[Senate Hearing 111-453]
[From the U.S. Government Publishing Office]
S. Hrg. 111-453
ADDRESSING UNDERINSURANCE IN NATIONAL HEALTH REFORM
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HEARING
OF THE
COMMITTEE ON HEALTH, EDUCATION,
LABOR, AND PENSIONS
UNITED STATES SENATE
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
ON
EXAMINING ADDRESSING UNDERINSURANCE IN NATIONAL
HEALTH REFORM
__________
FEBRUARY 24, 2009
__________
Printed for the use of the Committee on Health, Education, Labor, and
Pensions
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COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS
EDWARD M. KENNEDY, Massachusetts, Chairman
CHRISTOPHER J. DODD, Connecticut
TOM HARKIN, Iowa
BARBARA A. MIKULSKI, Maryland
JEFF BINGAMAN, New Mexico
PATTY MURRAY, Washington
JACK REED, Rhode Island
BERNARD SANDERS (I), Vermont
SHERROD BROWN, Ohio
ROBERT P. CASEY, JR., Pennsylvania
KAY R. HAGAN, North Carolina
JEFF MERKLEY, Oregon
MICHAEL B. ENZI, Wyoming
JUDD GREGG, New Hampshire
LAMAR ALEXANDER, Tennessee
RICHARD BURR, North Carolina
JOHNNY ISAKSON, Georgia
JOHN McCAIN, Arizona
ORRIN G. HATCH, Utah
LISA MURKOWSKI, Alaska
TOM COBURN, M.D., Oklahoma
PAT ROBERTS, Kansas
J. Michael Myers, Staff Director and Chief Counsel
Frank Macchiarola, Republican Staff Director and Chief Counsel
(ii)
C O N T E N T S
__________
STATEMENTS
TUESDAY, FEBRUARY 24, 2009
Page
Bingaman, Hon. Jeff, a U.S. Senator from the State of New Mexico,
opening statement.............................................. 1
Enzi, Hon. Michael B., a U.S. Senator from the State of Wyoming,
opening statement.............................................. 2
Schoen, Cathy, MS, Senior Vice President, The Commonwealth Fund,
New York, NY................................................... 4
Prepared statement........................................... 6
Shearer, Gail, MS, Director of Health Policy Analysis, Consumers
Union, Washington, DC.......................................... 29
Prepared statement........................................... 31
Rowland, Diane, D.Sc., Executive Vice President, The Henry J.
Kaiser Family Foundation and Executive Director, The Kaiser
Commission on Medicaid and the Uninsured, Washington, DC....... 38
Prepared statement........................................... 41
Turner, Grace-Marie, President, Galen Institute, Alexandria, VA.. 58
Prepared statement........................................... 60
Casey, Hon. Robert P., Jr., a U.S. Senator from the State of
Pennsylvania................................................... 68
Alexander, Hon. Lamar, a U.S. Senator from the State of Tennessee 70
Hagan, Hon. Kay R., a U.S. Senator from the State of North
Carolina....................................................... 72
Hatch, Hon. Orrin G., a U.S. Senator from the State of Utah...... 73
Burr, Hon. Richard, a U.S. Senator from the State of North
Carolina, prepared statement................................... 76
Coburn, Hon. Tom, a U.S. Senator from the State of Oklahoma...... 79
ADDITIONAL MATERIAL
Statements, articles, publications, letters, etc.:
Senator Brown, prepared statement............................ 82
(iii)
ADDRESSING UNDERINSURANCE IN NATIONAL HEALTH REFORM
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TUESDAY, FEBRUARY 24, 2009
U.S. Senate,
Committee on Health, Education, Labor, and Pensions,
Washington, DC.
The committee met, pursuant to notice, at 10:00 a.m. in
Room SD-430, Dirksen Senate Office Building, Hon. Jeff
Bingaman, presiding.
Present: Senator Bingaman, Casey, Hagan, Enzi, Alexander,
Burr, Hatch, and Coburn.
Opening Statement of Senator Bingaman
Senator Bingaman. OK. Why don't we go ahead and get
started. Senator Hatch is here and I'm told that Senator Enzi
may be able to be here. But it's not clear at this point.
I thank everyone for coming. As everyone knows there's a
great desire on the part of the Obama administration and the
Congress to develop comprehensive health reform legislation
this year. The legislation is intended to focus on expanding
health insurance coverage to all Americans and improving the
quality of our health care system and controlling the costs of
health care.
As part of developing this legislation, Senator Kennedy has
asked me to lead efforts here on our committee to develop some
of the coverage proposals. And I'm very glad to do that. As we
all know there are 45 to 47 million Americans currently
uninsured.
This number is expected to grow as the economic
difficulties continue. The case for expansion of health care
coverage is highlighted by the report that was released
yesterday by the Institute of Medicine entitled, ``America's
Uninsured Crisis--The Consequences of Health and Health Care.''
The report notes that there is a compelling case for action,
that health insurance matters and that expanding health care
coverage for all Americans is essential.
Today's hearing, however, is focused on an even more
complex problem. And that is the problem of underinsurance.
Underinsurance is the term used to describe the problems that
many Americans with health insurance may face in meeting their
health care expenses. Some experts define underinsurance as an
insured individual whose family medical expenditures total 10
percent or more of their income or whose health plan includes
deductibles greater than 5 percent of their income.
This first coverage hearing is on the issue of
underinsurance because it's a subject that's often ignored in
health coverage discussions. But it does impact a very large
segment of the American population. These are hard working
Americans who pay every month for health insurance benefits.
However, when they or their children become ill and rely on
those benefits they discover that the coverage either is not
comprehensive or they end up having a very significant out-of-
pocket cost that they did not anticipate.
Underinsurance occurs because health insurance plans may
have significant cost sharing requirements. It occurs because
certain conditions or treatments may be excluded from coverage
often as pre-existing conditions. This is particularly
problematic in the individual insurance market.
And finally plans may have overall limits on benefits that
fall far short of an enrollee's needs such as a cap on the
total number of days an enrollee may stay in a hospital or
aggregate lifetime limits on the total payments that may be
made for a particular service. In the end these insured
individuals may be left with thousands upon thousands of
dollars in health care expenses. Of course extending a very
rich benefit package to everyone may lead to over utilization
of unnecessary health care which could then, of course, further
drive up cost. The question of the right balance between
underinsurance which can lead to individual financial risk or
avoidance of needed health care and the resulting poor health
outcomes that come from that and over insurance which can drive
up health care costs is a difficult one, but one that obviously
needs to be addressed if we're going to enact comprehensive
health care.
Let me stop with that. I see Senator Enzi is here. Let me
call on him for any comments that he's got. Then of course
we'll hear from the witnesses and hopefully have some questions
for them.
Senator Enzi, thank you for being here.
Opening Statement of Senator Enzi
Senator Enzi. Thank you, Mr. Chairman, for holding this
hearing today on health insurance and the issue of the
underinsured. I look forward to working with members of the
HELP Committee and all members of the Senate to exact
meaningful health care reform legislation this year. That was a
challenge we were given at the White House Economic Summit
yesterday.
All of the speakers mentioned that health care is one of
the main economic factors that we have to deal with and should
be a priority. We do have a task force that's working on that
which is a couple of people from each of the committees that
are affected. And you'd be surprised how many committees are
affected by it.
This, of course, is the committee of jurisdiction for the
health care. I appreciate all the hearings that we've been
having in this committee. I have been assured that whatever
product any task force comes up with will come through regular
process which means through this committee. And that always
results in a better product.
This committee has gone from being one of the most
contentious committees to being one of the most productive
committees. I think it's because of the work that we do in
committees. I do miss the days of roundtables, however. And
hope that we'll go back to roundtables.
Hearings have a different meaning in the Senate. Because of
the way that they're set up, we bring in people to make
specific points. Whereas in the roundtables we bring in people
that have--15 or 20 people--that have actually been involved in
solving the issue and they have an interchange between
themselves as well as stating what they've done. That's helped
us a number of times in bills that we've drafted. I hope that
we'll add some of those to the repertoire.
We all emphasize and empathize with the stories that we'll
hear in today's testimony about patients who could not afford
their health care. We all support protecting individuals and
families from catastrophic health care costs. At the same time
we need to be careful that in trying to solve this problem we
don't make matters worse.
We know that while having the best of intentions many past
health care reform efforts to protect consumers have actually
increased costs and caused many of these same consumers to lose
their health insurance. The single greatest challenge in
reforming our health care system is rapidly escalating costs.
Last Friday USA Today reported that many individuals who
purchased their own health insurance faced double digit premium
increases in 2008 with some plan premiums increasing by 20, 30
and in one case 56 percent.
These increases aren't sustainable. And we don't address
the problem that is driving this cost growth more and more.
Americans will lose their health insurance if we continue that.
We also know that when consumers bear some of the costs of
their health care, total spending is reduced. It's common sense
that we're more vigilant with our own money than if someone
else is paying the bill. And this is especially true in health
policy.
Going all the way back to the Rand Study in the 1970s, we
know that reasonable cost sharing reduces spending without
adversely impacting the quality of care. Anyone needing further
proof of this, look no further than our recent experience with
health savings accounts. Health savings accounts require
consumers to pay for more routine services. And as a result
health savings accounts have seen premium increases that have
been dramatically lower than other types of insurance.
There are many factors that impact an individual's decision
to purchase health insurance. Certainly cost plays an important
role. But plan design and personal preference play a role too.
A 25-year-old male and a 55-year-old female have different
health needs. And would probably have very different ideas of
what they're willing to pay for health insurance. We need a
private health insurance market that can deliver choices of
high quality products to all types of people. Not a one-size-
that-fits-all federally determined solution.
While we all agree that patients should be protected
against catastrophic costs, we should not adopt reforms that
limit consumer's choices or try to develop the Federal one-
size-fits-all approach to cost sharing. I believe the most
important thing Congress can do to increase access to
affordable, high quality health insurance is to create an
environment that forces private health insurance companies to
innovate on ways to better control costs and compete for our
business.
I think that's one of the messages that the President
delivered yesterday as well--that we do have to work with
public and private companies and get the costs under control.
It's the costs that are driving us crazy and that are forcing,
particularly small businesses, out of the market.
Mr. Chairman, I thank you again for bringing us together
today. I look forward to hearing the testimony of our witnesses
and the question and answer period.
