have accumulated medical debt over time” (Commonwealth Fund).

The Commonwealth Fund report finds 72 million people have medical bill problems or are paying off medical debt. This accounts for 41 percent of working age Americans, up from 34 percent in 2005. In addition to the 72 million, there are 7 million adults age 65 and over that are dealing with these issues as well.

Rising Premiums

Escalating health care premiums have forced many employers to limit health care coverage they offered employees. Since 2000, premiums have raised a total of 84 percent and, as a result of these escalating costs, the percentage of the population with employer-sponsored coverage declined steadily between 2000 and 2006, while the percentage with public coverage has steadily increased. In 2000, 69 percent of employers offered insurance coverage and in 2006 the number of businesses offering coverage dropped to nearly 60 percent. Of those employers not offering coverage, some 73 percent cited “high premiums” as a “very important” reason for not including health insurance as an employee benefit. The Kaiser Family Foundation’s 2008 survey of employer health benefits found that between 1999 and 2008, the cost of empoyer provided family coverage insurance rose 119 percent, from $5,971 to $12,680. The employee’s share of that cost rose from $1,543 to $3,354. In fact, health care costs are getting to be so unreasonable, 36 percent of Americans are now forced to limit the amount they put toward retirement, according to the Employee Benefit Research Institute, a non-partisan research group.

According to a spring 2006 report by Emory University health economist Kenneth E. Thorpe, unpaid hospital bills, which are primarily from the uninsured, add 8.5 percent to the cost of health insurance for those who do have insurance and cost around $45 billion a year. In addition, a Blue Cross study found that if there are imbalances in the Medicaid and Medicare budgets, consumers and employers pay billions of dollars extra in medical costs.

A significant amount of money is being spent on medical research, allowing the U.S. to be an established leader in the development of new technology and remedies, especially drugs. However, waste and inefficiency also contribute significantly to health care costs. The U.S. uses a system with complex billing and paperwork that results in relatively high administrative costs and can also make things more complicated and frustrating for all parties involved.

People with chronic illnesses and diseases contribute significantly to health care costs. In any given year, close to 50 percent of health care expenditure is received by only 5 percent of the population. People with chronic diseases account for approximately 75 percent of our total health care costs. Other conditions, such as accidents, serious illnesses and premature births, can be expensive as well, and hospital costs alone can exceed $100,000 for each such case. On average, health care costs rise for an individual over time. Approximately one-fifth of health care costs will be used in the first half of our lives, while approximately half will be used after we turn 65.

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