Monthly Archives: April 2013

Health Insurance and Health Care Cost Update

After lengthy debates from 2008 to 2011, a presidential election and a Supreme Court decision, you would think we were getting a little further down the road to having a handle on health care in America. You would likely be wrong. The Robert Wood Johnson Foundation has just produced a report on insurance and small businesses from 2000 to 2011 and it isn’t pretty. Specifically, it looks as though fewer companies are offering health insurance to their employees and fewer employees are taking it even when offered. This is true for all businesses but particularly so for small business.The percentage of all companies offering insurance declined from 59% in the year 2000 to 52% by 2011. For small businesses, the numbers went from 47% in 2000 to 38% in 2011. The reason seems pretty clear. Annual premiums more than doubled for individuals over that period of time and rose even higher for family coverage to an astonishing $14,447 a year.  

Premiums for small businesses may actually be higher because these businesses with fewer employees have very little leverage with insurance companies. When spreading the risk, size matters, and organizations with large numbers to bring into the risk pool do much better in the premium department. Part of the idea of state operated health insurance exchanges under Obamacare is actually to be able to do a better job of creating larger risk pools for insurers to deal with. It may work, but the jury is still out.  Between individual mandates and the requirement for even small businesses to offer health insurance to their employees, there should be nearly universal coverage. Theoretically, spreading the risk over the entire population should cause premiums to drop but we will have to wait and see if that actually happens. 

The Robert Wood Johnson report and the general trend in healthcare costs would seem to suggest that even if widespread coverage fosters a reduced premium, increasing health care costs may eat up those reductions. While annual premiums were doubling between 2000 and 2010, the cost of the average American hospital stay was doing precisely the same thing.  This was true even though the average length of a hospital stay was declining. The average hospital stay jumped from an average $17,390 to $33,079 between 2000 and 2010 and this was actually a period of low inflation in the remaining parts the economy. 

There are differences in medical care costs by states. Washington State has relatively higher costs per inpatient day than many other states and the US in general. Across the US, nonprofit hospitals average about $2025 per inpatient day while for-profit hospitals come in a little under that at about $1629. The corresponding numbers for Washington State are $2,972 for nonprofit hospitals and $2,588 for profit hospitals.  

It would be nice if there were some simple explanation for this, but it appears there is not.  Even the reasons why U.S. health care costs in general are higher than other developed countries are a little obscure.  There are differences in physician compensation and particularly in the use of specialists and specialist compensation which may account for as much as 37% of the health care cost differences between the U.S. and other developed countries.  Our higher per capita income is also thought to contribute – 30% or more and regional differences in care costs contribute some more.  The basic, and large, problem is that we pay more for health care and get no better results than many who spend less. 

In 2012, the cost per day for hospital charges averaged $3,949 in the U.S., the next highest cost country on the high cost list was Chile at $1,552. Looking at common procedures, the total facility and physician costs for appendectomies, averaged $13,003 in the U.S., followed by Switzerland at $5,840.  A physician fee for a routine office visit averaged $89 in the U.S., also followed by Switzerland, at $64. The bottom line in the U.S. is that we spend almost three times as much on a hospital stay as other industrialized countries, even though average stays in other industrialized countries tend to be longer. 

Stay tuned.  We’ll try to keep tabs on development in Obamacare and health care costs in general; it doesn’t look like the book on health care and health insurance costs is anywhere near its last chapter. 

A Bad Day In A Bad Year

Taking a break from some of our insurance topics it is always worthwhile to take a few minutes to reflect on our recent history – particularly while so many of us here on the Olympic Peninsula have lived through it.  The year 1968 was a bad one as years go in America.  The year had really just gotten underway when the US experienced a major shock in Vietnam as the Tet Offensive let us know that we were facing a determined enemy with real strength. Barely two months later on April 4, 1968, Dr. Martin Luther King, Jr. was assassinated in Memphis Tennessee and the country was thrown into a turmoil it would have to repeat in a scant few months when Bobby Kennedy was assassinated at the Democratic National Convention.  

Even the odds and ends of history have a ring to them in 1968 with the Zodiac Killer rounding out a year that included the election of Richard M. Nixon to his first, non-Watergate term, the hijacking of Pan Am Flight 281 and the usual list of other crimes and events.

Kings death was a watershed moment. He had become the public face of the civil rights movement by 1963 and the March on Washington and his death didn’t just set off rioting and civil disturbance, it changed the nature of the conversation about non-violence as a path to social change.  The civil rights movement was never monolithic and certainly King did not control it.  Increasingly, branches like the Black Panthers were endorsing violent confrontation as an approach to social change. King himself seemed to have been increasingly focusing on social and economic inequality while retaining his nonviolent philosophy; after his death many of his followers became more radicalized.  

Dr. King had actually gone to Memphis to help sanitation workers in that city who were striking to have their union recognized and for improved safety standards and working conditions.  The strike was precipitated by the deaths of Echol Cole and Robert Walker, two garbage collectors who had been crushed by a truck.  

It was during his second trip to Memphis that James Earl Ray, an avowed racist, shot King on the balcony of the Lorraine Motel.  He was dead on arrival at the hospital.  While there were  conspiracy theories aplenty, there was substantial direct evidence of Ray’s involvement and the testimony of family and friends who said Ray had informed them of his intent to kill King.  Following the assassination, riots broke out and National Guard troops were deployed in cities across the United States including Memphis, Washington, D.C., Winston-Salem North Carolina and many others.    

What is sometimes forgotten is that the Sanitation Workers Strike that had King to the city twice continued after his death.  His widow Coretta Scott King and union leaders led more than 40,000 people through the streets of Memphis to draw attention to the union’s demands.  They, and he, were successful by mid-April when the city of Memphis agreed to a deal that meant the city recognized the union and workers were guaranteed a better wage. 

Martin Luther King Jr. was a great speaker and he left, in his own words, a note on how he hoped he would be remembered – “I’d like someone to mention that day that Martin Luther King Jr. tried to live his life serving others… I want you to be able to say that day that I did try to feed the hungry…  And I want you to say that I tried to love and serve humanity.” His sacrifice and his contribution to our country’s history are worth remembering.