What Health Care Really Costs | We Pay Much More Than Most of Us Realize


I shared last month’s column ("National Health Care Myths Debunked") about T.R. Reid’s book on health care with Ron Crawford and Judy Quinn of Washington, Iowa, and they sent me something that I thought I would share with you:

It is a synopsis by Ezra Klein of the Washington Post on the Kaiser Family Foundation’s 2009 Employer Benefits Survey. It polls employers about health benefits. It assembled a detailed look on the actual cost of health care. The survey shows that we all pay much more that we recognize for health care.

In fact, it’s among the largest investments we ever make, but it is difficult to track. Employers pay some of the tab as do individuals—and so do tax payers. Some of the payment even hides behind the deficit. Let’s get a grip on the situation:

Health care coverage now costs the average family $14,375, according to Kaiser. Over the last decade, premiums have increased by 138 percent. If the trend continues, the average family plan will cost $30,083 by 2019.

As impressive as they are, these are not the numbers that seize the minds of most Americans, and that causes a problem for health care reform.

According to Kaiser, 160 million of us receive health coverage through our employers, who pick up 73 percent of the tab. While it seems like a good deal, that money is taken from our wages before we receive them, so we don’t feel the pinch.

Now, think about this: Kaiser points out that health premiums have risen by 300 percent over the last 30 years, adjusted for inflation, and that corporate profits per employee have soared by but 200 percent. Hourly earnings for workers in comparison have fallen. In other words, wage increases have been consumed by health care costs.

Another 80 million of us are on such public plans as Medicare and Medicaid that are paid for by taxpayers. That leaves about 46 million of us uninsured. Costs for their care are shifted to the uninsured, which raises premiums for the average family by $1,100 each year.

The dilemma for Congress in trying to fix this mess is that they see health care costs crushing our economy, overwhelming government, and swallowing our wages, but the public is not feeling it. No one cuts a single check for $14,375 for health care.

Most people pay at most about 27 percent of it. Klein asserts that the surest way to cut health-care spending would be to make people shoulder more of the burden directly instead of hiding it in taxes and lost wages. But that idea would go over like a lead balloon.

Health care reform concentrates on people in acute distress, the uninsured, underinsured, and the poor few who have been left to the cruel chaos of individual or small-group insurance markets. The public insurance option would be open only to these small groups, and the bill’s hefty price tag would be devoted almost entirely to helping them afford coverage.

However, health care reform cannot simply be accomplished through cash transfers or a new insurance card. Study after study shows that we waste vast sums on medical interventions that just don’t work. If we can figure out which ones those are, we can stop using them.

But what if science finds some new and incredibly expensive treatments that are wildly effective? They will increase spending.

Liberals favor the public insurance option. If such a plan were open to all Americans and partnered with Medicare, it could negotiate deep discounts with health care providers. Klein shows that this sort of plan could save the average American 20 to 30 percent on premiums, but where is the profit for American business in that?

There are other ideas: Melinda Beeuwkes Buntin of the Rand Corporation and David Cutler, a health economist at Harvard University, recently estimated the savings could be attained by changing the system over the next 10 years.

The changes they recommended were not that dramatic: Replacing paper records with computerized files, making it easier for consumers to compare insurers; bundling payments for the treatment of a single illness rather than shelling out for each doctor visit, etc.

Still, added up, they amount to $2 trillion over 10 years, a lot of money for policies that have received almost no attention in this debate.

Yet, this is the quiet promise of health care reform. The grand plan might fail. Such plans often do. Nevertheless, we can make the system a bit better, a bit quicker, and a bit more agile.

Joe Brisben is a financial advisor at BDF Investments, a division of Broker Dealer Financial Services, member of FINRA and SIPC. Hear his commentaries at 11:50 a.m. weekdays on KCCK, 88.3 FM.

See The Iowa Source index to read more articles by Joe Brisben on Investing.