Now is the time to focus on healthcare affordability

By Karen Ignagni
July 10, 2012

Now that the Supreme Court has provided legal certainty on the recent healthcare reform law, the nation must turn its attention to affordability. While the law expands coverage to millions of Americans, a goal health plans have long supported, major provisions of the law need to be changed to avoid significant cost increases for consumers and employers.

Healthcare affordability is an issue that touches every part of our nation: single parents struggling to make ends meet; two-income families trying to get ahead in challenging times; and retirees trying to stretch their budgets. Equally important, rising medical costs crowd out government spending on other priorities, such as education and infrastructure, and put our nation’s businesses at a competitive disadvantage in a global economy.

The first priority is to address a number of the reforms taking effect in 2014 that will make healthcare coverage more expensive.

The law imposes a new $73 billion sales tax on health insurance that will add to the cost of coverage for people purchasing coverage on their own, for small employers, and for Medicare and Medicaid beneficiaries with private coverage. The Congressional Budget Office (CBO) has said that this tax will be “largely passed through to consumers in the form of higher premiums.” And an analysis by Oliver Wyman estimates that this tax “will increase premiums in the insured market on average by 1.9% to 2.3% in 2014,” and by 2023 “will increase premiums 2.8% to 3.7%.”

This tax will add a financial burden on families and small businesses at a time when they can least afford it, and it should be repealed.

In addition, all health insurance policies will be required to cover a broad range of mandated benefits, many of which are not included in some policies today. As a result, millions of people will be forced to purchase health insurance that is more comprehensive – and more expensive – than they currently have. The CBO found that premiums would increase because policies “would cover a substantially larger share of enrollees’ costs for health care (on average) and a slightly wider range of benefits.”

States should be given maximum flexibility to create the most affordable coverage options for consumers and employers in their states.

By limiting how much premiums can vary based on a person’s age, the law compels younger people to subsidize coverage for older individuals. This increases the likelihood that younger, healthier people will choose to pay the penalty and wait to purchase health insurance until after they get sick or injured, thus driving up costs for everyone else. Unless the restrictions on age rating are loosened, younger people will face significant cost increases at the same time the broader coverage expansion begins to take effect in 2014.

To make healthcare coverage more affordable, the nation must also address the soaring cost of medical care that continues to increase at an unsustainable rate. There needs to be a much greater focus on the main drivers of medical cost growth: soaring prices for medical services, new costly prescription drugs and medical technologies, unhealthy lifestyles, and an outdated fee-for-service system that pays for volume rather than value.

Health plans are doing their part by partnering with hospitals and doctors all across the country to change payment models to reward quality and better health outcomes. An AHIP study in Health Affairs examining private-sector accountable-care arrangements found that the support health plans provide to clinicians is critical to the success of these initiatives.

Health plans also have pioneered innovative programs and services to coordinate care for patients with multiple chronic conditions, help patients manage chronic disease, and promote prevention and wellness. These initiatives have demonstrated results in better health outcomes, improved patient safety, fewer preventable hospital readmissions and lower healthcare costs.

The healthcare reform law includes promising pilot programs aimed at getting public programs to emulate what is working in the private sector. Both sectors need to continue building upon this progress to create a healthcare system that is affordable for consumers and employers and can be sustained in the long run.

Meeting this challenge requires a national conversation involving all stakeholders. The choices the nation will need to make are not easy, but the conversation will help make our system work better for all Americans and result in a more competitive economy. And that is reason enough to roll up our sleeves and get to work.

21 comments

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The market forces and a healthier rate pool should reduce rates. Although I agree that a lot of progress needs to be made defining rating methodologies and rate pools, but for any insurance company to claim that their cost increases is due to millions of currently uninsured healthy and young people enrolling and paying premiums (and sharing their limited risk) would be a gross abuse. If this is blatantly untrue, then it demonstrates that the majority of those locked out of healthcare are sick and defenseless. A more disgusting scenario.

Posted by SeaWa | Report as abusive

The more the politicians and government get involved, two things will happen; health care costs will increase, health care quality will decrease.

The ACA will significantly increase health care costs.

See http://truehealth7.wordpress.com/

The facts no one wants to read.

Censorship is evil.

Posted by ALLSOLUTIONS | Report as abusive

This woman sounds like little more than a shill for the insurance industry and they have bought enough influence as it is!