The Chairman. Alright. Why don't we go ahead? We have four
excellent witnesses today. Let me introduce them, if they'll
just come forward.
Cathy Schoen is the Senior Vice President with the
Commonwealth Fund in New York.
Gail Shearer is the Director of Health Policy Analysis with
the Consumers Union.
Diane Rowland is the Executive Vice President with the
Henry J. Kaiser Family Foundation and Executive Director of the
Kaiser Commission on Medicaid and the Uninsured.
And Grace-Marie Turner is the President of Galen Institute
in Alexandria.
So thank you all very much for being here. Why don't we
start with you, Ms. Schoen if you would go ahead and give us
the main points we need to understand that you'd like to make.
We'll hear from all witnesses and then have some questions.
STATEMENT OF CATHY SCHOEN, MS, SENIOR VICE PRESIDENT, THE
COMMONWEALTH FUND, NEW YORK, NY
Ms. Schoen. Thank you, Mr. Chairman and committee members
for the invitation to testify on the underinsured and
implications for national reform. Rising health care costs and
stagnating cuts have fueled steep erosion in insurance coverage
across the Nation. In addition to steady increases in the
number of uninsured we're seeing a surge in the number of
adults who are underinsured, poorly protected in the event of
illness although they're insured all year long.
Current trends are saddling individuals and their families
with medical debt that can last for years and putting their
health at risk. Insurance reforms are central to improving
health system performance. But the way we design these reforms
is critical both for assuring access, addressing cost concerns
and addressing quality concerns.
In my remarks and prepared testimony I will briefly
summarize trends, discuss consequences and then discuss some
design principles as you look toward insurance reform.
First on trends. As we know the number of uninsured are up
dramatically from 2000 to 2007. They're projected to increase
to 61 million people by the end of the next decade. This
doesn't count the people who churn in and out of coverage and
our uninsured for part of the year.
We've seen a surge in the number underinsured. Our study
published last year in Health Affairs estimates 25 million
adults were underinsured as of 2007. This is a 60-percent
increase since 2003.
We define the underinsured as adults who spent a high share
of their income, 10 percent of their income, or more on medical
care expenses not counting premiums or 5 percent if they are
low income. We also use deductibles alone of 5 percent of
annual income for one person in the definition. This erosion is
moving up the income scale.
There was a tripling in the percent of underinsured among
adults in the middle-income range. In total an estimated 42
percent of all adults under 65 are now uninsured or
underinsured. This was before the current, severe recession.
Compared to those with more adequate coverage we find
underinsured and uninsured adults are much more likely to go
without needed care because of costs, not following up on
recommended care, not filling prescriptions for medication, not
seeing doctors when sick. About half the underinsured and two-
thirds of the uninsured reported this going without care
because of cost. Half of both groups also confront financial
stress including long-term medical debt.
Indeed the experiences of these two groups are increasingly
similar. It's getting hard to tell an insured, underinsured,
and an uninsured person from each other. The share of adults
under 65 going without care because of cost is affecting the
chronically ill as well.
In our 2007 study we found those with chronic illnesses
were not filling medications for their chronic diseases. With
both the uninsured and underinsured highly likely to go to the
hospital and go to the emergency room as a consequence.
In our 2008 international study of eight countries, the
United States stands out with half of all chronically ill
adults. This is all, not just the under 65 going without care
because of costs. We stand alone. And this rate was high for
the insured as well as the underinsured.
As was mentioned in your opening remarks this is because of
an ongoing erosion in the content of insurance limits on
benefits, higher deductibles. We know from the Rand Study that
part of this is an incentive to reduce unnecessary care. But
Rand as well as more recent studies found people are just about
as likely to cut back on essential and effective care as
discretionary care, particularly those with low incomes and
chronically ill.
More recently, studies who have focused on medications have
found that people cut back on essential medications unless the
benefit package is designed around value benefits. And this has
led to higher hospitalizations, emergency room and even spikes
in death. We're following behind other countries on preventing
preventable deaths amenable to health care before age 75. We
are now 19 out of 19 countries. Our rates of death came down
slightly while other countries moved more rapidly. Our health
is at risk.
I won't cite you the statistics on financial stress other
than to say we are seeing as of 2007, 72 million adults facing
bad debt, long-term debt, bill collectors, going without basic
necessities to pay for bills. This is up dramatically from
2005. The rates among the middle income group now look like the
low-income group did in 2001. This stress has all occurred
before the current severe recession.
As you turn to implications for insurance reform it's
important to remember that design matters. It matters for the
twin goals of health insurance, timely access to essential care
and financial protection. But it also matters for providing a
foundation for payment and system reforms to address the
current cost dilemmas and value dilemmas we face in this
country.
The fractured insurance system we have makes it very
difficult to design coherent payment policies. We all go in
different directions. It erodes incentives to invest for the
long-term. The multiple benefit designs churning in and out of
coverage drive up insurance administrative costs as well as
driving down and eroding incentives for the long-term.
I've provided a list of design principles in my testimony.
And I'll only list them briefly here, but would be happy to
discuss them as you turn to how to design insurance for the
twin goals of access and financial protection. We urgently need
these reforms.
We need to start discussing a minimum benefit floor. This
was a discussion in Massachusetts about putting a floor under
insurance so that we don't have insurance surprises where
insurance fails us with an emphasis on value benefits covering
essential care as well as catastrophic cost.
We need to provide income-related premium assistance to
make sure that that coverage is affordable. Pay particular
attention to low-income individuals both for cost sharing and
financial protection. Design of benefits should restrict the
number of benefit variations both to make choice possible and
to avoid risk selection. We need to have new mechanisms that
allow people to keep their insurance as well as have choices as
situations change.
I'll end my testimony just to urge you that this is an
urgent problem. If we do insurance reform, payment reform and
system reforms, we have an opportunity to put the Nation on a
much different track. A report released last week by the
Commonwealth Fund's Commission on a high performance health
system shows that we would be able to improve access, outcomes
and costs, but we need to act soon. Thank you.
[The prepared statement of Ms. Schoen follows:]
Prepared Statement of Cathy Schoen, MS
Executive Summary--Insurance Design Matters: Underinsured Trends,
Health and Financial Risks, and Principles for Reform
Thank you, Mr. Chairman, for the invitation to testify on the
underinsured and the implications for national health reform. Rapidly
rising health care costs and stagnant incomes have fueled steep erosion
in insurance coverage across the Nation. In addition to steady
increases in the number of people uninsured during the year, we are
seeing a surge in the number of adults and families who are
``underinsured''--those who are poorly protected in the event of
illness although they are insured all year long. In the midst of a
severe recession, current trends are saddling individuals with medical
debt that can last for years. Although employer coverage remains the
mainstay and primary source of insurance for working families, rising
costs are stressing private businesses and public employers, leading to
shifts of significant financial risk back onto families or drops in
coverage. As a nation, we urgently need health reform to provide a more
secure foundation for the future.
Insurance reform is essential and central to improving national
health system performance. Design matters. To provide a more secure
foundation, coverage reforms must be designed to facilitate the two
primary goals of health insurance--increasing access to care and
providing financial protection. Insurance reforms are also key for
providing a strong base for payment and other system changes that are
needed to sustain coverage over time and improve the performance and
value we get in return for our Nation's unparalleled expenditure on
health. Moreover, insurance reforms could focus competition on better
outcomes and added value. My remarks this morning and prepared
testimony present recent trends, summarize studies regarding the
consequences of inadequate coverage and gaps, and discuss design
principles with the potential to move our system in new, more positive
directions.
erosion in coverage: rising number underinsured and uninsured
From 2000 to 2007, a time of relatively low unemployment,
the number of uninsured increased by 7 million. The number of uninsured
is projected to reach 61 million over the next decade, assuming
recovery from the current recession. And these estimates do not count
all of those who lose coverage for at least part of the year.
From 2003 to 2007, the number of adults who were insured
all year but were underinsured increased by 60 percent. Based on those
who incur high out-of-pocket costs relative to their income not
counting premiums despite having coverage all year, an estimated 25
million adults under age 65 were underinsured in 2007.
Erosion in benefits is moving up the income scale. The
percent underinsured nearly tripled among adults with annual incomes in
the middle-income range. Although low-income adults are most at risk,
more than one of four adults with incomes above 200 percent of poverty
were either underinsured or uninsured in 2007. In total, 42 percent of
all adults were in one of these two insurance groups.
The underinsured were more likely to report limits on
benefits, gaps in benefits, and higher deductibles than those without
high costs relative to their income. At the same time, underinsured
adults devoted a high share of their income to premiums.
access, quality, and health at risk: consequences of inadequate
insurance
Compared to adults with more adequate coverage,
underinsured and uninsured adults were far more likely to go without
needed care because of costs--over half of the underinsured and two
thirds of the uninsured went without recommended treatment, follow-up
care, medications or did not see a doctor when sick. Half of both
groups faced financial stress, including medical debt. Indeed,
experiences were often similar.
Providing evidence of the breadth of coverage erosion, the
share of adults under age 65 who went without needed care because of
costs increased sharply from 2001 to 2007, rising from 29 percent to 45
percent. Rates were up across all income groups. Although typically
insured all year, middle-income adults reported the steepest increases,
jumping from 24 to 43 percent.
Among adults with chronic diseases, half of the
underinsured and more than 60 percent of the uninsured skipped
medications for their conditions because of cost. Both groups were at
higher risk of going to the emergency room or hospital than chronically
ill adults who were insured all year and not underinsured.
In the 2008 Commonwealth Fund eight-nation survey of
adults with chronic conditions, the United States stands alone with
half of all adults forgoing medications, not following up on
recommended care or not going to a doctor when sick. Rates were high
for the insured as well as the uninsured.
These experiences reflect an ongoing insurance design
shift away from pooling risk through premiums towards higher
deductibles, limits, and cost-sharing.
Although the design shift in part aims at incentives to
avoid unnecessary care, studies repeatedly find that reductions are
about equally likely to occur for effective as more discretionary care.
Moreover, foregone care is most likely among those with low-incomes.
Recent studies focused on medications find that caps and
cost-sharing that do not take the value of care into account lead to
adverse health outcomes, including complications from chronic disease,
increased hospitalization, and spikes in deaths.
