Column: Sick: The biggest increase in healthcare costs in 32 years
Healthcare is very much in the news, but for all the wrong reasons.
On the one hand, we had Republican presidential nominee Donald Trump visiting the “Dr. Oz” show last week to reveal some tidbits about his physical condition (he’s fat). On the other, Democratic nominee Hillary Clinton had a bout of pneumonia but declared herself fit as a fiddle (we’ll see).
The real story, however, wasn’t that the two oldest presidential candidates in U.S. history are showing their age but that the rest of us are still getting creamed by rising healthcare costs.
The U.S. Labor Department reported Friday that spending on healthcare rose last month by the biggest amount in more than three decades.
The overall price of medical treatment increased by 1% in August. I know that doesn’t sound like much, but it’s the largest monthly gain since 1984. And those seemingly itty-bitty monthly increases add up.
“If that 1% rate were sustained each month, you’d see 12% growth for the entire year, and that would be very concerning,” said Geoffrey Joyce, director of health policy for USC’s Schaeffer Center for Health Policy and Economics.
The cost of hospital services climbed 1.7% in August, the biggest gain since October 2015, while the average price of prescription meds jumped 1.3%. That means average drug prices are up 6.3% over the last 12 months, the largest such increase in two years.
At the same time, many Americans are paying more out of pocket for healthcare as they try to keep a lid on monthly premiums by accepting higher insurance deductibles.
“We’re definitely seeing growth in higher-deductible plans,” said Matthew Rae, a senior health policy analyst for the Kaiser Family Foundation. “If you’re using healthcare services, you certainly might be paying more.”
The spread of high-deductible plans belies the relatively modest growth in costs seen in Kaiser’s latest survey of workplace health benefits, released last week. It showed that annual family premiums for employer-sponsored health plans are up an average 3% to $18,142.
Family premiums have increased 20% over the last five years, which is a lot but a darn sight better than the 31% hike over the previous five years, and a huge improvement over the staggering 63% growth in the five years before that.
Rae credited the slowdown in part to the healthcare system becoming more efficient, but also to high-deductible plans shifting a greater share of the spending burden to patients.
In other words, it might look great on paper that premiums aren’t rising as fast as they were before. But that’s due in large part to insurers keeping costs down by providing less-comprehensive coverage.
Twenty-nine percent of all U.S. workers are now in high-deductible plans, up from 20% two years ago, according to Kaiser. Rae told me he expects the trend to continue as more employers offer health savings accounts as part of medical benefits.
Slightly more than half of covered workers currently face an annual deductible at of at least $1,000.
Meanwhile, prescription drugs aren’t getting any cheaper. Recent high-profile episodes, such as Mylan jacking up the price of its EpiPen by 500%, have attracted headlines. But more noteworthy is the way most drugs, including generics, receive annual markups that defy any sense of reason or market reality.
A recent report from the Government Accountability Office found that while the average price of generics has come down in recent years, more than 300 generic meds have experienced “at least one extraordinary price increase of 100% or more.” Investigators found 15 generic meds that have seen price hikes of more than 1,000%.
The report cited the example of clomipramine HCL, an antidepressant used to treat obsessive compulsive disorder. Over just a single year, the price of a 50-milligram capsule soared from 34 cents to $8.43 — an increase of more than 2,000%.
USC’s Joyce said he doesn’t favor price caps for brand-name drugs. That could deter innovation, he said.
But when it comes to generics, Joyce said, “we should treat them like public utilities. Make companies justify price increases.”
Last week, a bipartisan group of U.S. Senate and House members introduced legislation that would force drugmakers to defend to the U.S. Department of Health and Human Resources any price increase of more than 10%. Its chances of becoming law, in the face of what would no doubt be ferocious industry opposition, are slim to none.
Californians will have a say on drug prices in November when they vote on Proposition 61, the Drug Price Relief Act. It would require that state health programs such as Medi-Cal pay no more for prescription meds than the U.S. Department of Veterans Affairs, which, because it can negotiate with drug companies, often pays about 25% less than other federal entities.
Medicare is prohibited by law from negotiating drug prices for its 55 million beneficiaries, so the program pays whatever drugmakers can get away with.
This country already spends $3 trillion annually on healthcare. That represents about 17% of total economic activity. The average for all nations within the Organization for Economic Cooperation and Development is 9%.
It’s deeply worrying that one of our most robust and reliable engines of economic growth is the business of sick people.
Unless, that is, having the biggest hospital and drugstore bills is a point of pride.
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