Hopefully this admittedly weak healthcare act will lead, sooner rather than later, to a sensible National Care approach.

Basic health care provided to all citizens and paid for by a specific tax that, by law, cannot be used for anything else. One plan for all – no matter your age, income, employment, etc. Then all medical providers would know exactly what is covered, one electronic bill, lots of money saved in overhead. For those who choose, allow the purchase of private supplemental policies that cover extras and they can send in their own claims when they get a bill for a service not covered under the standard National Plan.

It is NOT rocket science and the US does not have to be so “exceptional” that we can’t model a plan after most other countries. Currently, we are only “exceptional” in that we are the only supposedly 1st world nation on the planet that allows it’s citizens to sicken and die if they cant afford their health care. We have millions of families going bankrupt because someone became ill or suffered a serious injury – that is not the way I want my country to be “exceptional”!

Posted by MidwestVoice | Report as abusive

@MidwestVoice:

That’s the glass half-full view: I hope you’re right. Less happy scenario is that this boondoggle will implode, or explode, because there’s nothing to keep prices down. Health insurers, for-profit hospitals, drug companies all paid off to the hilt, stay on the gravy train until they bankrupt everybody. Then Republicans force everyone into extreme rationing: employers bail out of the system, Repubs prevent real national health, the entire body politic, except those on medicare/medicaid, are forced onto the open market. Shills like Ms. Ignani will try to keep everyone calm and in line, but will they?

Posted by Calfri | Report as abusive

I am in 100% agreement with MidwestVoice, “This woman sounds like…”. Sentence by sentence, paragraph by paragraph, MidWestVoice lays out what needs to be said (and said and re-said.)

*All* data, information, cost comparisons, etc. have been available for at least some years. Benefits of a national system include not only valuable health advantages but massive per capita cost savings. Citizens win, employers win, households and communities win when health care is a shared responsibility – without need to blame one another for “poor life style choices”, an issue that needs a separate examination and may well see improvement when people have less cause for “comfort addictions”.

Seldom itemized but significant is “cost to home and community” in stress and dollars when lack of, or insufficient, care is faced. (Stress increases likelihood of chronic health issues.)

Also “never” discussed is American culture’s “trust problem”. We are a fractious, unhappy, accusing lot. Deciding we value one another to the point we’ll assure all of our “selves” of health care as per a national system (along lines described by MidwestVoice) might help us experience trust across the culture. Nations with national care systems *do* have significantly stronger “trust” scores, (general trust felt by citizens in the general society).

It is time to quite “fussing about” with whom to serve, their level of “deservedness,” and all the other petty ways we pretend a national care system is not the best concept operating globally – as demonstrated by oh, so many nations!

Posted by MaggieMP | Report as abusive

[...] Now is the time to focus on healthcare affordability [...]

Read Calfri’s reply to MidwestVoice, then re-read MidwestVoice’s comments.

I have to shift to Calfri’s concern on this from MidwestV: “Hopefully this admittedly weak healthcare act will lead, sooner rather than later, to a sensible National Care approach.”

I assume MidwestV holds the same views as many of us based on the “admittedly weak” description used. Personally, I’m outraged still that a public option was not part of the “reform” (Well, also outraged still that single-payer was not given full voice at reform hearings but accepted this a bit with promise of ‘public option’.)

Profiteering interests, and mind-sets that support those interests, were significantly involved, I hear, in what was passed as “reform”. I think their involvement shows in the results.

My inclination to rant is not helpful – so I return to my strong agreement with MidwestV’s comments … now with modified agreement to the 2nd paragraph.

Thanks to both MidwestVoice and Calfri. I *do* wonder if the debate on health care – now that it’s revived – doesn’t help more people think/ask: “Ok – now – what really *would* work?” I don’t hear as many angry outright rejections of the concept of universal care as seemed the case until very recently. … guess we’ll see, (and I know that I’ll not stop pressing).

Posted by MaggieMP | Report as abusive

Just remember that all insurance is not only “share the risk”. Consumers also “share the cost of necessary advertising, sales commissions, administration, claims review (i.e. denial) and those magnificent administrative buidings and parking facilities all insurance companies have.
Statistics suggest that private insurance companies do fraud prevention and fraud prosecution quite well. They also suggest that government government functionally ignores such ongoing losses to the extent that they are scandalous.