A study of low-income Medicaid beneficiaries found that
interruptions in coverage lead to increases in hospital admissions for
ambulatory care-sensitive (potentially preventable) conditions. Yet, we
fail to design such programs for continuity.
Poor access undermines quality and effective care. The
United States is falling behind other countries in reducing deaths from
conditions amenable to health care. As of 2003, we ranked last among 19
industrialized nations. Although the U.S. mortality rates declined
marginally (4 percent), other countries improved much faster (16
percent).
financial stress and economic insecurity
The sharp increase in the number of adults finding it difficult to
pay medical bills or in debt is perhaps the most visible consequence of
the deterioration in insurance coverage.
In 2007, 41 percent of adults--72 million people--said
they had problems paying their medical bills, faced bill collectors, or
were in debt for medical care, up from 34 percent or 58 million in
2005. The majority reported having insurance at the time these bills
were incurred.
The increase occurred across all income groups, though
rates were highest among low- and moderate-income families.
Underinsured or uninsured adults were most at risk.
Among those reporting difficulty paying bills or debt, 29
percent were unable to pay for necessities because of medical bills, 39
percent had used up their savings, 30 percent took on credit card debt,
and 10 percent added mortgages against their home.
It is important to remember that this stress occurred during a time
of relatively low unemployment, well before the current severe
recession.
moving in new directions: insurance and health system reform
Extending affordable insurance to all and doing so in a way that
ensures access and provides financial protection is critical to moving
in a more positive direction. Coverage expansion and insurance reform
are essential to addressing rising costs as well as concerns about wide
variations in quality and health care delivery system performance.
Fractured insurance makes it difficult to develop coherent payment
policies that could align incentives with better outcomes and prudent
use of resources. Unstable coverage, complex benefit variations, and
fragmented markets also increase administrative costs and erode
incentives to invest in population health for the long term.
Attention to insurance design is essential to provide affordable
coverage for all in a manner that ensures access to health care and
financial protection. Needed reforms include:
Setting a minimum floor and standard for health insurance
with benefits designed to support access to effective care and
protection when sick or injured.
Providing income-related premiums to assure coverage is
affordable.
Establishing lower cost-sharing and ceilings on out-of-
pocket expenses for low-income families.
Limiting the range of variation to facilitate choice and
discourage risk segmentation. This would also facilitate the
publication of useful comparisons.
Ensuring access and renewal and prohibiting premium
variations based on health risks. Coupled with risk-adjusted premiums,
such insurance market reforms would focus competition on outcomes and
added value.
Structuring insurance choices through a national insurance
exchange to help individuals and families choose coverage and stay
continually insured.
The design of insurance reforms should also aim to provide a more
secure foundation for payment and system reforms. Without a
comprehensive approach to improve the quality and cost performance of
the U.S. health system, coverage expansions will be difficult to
sustain.
A recent report by the Commonwealth Fund Commission on a High
Performance Health System illustrates the potential of an integrated
set of strategies. The analysis indicates reforms to provide
affordable, adequate coverage for all, align incentives with value, and
invest in essential information systems and public health measures have
the potential to achieve better access for all, improve health outcomes
and reduce projected growth in national spending by $3 trillion through
2020 (11 years) if reforms begin in 2010. National spending would
continue to increase but at a much slower rate.
Although politically difficult, there is an urgent need to move in
a new direction. Wide public concern and stress on private business and
the public sector make it increasingly clear that we cannot afford to
maintain the status quo. Each year we wait, the problems grow worse.
The Nation needs national leadership and public-private sector
collaboration to forge consensus to move in positive directions.
Insurance coverage reform, coupled with payment and delivery system
changes, have the potential to bend the curve of our Nation's spending
on health and put the Nation on a path to high performance. The time
has come to act.
Thank you for the opportunity to testify. This hearing could not be
more timely.
______
Thank you, Mr. Chairman, for the invitation to testify on the
underinsured and the implications for national health reform. Rapidly
rising health care costs and stagnant incomes have fueled steep erosion
in insurance coverage across the Nation. In addition to steady
increases in the number of people uninsured during the year, we are
seeing a surge in the number of adults and families who are
``underinsured''--these are adults who are poorly protected in the
event of illness although insured all year long. Efforts to moderate
premium increases have led to higher deductibles, increased cost-
sharing, and limits or caps on benefits. Shifting the costs onto
individuals and their families away from pooling risk through premiums
is threatening the health and economic security of the Nation. In the
midst of a severe recession, current trends are saddling vulnerable
families with medical debt that can last for years. Although employer
coverage remains the mainstay and primary source of insurance for
workers and their families, rising costs are stressing private
businesses and public employers. The United States is already by far
the most expensive health system in the world, and we are rapidly
widening the gap. As a nation, we urgently need health reform, starting
with insurance to provide a more secure foundation for the future.
Coverage reform is essential. Yet, the way it is designed matters
critically for facilitating access and providing financial protection
when sick--the primary goals of health insurance. Insurance reforms are
also key for providing a strong base for payment and other system
reforms that would enable us to sustain coverage over time by improving
the performance and value we get in return for our already high
investment in the health system. Moreover, insurance reforms could
focus competition on better outcomes and added value.
In my remarks and prepared testimony, I present recent studies on
the trends and consequences of the rising number of underinsured and
then discuss insurance benefit design principles to move in a new
direction with national health reform. In the discussion of trends, it
is important to remember that all of these studies were conducted
during a period of relatively low unemployment. Thus, they vastly
understate the urgent need for reform to secure the Nation's health and
economic well-being.
steep erosion in coverage: rising numbers uninsured and underinsured
Well before the current severe recession, coverage has been eroding
for the under-65 population. The number uninsured increased by 7
million people from 2000 to 2007, reaching 47 million--in a period of
relatively low unemployment (Exhibit 1).\1\ The increase was
concentrated among working-age adults. With a few exceptions, the time-
trend map of uninsured adults by State shows a loss in coverage across
the country (Exhibit 2). Children's coverage--the only bright spot--
improved thanks to expansions to low-income families through the
Children's Health Insurance Program (CHIP). Still, 8 million children
remain uninsured, and many do not have continuous coverage. Our
fractured insurance system and complex eligibility rules result in
millions of adults and children moving in and out of coverage from job
loss, shifts in employment, or other changes in income or family
relationships. Even growing a year older, as in a 19th birthday, makes
a difference.\2\ Those at risk of churning in and out of coverage as
well as remaining uninsured for long periods are likely to experience
considerable access problems and financial stress.
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\1\ C. DeNavas-Walt, B.D. Proctor, J.C. Smith, Income, Poverty and
Health Insurance Coverage in the United States: 2007, U.S. Census
Bureau, August 2008.
\2\ J.L. Kriss, S.R. Collins, B. Mahato, E. Gould, and C. Schoen,
Rite of Passage? Why Young Adults Become Uninsured and How New Policies
Can Help, 2008 Update (New York: The Commonwealth Fund) May 2008.
All projections indicate that without national policy action to
stem the tide, the number of people who are uninsured at any moment in
time will continue to increase rapidly. Assuming we recover from the
current recession, projections estimate 61 million will be uninsured by
2020 (Exhibit 1). These uninsured estimates do not count all the people
who lose coverage for a period of time during the year: as of 2007,
almost 30 percent of adults under age 65 were uninsured for some time
during the year.\3\
---------------------------------------------------------------------------
\3\ S.R. Collins, J.L. Kriss, M.M. Doty, and S.D. Rustgi, Losing
Ground: How the Loss of Adequate Health Insurance is Burdening Working
Families: Findings from the Commonwealth Fund Biennial Health Insurance
Surveys, 2001-2007 (New York: The Commonwealth Fund) August 2008.
---------------------------------------------------------------------------
Millions more are ``underinsured''--insured all year yet facing
such high cost-sharing relative to income that they lack adequate
financial protection when sick or injured. In our recent study of
underinsured trends from 2003 to 2007, we defined adults as
underinsured if they had insurance all year and had out-of-pocket
expenses for medical care of 10 percent or more of their annual income
or 5 percent if low income (under 200 percent of poverty) or whose
deductible alone was 5 percent or more of income.\4\ Notably, this
definition will miss those with inadequate coverage who were healthy
during the year--in other words, the estimate is likely to be
conservative.\5\
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\4\ C. Schoen, S.R. Collins, J.L. Kriss, and M.M. Doty, ``How Many
are Underinsured? Trends Among U.S. Adults, 2003 and 2007,'' Health
Affairs Web Exclusive (June 10, 2008):w298-w309.
\5\ A financial definition of the underinsured builds on the
seminal work of Pamela Farley Short. For early studies, see: P.F. Short
and J. Banthin, ``New Estimates of the Underinsured Younger than Sixty-
five Years,'' Journal of the American Medical Association 1995, 274
(16):1302-1306 and P.J. Farley, ``Who Are the Underinsured?'' Milbank
Quarterly 1985, 63 (3): 476-503.
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Using this financial definition of the underinsured, as of 2007, 25
million adults ages 19 to 64 were underinsured--a 60 percent increase
from 2003 (Exhibit 3). Adding underinsured adults to those uninsured
when surveyed or uninsured earlier in the year, more than 75 million--
two of five adults--were either underinsured or uninsured during 2007,
a sharp increase since 2003. Low-income adults are the most likely to
be underinsured or uninsured, yet middle- and higher-income families
experienced the most rapid deterioration in protection (Exhibit 4). The
percent underinsured nearly tripled for adults in families with incomes
of 200 percent of poverty or more (annual family incomes of $40,000 or
higher). As of 2007, more than one of four adults (27 percent) with
incomes placing them solidly into the middle class was either
underinsured or uninsured. Overall, lower-income adults have been
hardest hit: nearly three-fourths (72 percent) uninsured or
underinsured. These low-
income adults rarely have health insurance benefits through their jobs
yet by working have incomes that make them ineligible for public safety
net insurance programs in most States.\6\
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\6\ J.C. Cantor, C. Schoen, D. Belloff, S.K.H. How, and D.
McCarthy, Aiming Higher: Results from a State Scorecard on Health
System Performance (New York: The Commonwealth Fund) June 2007. See
page 23.
access and health at risk: consequences of inadequate insurance and
gaps
The core goals of health insurance are to provide timely and
affordable access to care and to protect against the costs of illnesses
and injuries. The ongoing deterioration of benefits undermines both
goals as benefit designs increasingly shift costs onto the budgets of
individuals and families when sick.
