Advertisement

Health Costs Soar as Sharply as Candidates’ Plans Diverge

Share

The relentless rise in healthcare costs may now be America’s most pressing domestic problem, at once a threat to the economy, family budgets and the social safety net. It’s also a window into one of the clearest choices facing voters in November.

Since 2000, health insurance premiums have soared by 59%, much faster than in the late 1990s, according to the Kaiser Family Foundation’s authoritative annual survey. On average, a family health insurance plan now costs workers and their employers nearly $10,000 a year. That’s as much as a company would pay a full-time worker earning the minimum wage.

This staggering bill is straining budgets from the kitchen table to the boardroom. Since 2000, wages have grown only one-fifth as fast as health insurance costs. On average, workers now pay more than $220 a month to insure their families.

Advertisement

The pressures are just as great for employers. To a remarkable degree, large employers are upholding their commitments despite the swelling bills, Kaiser found. Almost all of them still offer healthcare coverage. Most still pay at least three-fourths of the premium for workers with families.

But big companies may be responding by simply adding fewer workers. Dennis Cuneo, senior vice president for Toyota Motor Manufacturing of North America, says the cost of health insurance is pushing many large employers “to hold off hiring new workers as long as they can.”

Small businesses are responding to the pressure more directly. The percentage offering health insurance to their workers has dropped steadily since 2000. And those that provide insurance are contributing a much smaller share of the premium for family coverage than larger employers -- leaving workers to absorb more of the bill.

With fewer small businesses offering coverage, and more workers at firms large and small declining coverage even when it is offered because the cost is so high, the U.S. is facing the slow-motion unraveling of the employer-based system that has guaranteed healthcare for most Americans since World War II.

The number of Americans receiving healthcare on the job has dropped every year since President Bush took office. Public programs, such as Medicaid, have picked up part of the slack, but not all. The result is that the number of Americans without health insurance has increased to nearly 45 million, up almost 5.2 million since 2000.

Kenneth Thorpe, a health economist at Emory University in Atlanta, projects that unless the cost increases moderate, the number of uninsured will hit at least 50 million by 2010 as more employers drop coverage. E. Richard Brown, director of the UCLA Center for Health Policy Research, sees the same risk. “The trend line is toward disintegration of the employer-based system,” he says.

Advertisement

Kerry’s healthcare agenda is aimed at resisting that tide. In essence, his strategy is to encourage private employers to maintain insurance by shifting more of their costs to the federal treasury. He would have Washington assume most of the cost for catastrophic cases, if employers agree to disease management strategies meant to control spending. Kerry would use Medicare’s bulk purchasing power to try to negotiate lower prices for drugs. And he would provide small businesses generous tax credits to cover their workers.

Skeptics fear that Kerry’s plan would do more to shift than to reduce overall costs. But by lightening the burden for business, Kerry figures he can encourage more of them to provide insurance. Kerry would cover most of the remaining uninsured by expanding public programs. In both instances, he aims to reinforce the existing system under which virtually all Americans receive coverage (either at work or through government) in large groups meant to spread risk.

By contrast, Bush’s agenda encourages further movement away from the group-based system toward one in which individuals increasingly obtain insurance on their own.

Bush’s principal short-term idea for restraining healthcare costs is limiting awards in medical malpractice cases. But most leading health economists agree that malpractice abuse, although a genuine problem, is a minor factor in overall medical-cost inflation.

Bush’s real hope for controlling costs over time is creating a healthcare system in which individuals “become prudent shoppers,” as Senate Majority Leader Bill Frist (R-Tenn.) said last week. Put more directly, Frist means Americans will spend less on healthcare if they bear more of its cost personally.

That idea animates Bush’s major proposal for expanding access to care: He wants to expand tax-favored plans called Health Savings Accounts that individuals can use, in conjunction with insurance policies to protect against catastrophic costs, to pay for healthcare expenses out of their pocket. More companies are examining that approach too.

Advertisement

This might be an attractive option for many younger and healthier workers. But it risks leaving the traditional group plans with only the sickest and most expensive cases -- forcing them to raise premiums in a spiral that would encourage relatively healthy workers to quit for a better deal in the individual market. Eventually, Brown says, that might produce “price rationing of medical care,” as comprehensive coverage grows too expensive for all but the wealthiest and healthiest.

The essence of social insurance is the principle that society should share risk between the healthy and sick, wealthy and poor. Kerry would spend heavily to buttress that system.

Bush envisions a healthcare marketplace in which Americans increasingly operate as independent agents, exerting more control, bearing more risk and making the best deal they can on their own.

This fall’s election probably won’t illuminate the full magnitude of this choice. But make no mistake: These two men are offering radically divergent alternatives for how Americans should be protected against the inescapable adversities of life.

Ronald Brownstein’s column appears every Monday. See current and past Brownstein columns on The Times’ Web site at: www.latimes.com/brownstein.

Advertisement