Posted by OneOfTheSheep | Report as abusive

I forgot to mention that the “bottom line” should be “How much of each health care premium/co-pay/deductible dollar actually is paid out for actual “health care” and how much goes to “administrative expense/overhead”?

Posted by OneOfTheSheep | Report as abusive

The only change we need is for a cap on premium increases to be introduced. Then we’ll finally see the supply side squeezed.

Posted by NorthStarMan | Report as abusive

@OneOfTheSheep – not sure I fully understand your remarks re “… all insurance is not only “share the risk”.”

I follow you fine until your final sentence, “… government functionally ignores such ongoing losses (fraud?) to the extend that they are scandalous.” I spent my entire adult working life under the Canadian system (am from the US, have now returned). Fraud in the Canadian health care system was not an issue – at all.

I agree with your observations before that closing sentence. Everything I’ve discovered on the costs to the US system suggest admin expenses of the for-profit corporations is huge relative to (for instance) Canada’s system, (and I’ve studied the issue a lot). Plus – American doctors and patients alike are “dragged into” the complicated corporate for-profit system by need to make requests, appeals, etc. This adds to stress for many, as well as adds hugely to cost. (Doctors end up hiring extra staff to handle insurance related paper work in the American system.)

I also agree fully with your later posting of the question: “How much of each health care premium/dollar spent is paid out for actual care vs going to admin/overhead” (or profit coffers I would add.)

It’s a question that needs to be asked as we seek to make intelligent analysis and comparison of what we’ve got vs what we might design.

I’m actually pretty conservative “fiscally” but also of a “cooperative/humanitarian” bent – so a system like Canada’s made lots of sense to me. No deductibles, no co-pays, and nobody told they’re “not worthy” – all at approx 1/2 the per capita cost, and all the “capitas” are covered! (I worked in direct patient care in a hospital in the US before my “Canadian life” and was astonished as well as eventually angry, on my return, to discover how medical care had changed in my absence.)

(BTW – the Canadian system does not cover dental, vision, or supplemental such as wheelchairs. Meds also are not covered, but are much less expensive in Canada. Costs of all these can be deducted against income tax, are covered by programs for low-income, or are more comfortably covered by fund-raisers, etc. The really whopping costs that ruin Americans financially, or cause them to end up debilitated or dead years before their time, are covered. The French system, I think, is more comprehensive and is considered one of the best. But when I consider Canada’s land mass, the depth and length of it’s winters, and it’s small scattered population, (only about 1/10 the US population, small communities in some extremely remote regions), I think their system is a triumph.

Posted by MaggieMP | Report as abusive

Hi MaggieMP,

Medical fraud in the U.S. is rampant, and the excuse bureaucrats give is that they are required by law to pay promptly. Accordingly, they “believe and pay” almost every request for payment for anything and everything that shows up in their “in” box.

Physicians and pharmacies who choose to “game the system” are seldom caught or meaningfully prosecuted. The U.S. taxpayer gets the bill and Medicare/Medicaid “costs” escalate as a direct result.

Posted by OneOfTheSheep | Report as abusive

one key assumption is that insurance industry should keep profit margins constant and hence be able to throw money at things like her.

Posted by ajeoiawlkds | Report as abusive

“This woman sounds like little more than a shill for the insurance industry and they have bought enough influence as it is!
Hopefully this admittedly weak healthcare act will lead, sooner rather than later, to a sensible National Care approach.”
This statement by MidwestVoice says it all, and MaggieMP’s remarks on the Canadian system are down to earth.

Although I am outside the field & ignorant on the details of ACA, my close friends who are professionals in this seem to be uncertain and unclear on its implications & consequences. They all agree that the ACA does not cut the pie.
We will need something more inclusive and innovative. Duplicating systems from other countries will not work in the US. The biggest obstacle for change are the astronomical financial investments & interests in our present system.

In my opinion our health care system is identical to that of the Chinese. Both have ineffective health care.
In China all the health related enterprises are owned/controlled by a certain number of members of the communist party (the government), their friends & relatives. In the US they are owned & controlled by a certain number of mega corporations & families who control the government. Same monster different clothes.

Posted by GMavros | Report as abusive

You increase price when increase demand unless you increase supply. That means making more qualified doctors. How about free medical schools (in schools where 75% of the students can pass performance tests at end of each year and where the school take no other fees than the plan).

