qotd: Paradox of health care spending slowdown but higher financial burden for patients

Dobson/DaVanzo
Report prepared for the Federation of American Hospitals
July 23, 2014
Health Care Spending Slowdown: The Consumer Paradox
By Al Dobson, Ph.D., Gregory Berger, M.P.P., Kevin Reuter, Phap-Hoa Luu,
M.B.A. and Joan E. DaVanzo, Ph.D., M.S.W.

In recent reports we have outlined the continuing historic slowdown in
the growth rate of health care spending driven in large part by emerging
structural changes in the health care system. Recent evidence suggests
that the cost curve has continued to bend, with health care spending
declining in the first quarter of 2014. Despite this continuing trend in
health care spending growth, consumers are increasingly concerned that
they are ever-more financially burdened by spending on their own health
care.

This consumer perception is largely a factor of the "new normal" being
established through health insurance, which includes:

• Benefit plan designs, used by employers and insurers to shift greater
financial risk to consumers through higher out-of- pocket spending
(i.e., deductibles, co-payments, and co- insurance); and

• Health insurance premiums, which continue to rise faster than the
average person's income.

This trend of growth in out-of-pocket spending combined with increases
in health insurance premiums that outpace increases in wages is not
sustainable over the long term, and harms both patients and providers.

Key Findings

• In the first quarter of 2014, consumer spending on health care
declined by 1.4%, representing the largest decline in over 30 years

• Almost 60% of Americans think that health care costs have been growing
faster than usual in recent years, and more than 70% of consumers
attribute responsibility for their perceived high and rising costs to
health insurance companies

• Total premiums have increased substantially over the past decade, from
14.9% to 21.6% of median household income between 2003 and 20126

• Employee contributions to premiums and out-of-pocket spending have
risen 23% faster than employee costs since 2009 (32% in cumulative
growth vs. 26%)

• Cumulative growth in workers' contributions to premiums between 2002
and 2013 was 114%, approximately four times higher than growth in
workers' average income (31%)

• Deductibles for family coverage increased more than 75% from 2006 and
2013 (from $1,034 to $1,854), while enrollment in plans with a
deductible increased to 81% in 2013

• The percentage of workers enrolled in high-deductible plans ($1,000 or
more) has increased more than five times over the past decade, from 4%
in 2006 to 26% in 2014

• Overall, employees' premium contributions and out-of-pocket expenses
per capita have grown by 42% over the past five years, from $6,824 in
2009 to $9,695 in 2014

Payers and providers are both adjusting to a "new normal" in the
marketplace through a variety of multi-year strategies aimed at
improving quality, reducing costs, and minimizing financial risk within
the evolving regulatory framework. Additional interventions or blunt
policymaking, rather than allowing the market to respond to current
reform efforts, could interfere with the system.

Both payers (including employers) and providers have prepared multi-year
transition plans to adjust their business models, and require some level
of predictability and capital reserves. Major disruptions to the
operating environment for providers, payers and/or employers may
generate uncertainty, which ultimately could flow down to consumers in
the form of higher premium contributions and out-of-pocket spending.

http://fahpolicy.org/wp-content/uploads/2014/07/Dobson-DaVanzo-Federation-Cost-Sharing-Executive-Summary.pdf

Report:
http://fahpolicy.org/wp-content/uploads/2014/07/Dobson-DaVanzo-Federation-Cost-Sharing-Report.pdf

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Comment by Don McCanne

This report describes the paradox of the "new normal" in which increases
in health care costs have been slowing as payer/employers and providers
adjust their business models to the marketplace, while the financial
burden for health care on patient/consumers continues to increase. As
this report states, "this trend of growth in out-of-pocket spending
combined with increases in health insurance premiums that outpace
increases in wages is not sustainable."

This study was sponsored by the Federation of American Hospitals - the
lobby organization for America's private, investor-owned hospitals. To
no surprise, they recommend that the marketplace be allowed to work its
magic, avoiding disruptions or policy changes that could interfere with
the system. They caution that such interference "could flow down to
consumers in the form of higher premium contributions and out-of-pocket
spending."

What? They have just shown us how the market they want to protect is
taking care of payer/employers and providers (including for-profit
hospitals) while creating financial burdens for patient/consumers
through "higher premium contributions and out-of-pocket spending."

They haven't gotten reform right, and they won't as long as we allow the
medical/industrial complex to remain in charge. Reform needs to be
centered around the patient, yet it is the patient who is being dumped
on. Single payer would fix that.