According to the same Commonwealth Fund 2007 study, one-fourth of
underinsured adults reported deductibles of $1,000 or more compared to
8 percent of insured adults not classified as underinsured. More than
40 percent of underinsured adults paid 5 percent and one-fifth spent 10
percent or more of their income for their insurance. Premiums are up
but people are getting less coverage in return: compared to those with
more adequate coverage, underinsured adults were less likely to have
prescription benefits and more likely to have limits on the amount a
plan would pay or on the number of visits allowed.
Given higher cost-sharing and thinner insurance benefits, the
underinsured as well as those uninsured are at very high risk of going
without needed care because of costs. Controlling for income, health,
and other demographic differences, more than half of underinsured and
over two-thirds of uninsured adults went without recommended
medications, follow-up care or treatment, or did not see a doctor when
sick because of costs during the year (Exhibit 5). Underinsured rates
of foregone care were often similar to rates reported by the uninsured,
and cost-related access concerns were typically two to three times
higher than reported by adults with more adequate coverage.
As a whole, the share of non-elderly adults who went without care
because of costs increased from 29 to 45 percent between 2001 and 2007.
Rates increased across all income groups, yet moderate- and middle-
income adults experienced the more rapid increases (Exhibit 6). While
most were insured all year, adults with incomes between $40,000 and
$60,000 went without needed care due to costs at rates similar to those
reported by low-income adults in 2001. This shift up the income scale
further reflects the thinning of benefits.
Multiple studies provide evidence that exposure to costs have
negative effects on access to care for those with chronic conditions,
undermining efforts to manage conditions and prevent complications.\7\
In the Commonwealth Fund 2007 survey, we focused on adults with any of
four chronic conditions: high blood pressure, heart disease, diabetes,
or asthma/other chronic lung conditions. Among these chronically ill
adults, nearly half of underinsured adults and over 60 percent of those
uninsured skipped doses or did not fill prescriptions for their chronic
conditions (Exhibit 7). Lack of access to preventive, primary care, and
ongoing care contributes to increased reliance on hospital emergency
care (ER) or hospitalization. One third of underinsured chronically ill
adults in the study went to the ER or were admitted to a hospital.
Rates were similar to those reported by uninsured adults. Recent
studies indicate over-crowding of ERs is a result of more insured as
well as uninsured people turning to this safety net.\8\
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\7\ M.E. Chernew, A.B. Rosen, and A.M. Fendrick, ``Value-Based
Insurance Design,'' Health Affairs, March/April 2007 26(2):w195-w203;
M.E. Chernew, T. B. Gibson, K. Yu-Isenberg, et al., ``Effects of
Increased Patient Cost Sharing on Socioeconomic Disparities in Health
Care,'' Journal of General Internal Medicine, Aug. 2008 (8):1131-1136;
D.P. Goldman, G.F. Joyce, J.J. Escarce, et al., ``Pharmacy Benefits and
Use of Drugs by the Chronically Ill,'' Journal of the American Medical
Association 291, no. 19 (2004): 2344-2350; M.D. Wong, R. Andersen, C.D.
Sherbourne, et al., ``Effects of Cost Sharing on Care Seeking and
Health Status: Results from the Medical Outcomes Study,'' American
Journal of Public Health 91, no. 11 (2001): 1889-1894; Jonathan Gruber,
The Role of Consumer Copayments for Health Care: Lessons from the RAND
Health Insurance Experiment and Beyond (Washington, DC:Kaiser Family
Foundation) October 2006.
\8\ M.F. Newton, C.C. Keirns, R. Cunningham, et al., ``Uninsured
Adults Presenting to U.S. Emergency Departments: Assumptions vs.
Data,'' Journal of the American Medical Association, Oct. 2008
300(16):1914-24.
Patient-reported experiences are consistent with and confirm a rich
array of studies that find that cost-sharing, unless designed with a
focus on value, can result in the insured foregoing essential and
effective care, especially when costs are high relative to incomes.
Those with low or modest incomes are particularly at risk. Early on the
RAND health insurance experiment pointed to the need to design benefits
carefully to encourage effective care.\9\ This seminal study found that
cost-sharing reduced the likelihood of receiving highly effective care
as well as more discretionary care (Exhibit 8). Access for low-income
children and adults was particularly sensitive despite the fact that
the RAND design capped financial exposure relative to income. Among
those with chronic disease and low incomes, RAND found delayed or
foregone care had adverse health effects.\10\
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\9\ K.N. Lohr, R.H. Brook, C.J. Kamberg,et al., ``Use of medical
care in the Rand Health Insurance Experiment. Diagnosis- and service-
specific analyses in a randomized controlled trial,'' Medical Care,
Sept. 1986 24 (9 Suppl):S1-87; K. Davis, Will Consumer-Directed Health
Care Improve System Performance? (New York: The Commonwealth Fund)
August 2004.
\10\ J. Gruber, The Role of Consumer Copayments for Health Care:
Lessons from the RAND Health Insurance Experiment and Beyond
(Washington, DC: Kaiser Family Foundation) October 2006.
Recent studies reach the same conclusion, pointing to the
importance of benefit designs that encourage effective and preventive
care, including essential medications. A Canadian study assessing the
impact of increased cost-shares for medications among the elderly and
low-income, found a steep reduction in use of essential medications and
a sharp increase in adverse events (complications and deaths) as well
as increased use of the emergency department (Exhibit 9).\11\ In the
United States, Hsu and colleagues at Kaiser Permanente found that
placing a limit on pharmacy benefits led to patients skipping their
blood pressure and other essential medications (Exhibit 10).
Consequences included poorer adherence to drug therapy and worse
control of blood pressure, lipid levels, and glucose levels.\12\ The
study also found a spike in mortality. Moreover, cost savings from
capping benefits were offset by increases in the costs of
hospitalization and emergency room use.\13\
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\11\ R. Tamblyn, R. Laprise, J.A. Hanley, et al., ``Adverse Events
Associated with Prescription Drug Cost-Sharing Among Poor and Elderly
Persons,'' Journal of the American Medical Association, Jan. 2001
285(4):421-29.
\12\ J. Hsu, M. Price, J. Huang, et al., ``Unintended Consequences
of Caps on Medicare Drug Benefits,'' New England Journal of Medicine,
June 1, 2006 354(22):2349-59.
\13\ See also, S.R. Collins, et al., A Roadmap to Health Insurance
for All: Principles for Reform (New York: The Commonwealth Fund)
October 2008.
Preventive measures can avoid or delay the onset of many
conditions. Nationally, we see broad evidence of failure to intervene
early or provide preventive care--with gaps in coverage contributing to
poor quality care. Adults in the United States receive the recommended
screenings and preventive care for their age groups only half the
time.\14\ Those uninsured for any time during the year are the least
likely to receive preventive care but rates are also low among the
insured (Exhibit 11). The underinsured and uninsured often delay or
postpone care or go without essential medications and preventive care
that could help prevent complications of chronic conditions. Only 63
percent of uninsured adults with diabetes had their illness under
control compared with 81 percent of insured adults with diabetes. In
addition, uninsured adults reported their high blood pressure was under
control at half the rates reported by insured adults.
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\14\ The Commonwealth Fund Commission on a High Performance Health
System, Why Not the Best? Results from the National Scorecard on U.S.
Health System Performance, 2008 (New York: The Commonwealth Fund) July
2008.
Gaps in coverage increase risks of complications over the longer-
term as well. McWilliams and colleagues found that among adults with
chronic conditions, previously uninsured adults who acquired Medicare
coverage at age 65 reported significantly greater increases in the
number of doctor visits and hospitalizations and in total medical
expenditures than did previously insured adults, with the difference
persisting through age 70.\15\
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\15\ J.M. McWilliams, E. Meara, A.M. Zaslavsky, and J.Z. Ayanian,
``Use of Health Services by Previously Uninsured Medicare
Beneficiaries,'' New England Journal of Medicine, July 2007 357(2):143-
53.
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The leading chronic diseases--diabetes, asthma, congestive heart
failure, coronary artery disease and depression--account for a
disproportionate share of potentially preventable complications, severe
acute conditions, and related co-morbidities. With early interventions
to prevent the onset of disease or deterioration in health, the United
States could substantially lower health risks and help people lead
healthier, longer, and productive lives. Yet, current health insurance
design incentives often run counter to goals of chronic care management
and preventive care and incentives for physicians to improve.\16\
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\16\ M.E. Chernew, A.B. Rosen, and A.M. Fendrick, ``Value-Based
Insurance Design,'' Health Affairs March/April 2007 26(2):w195-w203.
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Compared to other countries, we are losing ground. In a 2008 eight-
country survey that focused on chronically ill adults with recent care
experiences, U.S. chronically ill adults are far more likely to go
without needed care because of costs than do their counterparts in
other countries.\17\ More than half of chronically ill U.S. adults did
not see a doctor when they were sick or did not adhere to and follow up
on recommended care (Exhibit 12). The U.S. rate is double to five times
higher than rates of foregone care in seven other countries. U.S. rates
were high for both insured and uninsured adults. In contrast to the
United States, the other seven countries have a minimum benefit floor
that is comprehensive. Two countries--Germany and France--have special
provisions that cap total out-of-pocket spending relative to income for
those with chronic conditions. Germany has a general provision that
caps expenses at 2 percent and lower rate of 1 percent for the
chronically ill or disabled. France lowers prescription costs for
essential medications and covers care in full for those with serious
and chronic diseases.\18\
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\17\ C. Schoen, R. Osborn, S.K.H. How, M.M. Doty, and J. Peugh,
``In Chronic Condition: Experiences of Patients with Complex Health
Care Needs, in Eight Countries, 2008,'' Health Affairs Web Exclusive
(Nov. 13, 2008):w1-w16.
\18\ I. Durand-Zaleski, ``The Health System in France,'' Eurohealth
14, no. 1 (2008): 3-4; R. Busse, ``The Health System in Germany,''
Eurohealth 14, no. 1 (2008): 5-6.N.
Those with chronic disease or acute conditions often end up
admitted or readmitted to hospitals, with surgery or expensive
procedures for preventable complications, such as amputations or kidney
dialysis for diabetics. Too often instead of acting early to stop the
onset of or complications associated with diabetes, we build dialysis
centers and, for Medicare patients, cover the costs of treating end-
stage renal disease.\19\
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\19\ David Tuller, ``Overshadowed, Kidney Disease Takes a Growing
Toll,'' New York Times, Nov. 18, 2008.