How about the government getting patents on the drugs they helped finance.

In addition there are few informed consumers on health care or health insurance. Big brother is needed without informed consumers the competition does not work. To get big brother you need either lots of regulation or government take over. The insurance companies will rob and kill if they are made big brother.

Posted by SamuelReich | Report as abusive

The ACA would have died if it had tried to be more like other socialized medical systems like the Canadian or British system. And that will be its problem: that it didn’t try to write out all the current profit takers in the system. Old age care can be expensive no matter how healthy a lifestyle one had. And the very health conscious seem to have the largest bills – at least among those I know. I know from experience that the kinds of medical problems I have had don’t seem to have anything to do with my “lifestyle choices” and more to do with my old age and the fact that it is time for me to wear out. Physical wear and tear is the real problem now. In fact it is the healthy choices – like being a walker most of my life – that are the most painful problems now. My whole life I underestimated physical wear and tear from healthy activities. In fact – a recent problem that required surgery seemed to have no connection to my lifestyle and was simply the result of my age. There are/will be millions like me and we last a long time due to better care.

The government won’t be able to control costs until it is so expensive a nationalized system looks better by comparison. But it could be another ten to twenty years before we see something like Midwestvoice and MaggieMP describes.

But if premiums rise over all (as has happened apparently in Massachusetts, I don’t know how anyone will be able to claim the problem was solved?

BTW – it was odd that the SC decision was not linked in the Reuters article and I looked at the SC site and couldn’t find it there either, at least last week. It was a surprising and maybe even a desperate decision?

Posted by paintcan | Report as abusive

Until the government controls insurance rates and drug costs, as they do in Europe, the middle class will lose its health care. DON’T EVER vote Republican.

Posted by urownexperience | Report as abusive

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What she’s saying is true. The ACA is a step in the right direction, but needs fine-tuning. I know what I’m talking about – unlike many of the commenters here, who have misguided by partisan career politicians in DC.

Posted by NATIVEPDXR | Report as abusive

Seriously? First, let’s loose the sexist references. Just because a woman wrote this article doesn’t make the author a “shrill.” Nor is there cause to call her an “ignorant airhead.” Grow some tact, people.

The purpose of Ms. Ignagni’s post was to discuss ways to control health care costs. Why not comment on that discussion, rather than joining in the “make insurance the scapegoat” battle call? If insurance companies did not contract with providers, thereby controlling rates through negotiation, provider profits would escalate as precipitously as the pharamaceuticals.

The cost drivers of health care include, among others: enormous amounts charged by hospitals and ancillary providers for unnecessary and duplicative tests, astronomical profits garnered by pharmaceutical companies, and yes, fraudulent billing practices. It’s time to take a look at everyone involved in the health care industry before singling out a single group to blame for escalating costs.

There are many not-for-profit insurance companies across the U.S. If Congress would allow intrastate policy sales, consumers could shop around for the best rates.

Many of the uninsured utilize emergency rooms for non-emergent care. If Congress would subsidize charity care in urgent care clinics, the uninsured could receive their non-emergent care in lower cost clinics rather than in the most expensive facilities.

Universal care is not the answer. The Federal government was given dominion over Medicare funds and it’s squandered the monies on a myriad of unrelated programs. What makes you think it would treat tax revenues for universal care any differently?

It’s time to look at the whole picture, and stop making one industry the fall-guy for frustration and a lack of good ideas by policymakers.

Posted by tinkingboutit | Report as abusive

Ignani correctly points out that many aspects of the Affordable Care Act paradoxically will make health care less affordable for those not singled out for subsidy. Insurers are destined to play the happless role of tax collector in this political scheme to redistribute income through the health system. We are paying a high price for our past indulgences, and would be wise to listen to the whipping boy for a change.

Posted by PaulHewitt33 | Report as abusive

Why does a mammogram cost $30 in India and $500 in the US?
Work out that difference, and you see why we have the most expensive, yet least efficient system in the world. Doctors are paid far too much, nurses far too little insurance and hospitals make too much money and businesses suffer the cost

Posted by GA_Chris | Report as abusive

The big nut is the exorbitant incomes of MDs. In my neighborhood they drive BMWs, Lexuses and Mercedes, they have Ross Report in their waiting rooms and they work 4-day weeks so they can take long weekends in the Hamptons.

Posted by RichardNYC | Report as abusive