A new Urban Institute study reminds us that failure to achieve the right kind of healthcare reform is not an option. By 2019, the study forecasts, between 53 million and 66 million U.S. residents will be uninsured. Healthcare spending by individuals and families will rise between 46 percent and 68 percent over the next decade, the study predicts. Government costs for programs like Medicare and Medicaid will double by 2019 if there's no action on reform.
Insurance consultant Milliman's latest report on the growth in health costs is equally sobering. This year, total health spending for a family of four with employer-based PPO coverage is expected to be $16,771, up 7.4 percent from 2008, Milliman said. While this is the third straight year of decreasing cost growth, it is also the third consecutive year in which the employee share of the cost rose by double digits. The major driver this year is a whopping 14.7 percent increase in the employees' share of the premium. This affects everybody with employer-based insurance, while the 5.4 percent increase in out of pocket cost sharing (copays, deductibles, etc.) hits only those who use healthcare services.
"Of the $16,771 total cost for a family of four," Milliman noted, "the employer pays about $9947 in employer subsidy (59%), while the employee pays $4004 (24%) in employee contributions and $2820 (17%) in out of pocket costs." So an average family with "employer-provided" insurance will spend $6824 on health care this year--not counting the amount by which employers lower wages to pay for their "subsidy."
As health costs rise, more and more of them will be shifted to employees, which means that fewer and fewer working people will be able to afford the cost of insurance. This should raise serious questions about proposals to tax workers on the value of the employer share of premiums.
Milliman also broke down health spending by category. Inpatient and outpatient facility costs comprise 47 percent of the total, while physician costs represent 34 percent, prescription drug costs, 15 percent, and other services, 4 percent. Outpatient services and drug spending have outpaced the Milliman index for the past five years, while physician spending has risen more slowly, increasing just 6 percent in 2009.
Overall, Milliman said, an increase in unit costs, rather than in utilization, is the main contributor to this year's increase in healthcare spending. In fact, utilization of inpatient and outpatient services is relatively flat. Milliman suggested that efforts by the government and private payers to control utilization are the reason--although the recession is certainly restraining demand for healthcare services. Any number of factors may be contributing to the growth in unit costs, including more intensive use of technology and higher wages for nurses, lab techs, and other professionals in short supply.
The reform debate is still largely focused on insurance and on covering the uninsured. If only we had a public plan to compete with private insurers and/or a government-controlled market for small firms and individuals, some reform advocates say, we could lick this problem. But it's clear that something else in the system is responsible for our runaway medical inflation. It will be very difficult to catch and tame that many-headed, voracious creature. But unless we do, it will eat us alive.