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Complications of chronic disease often result in potentially
preventable hospitalizations, particularly in low-income communities
with reduced access to primary care. As illustrated in the Commonwealth
Fund National Scorecard, hospital admissions for ambulatory care-
sensitive conditions, such as diabetes, asthma and heart failure, are
three to five times higher in low-income communities than in higher
income areas (Exhibit 13).
A recent study by Bindman and colleagues underscores the importance
of continuous as well as adequate coverage. The study found that
interruptions in Medicaid coverage were associated with sharply higher
rates of hospitalization for conditions that could have been treated in
a much less expensive setting or prevented (Exhibit 14).\20\ The
probability of hospitalization for ambulatory-care sensitive conditions
(e.g. asthma, diabetes, hypertension, pneumonia, ruptured appendix) was
eight times higher for those with interrupted coverage--and four times
higher after controlling for demographics. In this study of California
Medicaid beneficiaries, 62 percent experienced an interruption in
coverage during the study period between 1998 and 2002--the average
duration of interruption was 25 months. Most became uninsured when they
lost Medicaid.
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\20\ A. Bindman, A. Chattopadhyay and G. Auerback, ``Interruptions
in Medicaid Coverage and Risks for Hospitalization for Ambulatory
Sensitive Conditions,'' Annals of Internal Medicine, Dec. 2008
149(12):854-60.
Our failure to provide adequate coverage and ensure access as well
as lack of emphasis and value for primary and preventive care
undermines the health of the Nation. Despite spending far more of our
national resources on the health system, the United States is failing
to keep pace with other countries in reducing deaths from conditions
that are potentially preventable with early access to timely and
effective care. From 1997/1998 to 2002/2003 the United States fell to
last place behind 18 other high-income countries on mortality amenable
to health care before age 75 (Exhibit 15). This provides a sensitive
measure of potentially preventable deaths, including children dying
from infections and respiratory diseases before age 14, diabetic deaths
before age 50, appendicitis, and screenable cancers. Although the U.S.
rates declined by 4 percent, other country rates improved much faster
with an average decline in mortality of 16 percent. The difference
between the U.S. rate and the lowest rate countries amounts to 100,000
potentially preventable deaths per year.
financial stress and economic insecurity
The financial and economic consequences of having inadequate
insurance or being uninsured are immediate and often long-lived as
medical debt accumulates. In our 2007 survey, 72 million adults ages
19-64 (41 percent) faced problems paying their medical bills or were
paying medical debt over time--an increase from 58 million (34 percent)
in 2005 (Exhibit 16). The majority of adults (60 percent) with bill
problems or debt had insurance at the time the healthcare expenses were
incurred.\21\ This increase occurred across all income groups but
especially among families with low and moderate incomes: more than half
of adults with incomes under $40,000 reported problems with medical
bills in 2007 (Exhibit 17). Adults with gaps in health insurance
coverage or those underinsured were most at risk of having problems
with medical bills: three of five reported any one medical bill problem
or accrued medical debt, more than double the rate of those who had
adequate insurance all year.
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\21\ S.R. Collins, J.L. Kriss, M.M. Doty, and S.D. Rustgi, Losing
Ground: How the Loss of Adequate Health Insurance is Burdening Working
Families: Findings from the Commonwealth Fund Biennial Health Insurance
Surveys, 2001-2007 (New York: The Commonwealth Fund) August 2008.
Of the estimated 50 million adults who were paying off medical debt
in 2007, many were carrying substantial debt loads that had accrued
over time. One-quarter of adults with medical debt were carrying $4,000
or more in debt and 12 percent had $8,000 or more. More than one-third
(37 percent) of adults with medical debt were carrying overdue bills
from care received more than 1 year ago.
In the face of mounting medical bills and debt, many adults are
making stark trade-offs in their spending and saving priorities. Among
adults who reported financial stress or accumulated debt in 2007,
nearly one third (29 percent) said they had been unable to pay for
basic necessities like food, heat, or rent because of medical bills; 39
percent had used all their savings; 30 percent had taken on credit card
debt; and 10 percent had taken out a mortgage against their home. Such
actions were especially high among people who had spent any time
uninsured or those underinsured. Nearly half of adults who had spent
any time uninsured and reported medical bill problems had used all
their savings to pay for their medical bills and two of five were
unable to pay for food, heat, or rent. Underinsured adults made similar
trade-offs: 46 percent said they had used all their savings, 33 percent
took on credit card debt, and 29 percent were unable to pay for basic
life necessities. In short, underinsured and uninsured adults are going
without care and living with the financial stress of medical bills. The
United States is unique among industrialized countries: it is possible
to be insured all year yet face bankruptcy or exhaust savings for
retirement or college if you get sick.
To date, much of the erosion in more comprehensive coverage,
including benefit limits has occurred in the small group and individual
market. Although there has been a broad trend toward higher cost-
sharing, including higher deductibles and copayments for medications
and other care, employees of small businesses have been particularly
hard hit. Without the leverage and risk pool of large firms, small
businesses tend to pay the same premiums or more for less comprehensive
coverage.\22\ As employers try to ``buy down'' the cost of premiums to
hold onto coverage, average deductibles for single coverage in PPO
plans for small firms have quadrupled since 2000 (Exhibit 18).\23\
Similarly, those insured through the individual market tend to pay more
and get less due to much higher administrative costs (including
underwriting and marketing) and restrictions in benefits. Coverage
equivalent to employer plans in the individual market--if available--is
estimated to cost at least an additional $2,000.\24\ Plans in the
individual market and small firm market are also more likely to place
restrictions on benefits, including caps on the amounts plans will pay.
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\22\ J.R. Gabel and J.D. Pickreign, Risky Business: When Mom and
Pop Buy Health Insurance for Their Employees (New York: The
Commonwealth Fund) April 2004.
\23\ G. Claxton, J. Gabel, B. DiJulio, et al., ``Health Benefits in
2008: Premiums Moderately Higher, While Enrollment in Consumer-Directed
Plans Rises In Small Firms,'' Health Affairs Web Exclusive (Sept. 24,
2008):w492-w502.
\24\ T. Buchmueller, S.A. Glied, A. Royalty, K. Swartz, ``Cost and
Coverage Implications of the McCain Plan to Restructure Health
Insurance,'' Health Affairs Web Exclusive (Sept. 16, 2008):w472-w481.
moving in new directions: insurance and system reforms
Extending affordable insurance to all and doing so in a way that
ensures access and provides financial protection is critical to moving
in a more positive direction. The United States leads the world on
health care spending: at an expected 17 percent of gross domestic
product (GDP) in 2009, we are an outlier and spending per person is
double or more what other countries spend. With current trends, the
share of GDP spent on health care is projected to increase to 21
percent by 2020, at the same time millions more will lose basic access
to care.\25\
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\25\ The Commonwealth Fund Commission on a High Performance Health
System, The Path to a High Performance U.S. Health System: A 2020
Vision and the Policies to Pave the Way (New York: The Commonwealth
Fund) February 2009. 2020 estimates from the Lewin Group. International
comparisons from OECD.
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Insurance reform is essential to address rising costs as well as
growing concerns about wide variations in quality and health care
delivery system performance. In addition to access concerns, the
fractured insurance makes it difficult to develop coherent payment
policies that could align incentives with better outcomes and more
prudent use of resources. Further, insurance markets do not align
incentives to reward added value--better outcomes as well as efficient
use of resources.
Discontinuous coverage increases administrative costs and erodes
incentives to invest in population health and disease prevention for
the long term. Further, competing private insurance plans can often
gain at the margin by using benefit designs that segment patients by
health risk or deny or limit coverage and care to the sickest. For
instance, by limiting benefits for chemotherapy without regard to
effective care or cost-sharing, insurance companies can lower premiums.
Ten percent of the sickest share of the population account for 64
percent of total national spending each year--the healthiest half
account for only 3 percent (Exhibit 19).\26\ With such highly
concentrated expenditures, there is a strong financial incentive to
appeal to the healthier half of the population--even a small increase
or decrease in the share of the sickest 10 percent enrolled with an
insurer makes a difference. It is in no health plan's interest to
advertise for the best outcomes for chronic conditions and in all
plans' interests to appeal to young, healthier adults. Currently, we
have no mechanism to counteract this market incentive.
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\26\ S.H. Zuvekas and J.W. Cohen, ``Prescription Drugs and the
Changing Concentration of Health Care Expenditures,'' Health Affairs
Jan/Feb 2007 26(1):249-257.
The complexity and fragmentation of the current insurance system
adds cost without value. Net costs of private insurance administration,
including underwriting, marketing, claims payment, and profit margins
have grown faster than total health spending for the past decade--more
than doubling from 2000 to 2008 (Exhibit 20).\27\ The United States
leads the world in the proportion of national health expenditures spent
on insurance administration, and the Nation could save $102 billion
annually if it did as well as the best countries.\28\
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\27\ The Commonwealth Fund Commission on a High Performance Health
System, The Path to a High Performance U.S. Health System: A 2020
Vision and the Policies to Pave the Way (New York: The Commonwealth
Fund) February 2009.
\28\ The Commonwealth Fund Commission on a High Performance Health
System, Why Not the Best? Results from the National Scorecard on U.S.
Health System Performance, 2008 (New York: The Commonwealth Fund) July
2008.
Moreover, these costs do not include the internal costs to
providers of multiple reporting forms, formularies, prices or payment
methods for the same care, and benefit designs. Insurance complexity
requires additional staff and consumes physician time that could
otherwise be devoted to patient care. In Commonwealth Fund
international and national surveys, U.S. patients stand out for reports
of time spent on insurance-related paper work or disputes.\29\
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\29\ C. Schoen, R. Osborn, M.M. Doty, et al., ``Toward Higher-
Performance Health Systems: Adults' Health Care Experiences in Seven
Countries, 2007,'' Health Affairs Web Exclusive (October 31,
2007):w717-w734; S.K.H. How, A. Shih, J. Lau, and C. Schoen, Public
Views on U.S. Health System Organization: A Call for New Directions
(New York: The Commonwealth Fund) August 2008.
