Politicians aren’t solving the health insurance crisis

By Neil E. Weisfeld

(published in The Times [Trenton, NJ], February 22, 2006)

It’s time for some honest talk about health insurance availability and cost—and we’re not getting it from President Bush in his State of the Union address, from many politicians on either side of the aisle, or from private interest groups.

Consumers who have the impression that health insurance costs are steadily heading for the stars are right.  In New Jersey, the average annual premium for family coverage is now an almost unbelievable $13,000 per year. 

Partly the skyrocketing cost of health insurance reflects the overall lack of control in health care spending in the United States.  We spend, per person, more than 50 percent more than any other country, almost twice as much as Canada, Germany, or France, and nearly two and one–half times as much as Britain.  Yet, our health is no better.  In fact, on many measures we are less healthy than people in these and other frugal countries. 

High health care costs aren’t the only explanation for rising health insurance premiums, though.  The prestigious Center for Studying Health System Change reported that in 2003, the most recent year for which data were available, total health care costs rose eight percent, but employers’ premiums rose 13 percent.

Health insurance costs continue to rise in large part because private insurance is covering the losses created by Medicare, Medicaid, and gaps in health insurance.  These two giant government programs pay hospitals less than their costs.  Many of the uninsured—about 1.2 million people in New Jersey alone—generate almost no payment at all.  Meanwhile, private insurers pay about 20 percent above hospitals’ costs.

The President’s answer is “health savings accounts” (HSAs).  These are arrangements in which individuals buy insurance that covers only the most expensive, or “catastrophic,” treatments, while paying for other health care through tax-deductible IRA-type accounts.

The great advantage of HSAs is that they force people to pay attention to costs and to look, when possible, for bargains.  The assumption is that people who rely on insurance to pay for health care don’t pay much attention to costs at all.  Supporters of HSAs say that millions of Americans already have adopted this form of coverage.  In general, supporters are driven by an ideology that favors “market” solutions.

Opponents see many disadvantages to HSAs.  They are more appealing to healthy people than to sick people, who need a lot of tests and treatments.  They are more appealing to affluent people—such as high-bracket taxpayers and people who are used to accounting paperwork and financial decision-making.  As a result, those who stick with conventional health insurance will tend to be sicker, which will drive up health insurance premiums still further.  And, they’ll be poorer, which will mean that more and more of them will be gradually priced out of the market.

HSAs encourage wise, cost-conscious choices in health care.   But health care providers are notorious for failing to provide useful information about prices, alternative treatments and tests, or comparative quality.  How can we make wise choices with little knowledge?
Further, by paying only for expensive services, HSAs may discourage inexpensive preventive services, such as smoking cessation treatment and vaccinations—services that save thousands of dollars in the long run for many people who use them.

Finally, the availability of HSAs encourages employers to stop offering health insurance as a job benefit.  This probably will increase the growing number of the uninsured, who already amount to 15 percent of all Americans.  Again, this will shift more costs to people with insurance and HSAs.

What should we do, instead?  We need to enroll as many of the uninsured as possible in Medicaid and other government-backed insurance programs, as Gov. Corzine and other progressive-minded leaders of both parties are trying to do.  We need to rationalize the payment system, so costs can be compared across providers and provider revenue is more predictable.  We need to collect more cost-effectiveness data and promote alternatives to high-priced procedures and inpatient care.  We need to help employers who offer insurance coverage and penalize those who don’t. 

What we don’t need are more ways to divide the nation between the wealthy who can pay for their own services and the poor who must depend on welfare-style programs.  Instead of more ideology and fixed ideas, we could use some good American pragmatism.