Fevered Pitch: Health-Care Costs
by Joel Dresang
The swelling cost of health care has become a festering pox on Americans' finances.
The latest report from the federal Centers for Medicare and Medicaid Services says Americans spent $1.6 trillion on health care in 2002, up more than 9% from the year before--about $5,440 for every man, woman, and child nationwide.
The U.S. spent more than twice per person what other countries spent on health care in 2001, according to a comparison by the Organization for Economic Cooperation and Development. In fact, U.S. medical expenses were 47% higher per citizen than the next closest spender, Switzerland.
Growing demand is partly to blame for medical spending going through the roof, but the chief culprit is runaway costs, which have jacked up insurance premiums, crimped employer health coverage, and rendered many more Americans uninsured.
At the rate they're growing, U.S. health expenditures will exceed government projections of $2.8 trillion by 2011. The scope is monumental. But the consequences are commonplace.
Christina, from Arizona, is a single mother who has diabetes. Even though her ex-husband's insurance covers their son, Christina struggles against uphill health costs.
"I can't afford to move out of my parents' home," she says in response to a "What's Your Story?" query from Home & Family Finance Resource Center. "I would say approximately half of my income goes to my medical costs. It affects not only me but my son and my parents. It causes me stress because when I got divorced I had to file bankruptcy, and I live in fear of getting to the point where my medical costs get so high again that I can't keep up with them." (We developed this article with input from readers contributing to What's Your Story.)
Lack of coverage causes 18,000 unnecessary deaths annually.
She doesn't see the specialists she should because she can't pay 20% of their charges, as her insurance requires. She postponed a root canal for a year until her parents arranged to finance it. She has sought assistance from the state and considered moving to Canada for health insurance.
"It's very hard because I hate having to ask my parents for help," Christina says. "I am an adult and feel that I should be self-supportive. I also don't want to burden my parents."
Health care at work
In the U.S., health insurance coverage for most people younger than age 65 comes as a benefit of employment. But because of the mushrooming costs, more employers are cutting coverage or passing along more of the costs to their employees. Evidence of the fallout from escalating medical costs is rampant.
A survey by benefits consultant Hewitt Associates, of Lincolnshire, Ill., found that companies expected medical costs to rise 14% in 2004 but could afford to handle an increase of only 9%. Among their solutions: Raise employees' share of premium payments and charge more for dependent coverage.
Nearly 80% of employers surveyed by Watson Wyatt Worldwide and the Washington Business Group on Health planned to increase employees' burden of health costs in 2003; one-third said they'd reduce health coverage.
U.S. health costs could exceed $2.8 trillion by 2011.
The Census Bureau counted 2.4 million more uninsured Americans in 2002, the largest increase in a decade and the second year in a row that the share of the population without health insurance rose--to more than 15%, or nearly 44 million people. The number and percentage of Americans covered by employer-based health plans dropped, and the number enrolled in government programs increased.
Some 86% of large employers plan to require their retirees to pay more for health insurance, according to a Hewitt survey with the Washington, D.C.-based Kaiser Family Foundation. Also, 10% of companies said they have stopped offering health benefits for future retirees; 20% plan to eliminate such benefits.
Laurie, from Michigan, has been working for the same company for more than 13 years, and up until about five years ago her employer paid her family's medical coverage completely. Then, the company started taking $8 every other week from her paycheck to help pay for the insurance. That grew to $40 and now is at $93 per paycheck.
"I can't afford not to have health insurance," Laurie says. "However, it is taking an ever-increasing percentage of my paycheck. And I don't know where this is going to end."
Kip, from Montana, says monthly premiums for his family's insurance rose about 25% in 2004. Plus, deductible payments have jumped to $1,000 per family member in 2004 from $250 for the whole family in 2003. For Kip, his wife, and their newborn child, that means out-of-pocket health costs will leap to $3,000 from $250 the year before.
More employers are cutting coverage or passing along more of the costs to their employees.
"This is a huge hit for us, with a new little one and the medical costs associated with having a premature baby," Kip says. "We'll definitely hit the $3,000 deductible this year, costing us an additional $250 per month, money that we hadn't budgeted for."
The sad part is, Kip says, he and his wife checked around and learned that their health coverage is still pretty good compared with what others they know are getting.
"The number of medical collections and bankruptcies is going to keep rising," Kip says, "until we, as a nation, do something about the problem."
Radical remedies
That medical expenses have reached a tipping point is evident in some of the remedies being proposed--measures that a decade ago might have seemed radical.
For instance, a Chicago-based group called Physicians for a National Health Program is pushing for a government health-care plan that would replace the current system and, they say, would cost less and leave no one uninsured. Though they are a small minority of their profession, they represent a break in traditional opposition to such reforms.
Also, the U.S. Chamber of Commerce has linked arms with the AFL-CIO as leading sponsors of Cover the Uninsured Week, an annual campaign to call attention to the plight of those without health coverage. Honorary co-chairmen, former Presidents Gerald Ford and Jimmy Carter, suggest the bipartisan nature of the cause.
"I don't know where this is going to end."
The Institute of Medicine, part of the National Academies of Science in Washington, D.C., has called on the White House and Congress to ensure that by 2010 Americans have health-care coverage that is universal, continuous, and affordable. According to a report from the prestigious group, lack of health insurance causes 18,000 unnecessary deaths each year, and the U.S. loses up to $130 billion annually through the poor health and early deaths of adults who aren't insured.
"Something needs to be done," says Christina, the Arizona woman afflicted by diabetes, low pay, and unaffordable medical costs. "People shouldn't have to go into serious debt in order to keep themselves healthy--or even alive."
Monthly Contributions to Family Coverage
March 22, 2004
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