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Multiple variations in benefits, underwriting, and marketing costs
all drive up costs of insurance administration. These costs are
particularly high as a share of premiums in the small group and
individual market, consuming 22 to as much as 40 percent of
premiums.\30\
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\30\ The Lewin Group technical report, The Path to a High
Performance U.S. Health System: Technical Documentation, February 2009.
See page 14.
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Complex variations in benefits also undermine meaningful choice and
open the door to potential market segmentation based on health risks.
Even within the current Medicare Advantage program, the wide variation
in benefit designs makes it difficult to make an informed choice on
anything but premium rates and whether your current doctor is in the
network (Exhibit 21). Plans vary on multiple dimensions and the extent
of the variation is often not evident until one enrolls or experiences
a serious illness.\31\
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\31\ E. O'Brien and J. Hoadley, Medicare Advantage: Options for
Standardizing Benefits and Information to Improve Consumer Choice (New
York: The Commonwealth Fund) April 2008.
As evidence of the potential to reduce overhead costs with reforms,
private insurers in other countries with multi-payer systems, including
the Netherlands and Switzerland, for example, are able to provide
coverage with only 5 percent of premiums allocated to plan overhead and
the rest for benefits.\32\ In these countries, relatively little is
spent on marketing, benefits are more standardized and comparable, and
underwriting health risks (i.e., premium variations based on health) is
prohibited. Similarly, the standard option offered to Federal employees
through the Federal Employee Health Benefits Program (FEHBP) operates
for about 5 percent of claims.\33\
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\32\ R.E. Leu, F.F.H. Rutten, W. Brouwer, et al., The Swiss and
Dutch Health Insurance Systems: Universal Coverage and Regulated
Competitive Insurance Markets, The Commonwealth Fund, January 2009.
\33\ Jon Gabel e-mail and memo to Commonwealth Fund, January 30,
2009.
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Among States, Massachusetts efforts to achieve coverage for all
have succeeded in insuring all but 2 percent of the population.\34\
Rates for underinsured have also declined.\35\
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\34\ Jon Kingsdale, Executive Director, Commonwealth Health
Insurance Connector Authority, presentation at AcademyHealth National
Health Policy Conference, ``Massachusetts Health Care Reform Results So
Far and Looking Ahead,'' February 2, 2009.
\35\ S.K. Long, The Impact of Health Reform on Underinsurance in
Massachusetts: Do the Insured Have Adequate Protection? (Washington,
DC: The Urban Institute) October 2008.
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Massachusetts has also shown that consolidating risk, changing
market competitive rules, and organizing an insurance connector with an
easy web-based choice of plans, with review of premiums for
reasonableness, can improve benefits and lower premiums. Benefits have
improved and premiums costs have come down following reforms. For
example, a typical uninsured 37-year-old male faced a monthly premium
of $335 pre-reform, compared with $184 post-reform, with a $2,000
deductible instead of a $5,000 deductible pre-reform. To provide
choices but simplify decision-making, Massachusetts has offered three
tiers of benefits--labeled gold, silver, and bronze--with actuarially
equivalent policies within each tier. The Web site fully discloses the
plan features and variations as well as premiums.
insurance design principles
Insurance market reforms--including minimum requirements on
insurers to cover everyone, the sick and healthy alike, at the same
premium--could ensure the availability of coverage across the United
States. Organizing a national insurance
exchange that builds on the experience of Massachusetts and other
countries could enhance choice and continuity, focus competition on
better outcomes, and provide a mechanism to broadly pool risk. All
these elements provide a foundation for broader health system reforms.
There are several key principles to insurance and benefit design if
reforms seek to expand coverage and aim to improve access, provide
financial protection, and focus insurance market competition on better
outcomes (Exhibit 22).
Establish a minimum benefit level. The goals of access and
financial protection should guide this minimum. A minimum is necessary
to avoid driving coverage even lower and will be necessary for any
reform requiring everyone to have insurance. It sets the standard for
minimum ``creditable'' coverage.
Minimum design. To assure access and provide protection a
minimum should:
Be broad in scope, including essential acute care.
Prohibit disease-specific or service-specific limits:
otherwise, patients can ``run out'' of critical care (such as
effective medication or cancer treatment) and opportunities for
risk segmentation remain.
If deductibles are included, exempt preventive care
and essential care for chronic conditions. Primary and
preventive care should either be covered in full or with
minimal copayment to encourage and support providing the right
care and to align incentives with efforts to hold clinicians
accountable for care outcomes.
Set lifetime limits high or eliminate altogether and
standardize to facilitate comparisons.
Establish annual out-of-pocket maximums, including
deductibles and copayments or coinsurance.
Low-income protection. Reduce cost-sharing and limit total
out-of-pocket exposure for low-income individuals and families. At or
near poverty, families are already spending most or all of their income
on basic essentials such as food and housing. Therefore, they are
particularly sensitive to costs, including costs for preventive and
chronic care.\36\ Expansion of the Medicaid/SCHIP program to adults and
higher incomes, with sliding scale premiums and modest cost-sharing (as
in Massachusetts), is one potential approach. Given advances in
electronic claims, it would also be possible to limit total out-of-
pocket exposure as a share of income.
---------------------------------------------------------------------------
\36\ M.E. Chernew, T.B. Gibson, K. Yu-Isenberg, et al., ``Effects
of Increased Patient Cost Sharing on Socioeconomic Disparities in
Health Care,'' Journal of General Internal Medicine, Aug. 2008
(8):1131-1136.
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Limit the range of variation in benefit designs. More
standardized benefits, including actuarial bands within limit ranges
(e.g., same scope of benefits and total out-of-pocket protection but
variations in deductible or cost-sharing) help facilitate choice and
encourage risk pooling. Review should limit designs without clear
rationale based on effectiveness and appropriateness of care.
Premiums for the standard plan should be affordable, with
income-related premium assistance for premium costs in excess of a
given threshold of income. Such provisions could include sliding-scale
premiums or tax credits that vary with income.
Public comparisons of choices. Standardization plus web-
based posting should make it easy to compare information on benefits,
expected out-of-pocket costs, physician and other provider networks,
and premiums.
Insurance market reforms to ensure access, avoid premium
variations based on health risks, and focus competition on outcomes. In
the context of coverage for all, ground rules should require that
insurers cover everyone (guaranteed issue and renewal) and charge the
same premium regardless of health status of enrollee (community rating
or age bands). If there is an insurance exchange, these provisions
should apply to plans sold through the connector and those sold outside
the connector. Such provisions would lower underwriting and marketing
costs.
Risk adjustment of premiums. Premiums should be risk-
adjusted to reduce incentives to avoid risk and to provide incentives
to promote positive outcomes, including better outcomes for those with
complex or chronic conditions.
Competition based on value added. The goal of the various
insurance market reforms, including an exchange, should be a market
where plans and care systems that achieve better health outcomes with
more prudent use of resources do well and those that do not lose money
and market share. Insurers should compete on the basis of the added
value they bring by fostering quality and efficiency in the delivery of
health care, and efficiency in administrative costs.
Structure insurance choices and make it easy to enroll and
stay insured through a national insurance exchange or ``connector.''
Insurance reforms that extend coverage to all, set a minimum
benefit floor, limit the range of variation, and eliminate underwriting
would reduce complexity, ensure access, improve continuity, and lower
administrative costs. Such reforms will require a significant increase
in the role of the public sector to provide a framework and oversight
for market competition and to provide financing to make coverage
affordable relative to incomes.
improving access, quality, and slowing cost growth
Although insurance reforms are essential, health reforms will need
to combine insurance with payment and system reforms to achieve the
triple goals of improving access for all, achieving better quality
(health outcomes), and slowing the growth of health spending. Indeed,
unless reforms also seek to improve the value of care and the
performance of the care system, efforts to expand coverage will be
difficult to sustain. At the same time, efforts to provide affordable
insurance to all and reform the insurance market could provide a
stronger foundation for payment and system reforms.
In its 2007 call for more comprehensive reform, the Commonwealth
Fund Commission on a High Performance Health System identified five
core strategies for improving on all three dimensions of system
performance and fostering care system innovations.\37\ These include:
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\37\ The Commonwealth Fund Commission on a High Performance Health
System, A High Performance Health System for the United States: An
Ambitious Agenda for the Next President (New York: The Commonwealth
Fund) November 2007.
Ensuring affordable coverage for all.
Aligning incentives with value and effective cost control.
Fostering accountable, accessible, patient-centered and
coordinated care.
Aiming high to improve quality, health outcomes: investing
in information systems and efforts to promote health and disease
prevention.
Accountable leadership and collaboration to set and
achieve national goals.
To examine what could be possible with an integrated set of
insurance, payment, and system reforms, the Commission recently issued
a report entitled, The Path to a High Performance U.S. Health System: A
2020 Vision and the Policies to Pave the Way. The Path report provides
a set of recommendations in each strategic area and assesses the
potential impact from 2010 to 2020 using policies that illustrate
recommended actions.
Central to the Commission strategic recommendations is the creation
of a national insurance exchange that offers a choice of private plans
and a new public plan, with associated insurance market reforms and
provisions to make coverage affordable.\38\ Insurance recommendations
include:
---------------------------------------------------------------------------
\38\ The Commonwealth Fund Commission on a High Performance Health
System, The Path to a High Performance U.S. Health System: A 2020
Vision and the Policies to Pave the Way (New York: The Commonwealth
Fund) February 2009.
Establish a health insurance exchange that offers an
enhanced choice of private plans and a new public plan. This new public
plan would offer comprehensive benefits with incentives for disease
prevention and payment methods that reward results. It would build on
Medicare's claims administrative structure and national provider
networks. The exchange and new public plan would be open to all,
including large employers.
Require individuals to have coverage and employers to
offer coverage or contribute to a trust fund for insurance, sharing
responsibility to pay for insurance for all.
Provide income-related premium assistance to make coverage
affordable.
Expand eligibility for and improve payment under Medicaid
and the Children's Health Insurance Program to improve affordability
and access. Eliminate Medicare's 2-year waiting period for the
disabled.
Set a minimum benefit standard to ensure access and
adequate protection from the financial burden of obtaining needed
health care.
Reform health insurance markets to improve insurance
efficiency, access, and affordability by prohibiting premium variation
based on health and guaranteeing offer and renewal of coverage to all,
regardless of health status.
Building on this foundation, an integrated set of polices would
change the way the Nation pays for care and would invest in system
reforms and health initiatives. Payment reforms include: enhanced value
for primary care and new payment methods to support better care
coordination and management of chronic disease (often called ``patient-
centered medical home''); moving away from fee-for-service to more
``bundled'' payment for care; and correcting price signals to align
payment levels with more efficient care. Together the set of payment
reforms aim to reward efficiency (high quality and prudent use of
resources) and penalize waste and ineffective care by stimulating and
supporting a more effective and efficient delivery system. System
reforms include investing in and expanding effective use of health
information technology and networks (HIT with information exchanges),
providing better information on comparativeness effectiveness and using
this information to guide benefit and pricing policies, and all-
population data with benchmarks of top performance.
The analysis of the potential impact indicates that it would be
possible to extend affordable insurance to everyone, improve quality,
and substantially slow the rate of growth of national spending by a
cumulative $3 trillion by 2020 assuming reforms begin in 2010. Although
spending would slow compared with projected trends, it would still go
up each year (Exhibits 23 and 24).
Many of the Commission recommendations would be politically
difficult to achieve. They depend on building the political will and
consensus that the Nation can no longer afford to continue on the
current path. Changes will require new leadership roles and
collaboration across public and private sectors. Effective payment
reforms will require time to develop and implement and flexibility to
innovate as the Nation learns. Information systems require investment
and time to yield maximum returns through adoption and use.
With the current severe recession, there is broad public support
for fundamental reform. The United State's continued failure to protect
its population when sick is undermining national health and economic
security. Wide public concern and stress on businesses and public
sectors make it increasingly clear that we cannot afford to maintain
the status quo. Each year we wait, the problems grow worse. There is an
urgent need for leadership and policy action to force consensus to move
in a positive direction.
Thank you for the opportunity to testify on these critical issues.
Senator Bingaman. Thank you very much.
Ms. Shearer, please go right ahead.
STATEMENT OF GAIL SHEARER, MS, DIRECTOR OF HEALTH POLICY
ANALYSIS, CONSUMERS UNION, WASHINGTON, DC
Ms. Shearer. Thank you, Mr. Chairman, members of the
committee. Thank you very much for the invitation to testify on
this important issue of the underinsured. The key break downs
of the health coverage marketplace that have fueled the growth
in the underinsured include the increase in high deductible
coverage, annual caps in coverage, lifetime benefit limits,
limited benefits, preexisting condition exclusions, higher co-
pays, out of network charges, bare bones policies and a flawed
individual health insurance market.
During 2008, Consumers Union sent a bus around the country
to find out what was happening to real people and their
healthcare. More than 4,000 people told us their healthcare
stories. In my written statement I have presented profiles of
several of these people that we encountered. Each tells in its
own way that we are all at risk of being underinsured.
Kim, in Minneapolis came to the end of her 18 months of
Cobra coverage and then found that her individual policy had a
glaring loop hole. A condition that she not file any claims for
counseling for 2 years. She had been in grief counseling
following her husband's suicide.
Charles, in Georgia discovered that the doctor's office on
one floor of the insurance company's network was covered, but
on the second floor where biopsies are done, was not part of
the network. Finding an in network surgeon for his prostate
cancer proves so challenging that he said, ``It's not the
cancer that's going to kill me, it's the insurance company.''
Bea from North Carolina was laid off from her county social
worker job and could only afford catastrophic coverage which
did not cover her preexisting condition including her
arthritis. She told us, ``I quickly realized that the American
dream of owning your own business is only for the young and the
healthy.''
Solving the problems faced by the underinsured will require
fundamental reforms of our health care system. It's relatively
easy to review the situation of the individual's plights and
conclude that deductibles should be lower, benefits should be
more comprehensive, networks should provide appropriate
services and caps and annual or lifetime benefits should be
prohibited, for example. But the underlying problem is that
health care costs are high as a percentage of GDP and continue
to grow at a rate faster than the rate of other goods and
services.
This differential growth rate translates to higher
premiums, higher co-payments and higher burdens on individuals
and families. As long as the growth in health care costs
continues unabated, we will struggle as a nation to address the
very difficult challenge of coming up with how to best pay for
health care and relieve the burden on the underinsured.
Consumers Union believes that the problems faced by the
underinsured can best be addressed by health reforms that
provide for broad-risk pooling with comprehensive quality
coverage for all. A health care system that allows pre-existing
condition exclusions, caps and benefits and underwriting can
not address the underlying problems. A key building block that
will make this kind of affordable coverage is increased
comparative effectiveness research. Congress took an important
step by including funding for expanded comparative
effectiveness research in the Stimulus bill.
Consumers Union has developed a program, Consumer Reports
Best Buy Drugs, that demonstrates why this type of research is
so important. Our reports show that individuals can often save
between $1,000 and $2,000 a year simply by switching from a
high priced drug to a best buy drug that is equally safe and
effective. The reality is that in this country and in this
economy, just about all of us are at risk of being
underinsured.
The cause might be a pink slip, a major accident, a birth
defect, a serious illness such as cancer, pregnancy or being
eligible only for a limited, loop hole laden, individual
policy. The real issue is the growth of health care costs at a
rate much higher than GDP growth and the responses of payers
who increase deductibles and decrease coverage. The problem of
the underinsured must be addressed in the context of overall
system reform that helps moves to a system that rewards
prevention, bases decision on evidence and is committed to
getting better value for our health care dollar whether the
dollar comes from taxpayers, consumers or employers.
Mr. Chairman and members of the committee, the growing
problem of the uninsured and underinsured cries out for your
prompt attention. Thank you very much for considering our
views.
[The prepared statement of Ms. Shearer follows:]
Prepared Statement of Gail Shearer, MS
executive summary
The reality is that in this country--and in this economy--just
about all of us are at risk of being underinsured. The cause might be a
pink slip, a major accident, a birth defect, serious illness such as
cancer, pregnancy, or being eligible only for a limited, loophole-laden
individual policy.
While the definition of the ``underinsured'' varies, quantitative
definitions used by the government tend to focus on the percent of
adults between 19 and 64 whose out-of-pocket health care expenses
(excluding premiums) are 10 percent or more of family income. The ranks
of the underinsured have grown. The Commonwealth Fund estimates that 42
percent of U.S. adults were uninsured or underinsured in 2007. You can
be sure that with the recent loss of millions of jobs, and
unaffordability of COBRA premiums, these numbers will rise dramatically
in 2008 and 2009.
Research by the Consumer Reports National Research Center used a
series of questions to determine the percent who were underinsured
based on answers to questions such as whether they considered their
deductible too high, and whether they felt adequately covered for costs
of surgery, doctors visits, and catastrophic medical conditions. We
found that 41 percent of the adult population sampled lacked adequate
health coverage. Nine percent of the underinsured (by our survey) took
extraordinary measures to pay medical bills, including dipping into
IRAs, 401(k)s or pension funds, selling cars, trucks or boats, or
taking on home equity or second mortgage loans.
Underinsurance is a problem for two key reasons: Inadequate
coverage results in the financial burden of uncovered health care. In
our survey, for example, 30 percent of the underinsured had out-of-
pocket costs of $3,000 or more for the previous 12 months.
Underinsurance can lead to medical debt and even bankruptcy. The second
problem posed by underinsurance is delayed or denied health care and
poorer health outcomes, caused by the financial barrier to care.
The key breakdowns of the health coverage marketplace that have
fueled the growth in the underinsured included the increase in high
deductible coverage, annual caps in coverage, lifetime benefit limits,
limited benefits, pre-existing condition exclusions, higher co-pays,
out-of-network charges, barebones policies, and a flawed individual
health insurance market.
Fundamental reforms of our health care system are needed to solve
the problem of the underinsured. A necessary building block will be
expanded research of comparative effectiveness so that we increase the
knowledge base for making treatment and coverage decisions. It will be
necessary to cut the growth of health care costs and get better value
for our health care dollar in order to be able to afford the coverage
improvements and expansions necessary to eliminate the risk of being
underinsured. Moving from the ranks of the uninsured to the insured
does not guarantee protection against the financial hardship that
illness can bring, as demonstrated by the plight of the underinsured.
We look forward to working with you to address this problem that
threatens families with financial crises just when they are battling
health care challenges.
______
Mr. Chairman, members of the committee, thank you for the
invitation to testify on the issue of the underinsured. This growing
problem creates financial hardship and results in barriers to getting
needed health care. Being underinsured in America means both pocketbook
and healthcare hardship. Fortunately, there is increased awareness that
we can't assume that a simple measure of the uninsured neatly sums up
the health care status of our Nation. The growing population of
underinsured demonstrates clearly that moving from the ranks of the
uninsured to the insured alone does not guarantee protection against
the financial hardship that illness can bring. We commend you for
holding this hearing to help keep attention focused on this crucial
element of the health care problem.
Consumers Union\1\ is the independent, non-profit publisher of
Consumer Reports, with circulation of about 7 million (Consumer Reports
plus ConsumerReports.org subscribers). We regularly poll our readership
and the public about key consumer issues, and the high cost of health
care consistently ranks among their top concerns. My statement includes
information about a survey that we conducted about the problem of the
underinsured.
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\1\ Consumers Union, the nonprofit publisher of Consumer Reports,
is an expert, independent organization whose mission is to work for a
fair, just, and safe marketplace for all consumers and to empower
consumers to protect themselves. To achieve this mission, we test,
inform, and protect. To maintain our independence and impartiality,
Consumers Union accepts no outside advertising, no free test samples,
and has no agenda other than the interests of consumers. Consumers
Union supports itself through the sale of our information products and
services, individual contributions, and a few noncommercial grants.
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After reviewing the latest numbers that show a recent growth in the
ranks of the underinsured, my testimony will show how being
inadequately insured can place tremendous health and financial burdens
on families. I will provide an overview of the basic causes of becoming
underinsured, present some profiles of the faces of the underinsured,
and will provide some comments about finding a solution to this
problem.
the underinsured: the numbers
Estimates of the underinsured vary based on the underlying data
source, the methodology, and the definition. Early estimates of the
underinsured used focused on risk of incurring out-of-pocket costs (not
including premiums) exceeding 10 percent of income.\2\ Government
estimates are based on the percent of adults between 19 and 64 whose
out-of-pocket expenses are 10 percent or more of family income,
sometimes adjusting to a lower percent for low-income individuals.\3\ A
recent Commonwealth Fund estimate shows a 60 percent growth in
underinsured between 2003 and 2007, with an estimated 25.2 million
individuals underinsured in 2007. The Commonwealth Fund estimates that
42 percent of U.S. adults were uninsured or underinsured in 2007.\4\
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\2\ Pamela Farley Short and Jessica S. Banthin. 1995. New Estimates
of the Underinsured Younger than 65 Years. JAMA. 274: 1302-1306.
\3\ Jessica Banthin. AHRQ, Out-of-Pocket Burdens for Health Care,
Insured, Uninsured and Underinsured. September 23, 2008.
\4\ Cathy Schoen, et al., How Many are Underinsured? Trends Among
U.S. Adults, 2003 And 2007, Health Tracking, Health Affairs--Web
Exclusive, June 10, 2008. See also: Jessica S. Banthin and Didem
Bernard, Changes in Financial Burdens for Health Care--National
Estimates for the Population Younger than 65 Years, 1996 to 2003, JAMA,
December 13, 2006.
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consumer reports national research center survey research report \5\
The Consumer Reports National Research Center conducted a
nationally representative survey of 2,905 respondents between the ages
of 18 and 64 in May 2007. The findings were reported in the September
2007 issue of Consumer Reports.\6\ We found that 16 percent of the
adult population under 65 was uninsured. We also found that 29 percent
of those surveyed who had health insurance at the time of our survey
were underinsured. Combined with the uninsured, the CR survey found
that 41 percent of the population sampled lacked adequate health
coverage.
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\5\ Health Care Experiences of the American Public: May 2007
Survey, Consumer Reports National Research Center Survey Research
Report.
\6\ Are You Really Covered? Why 4 in 10 Americans can't depend on
their health insurance, Consumer Reports, September 2007.
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Nine percent of underinsured in our survey took extraordinary
measures to pay medical bills--including dipping into IRAs, 401(k)s, or
pension funds, selling cars, trucks or boats, selling off stocks and
bonds, taking on home equity or second mortgage loans, selling homes,
or declaring bankruptcy. Three percent reported taking on home equity
or second mortgage loans, selling homes, or declaring bankruptcy. While
65 percent of the adequately-insured felt well prepared for unexpected
future medical expenses, only 37 percent of the underinsured expressed
such confidence.
The underinsured were defined by Consumer Reports based on
responses to individual survey items. Respondents were categorized as
underinsured if they were insured and complained in our survey about
two or more of the following aspects of their plans:
It does not adequately cover prescription drug costs;
It does not adequately cover the costs of doctors' visits;
It does not adequately cover the costs of medical tests;
It does not adequately cover the costs of surgery or other
medical procedures;
It does not provide enough coverage for catastrophic
medical conditions;
The deductible is too high.
Table 1 shows the percent of underinsured reporting various types
of dissatisfaction. Table 2 shows the relative financial impact on the
underinsured compared with the insured.
Table 1.--Dissatisfaction with Insurance: Consumer Reports National
Research Center Survey
------------------------------------------------------------------------
Percent of respondents who are underinsured expressing In
dissatisfaction with these aspects of their insurance: Percent
------------------------------------------------------------------------
Deductible is too high...................................... 70
Does not adequately cover the costs of medical tests........ 67
Does not adequately cover prescription drug costs........... 63
Does not adequately cover the costs of surgery or other 58
medical procedures.........................................
Does not adequately cover the costs of doctors' visits...... 53
Does not provide enough coverage for catastrophic medical 51
conditions.................................................
------------------------------------------------------------------------
Table 2.--Financial Impact of Being Underinsured Consumer Reports
National Research Center Survey
------------------------------------------------------------------------
Under-
insured Adequately
[In insured [In
percent] percent]
------------------------------------------------------------------------
Compared with adequately insured, the
underinsured in our survey were:
Twice as likely to spend $3,000 out-of- 30 16
pocket for medical expenses in the past
12 months...............................
Four times as likely to have dug deep 33 9
into their savings to pay for medical
expenses................................
Twice as likely to have charged at least 29 11
some of their medical bills to credit
cards...................................
Three times as likely as adequately- 27 8
insured to have outstanding unpaid bills
owed to doctors or hospitals............
------------------------------------------------------------------------
why is underinsurance a problem?
There are two serious health system problems that result from the
growing numbers of the underinsured--the financial burden resulting
from uncovered health costs and the health care burden caused by
delayed or denied care.
Financial burden of uncovered health care. Health care is
expensive. When needed health care must be paid out-of-pocket, the
burden on those who are sick can add tremendously to the burden of
fighting illness. The burden falls hardest on those with the least
resources to weather the extra burden of illness--those with low and
moderate income. Our survey found the underinsured were much more
likely to face out-of-pocket costs of $3,000 for the previous 12 months
(30 percent vs. 16 percent of the adequately insured).
Medical debt has increased recently, even before the financial
crisis of 2008. Forty-nine million adults (28 percent of the adult
population) reported carrying medical debt in 2007, an increase from 21
percent in 2005.\7\ Not surprisingly, underinsured adults, who have
less comprehensive health care coverage, are more likely than the
insured to face medical bill and medical debt problems. Some of the key
factors were inadequate drug and dental coverage, high premiums as
percent of income, out-of-network charges, and benefit gaps.\8\
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\7\ Sara Collins, et al., Losing Ground: How the Loss of Adequate
Health Insurance is Burdening Working Families, The Commonwealth Fund,
August 2008, p. 10.
\8\ Michelle M. Doty, et al., Seeing Red: The Growing Burden of
Medical Bills and Debt Faced by U.S. Families, Issue Brief, the
Commonwealth fund, August 2008.
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The Commonwealth Fund study \9\ found that the underinsured, 82
percent of which were insured at the time they were provided medical
care, face other burdens from high medical bills.
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\9\ The Commonwealth Fund Biennial Health Insurance Survey (2007),
Chart pack, Figure 15.
29 percent are unable to pay for basic necessities such as
food, heat or rent;
46 percent used up all of their savings;
12 percent took out a mortgage against their home or took
out a loan;
33 percent took on credit card debt.
As a nation, the current financial crisis has been a cogent
reminder of the downside of carrying too much debt. Medical costs
contribute substantially to debt. Sixty percent of underinsured or
uninsured adults reported medical bill problems or debt in the
Commonwealth Fund Biennial Health Insurance Survey (2007). This study
showed that 62 percent of those with medical debt had insurance at the
time of their medical incident.\10\ Clearly, health insurance is not
providing the financial protection that it is meant to.
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\10\ Michelle M. Doty, et al., Seeing Red: The Growing Burden of
Medical Bills and Debt Faced by U.S. Families, Issue Brief, The
Commonwealth Fund, August 2008.
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Medical expenses of the underinsured are a major contributing
factor toward bankruptcy. Researchers at Harvard Medical School and
Harvard Law School conducted interviews with families who filed for
bankruptcy in 2001. About half said that medical costs contributed to
the bankruptcy. Three quarters of those whose bankruptcies were related
to health care expenses had insurance when the illness began.\11\
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\11\ David U. Himmelstein, Elizabeth Warren, Deborah Thorne and
Steffie Woolhandler, Illness and Injury as Contributors to Bankruptcy,
Health Affairs, February 2, 2005.
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Barrier to getting needed health care. Being underinsured
translates into delayed or foregone medical care, and this can result
in people getting sicker and even death. Commonwealth Fund research
found that the underinsured are more likely not to fill a prescription,
to skip a test or treatment, to not visit the doctor for a medical
problem and to forego needed specialist care.\12\
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\12\ Cathy Schoen, et al., Insured but not Protected: How Many
Adults are Underinsured?, Health Affairs Web Exclusive, June 14, 2005,
p. 295.
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High deductibles and co-pays can result in delayed care or foregone
care. The recent Kaiser Family Foundation/American Cancer Society
report tells the story of a prostate cancer survivor whose health
insurance has a $3,750 deductible. He cuts back on screening to every
other year, instead of every year, because of the burden of the $250
test.\13\
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\13\ Kaiser/Cancer, p. 8.
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different routes to being underinsured
High out-of-pocket health care costs can lead to financial burden
and to consumers being underinsured in a number of ways. Some of the
most common causes of being underinsured are high deductibles, caps on
annual or lifetime benefits, limited benefits, pre-existing condition
exclusions, co-pays, network restrictions, barebones policies, and
limited individual health insurance policies.
Increase in high deductible coverage. One route to being
underinsured is high deductible health insurance. Many consumers who
lack employer-based coverage can not afford comprehensive coverage and
resort to a high deductible policy in the individual market. Tax policy
that favors health savings accounts has fueled the growth of high
deductible coverage. Many employers are offering high deductible
coverage. If a family earning $50,000 faces a $5,000 deductible, even a
minor illness can cause them to fall into the ranks of the
underinsured.
Average deductibles are on the rise. In the individual market, 67
percent of coverage has deductibles of $1,000 or above.\14\ The Kaiser
Family Foundation/Health Research & Education Trust annual Employer
Health Benefits report showed an increase in high deductible health
plans offered by employers from 7 percent in 2006 to 13 percent in
2008.\15\
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\14\ Kaiser/Cancer, p. 9.
\15\ P. 5, Employer Health Benefits, 2008 Summary of Findings, The
Kaiser Family Foundation and Health Research & Education Trust.
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Annual caps in coverage. Many policies have annual caps in
coverage. A serious illness--such as a brain injury or cancer--can lead
to reaching the cap in coverage. High costs of cancer treatment, for
example, can quickly lead to using up a $100,000 benefit. The Kaiser/
ACS report tells the story of a breast cancer patient with employer-
sponsored coverage with a $100,000 annual limit. Having to face a
medical debt of $30,000 while battling cancer created major stress.\16\
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\16\ Kaiser p. 11.
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Lifetime caps in benefits. Many policies also have lifetime caps in
benefits. Again, with a serious illness, these caps can be reached.
Limited benefits. Policies limit benefits in other ways, such as
excluding emergency room coverage and excluding prescription drugs.
Individual insurance plans are more likely to have limited benefits, in
part to keep premiums low and in part because of the concern about
adverse selection in this market. Even employer plans often limit
benefits. For example, 55 percent of covered workers in small firms (3
to 199 workers) have limited mental health benefits, e.g., limits of 20
or fewer outpatient mental health visits per year.\17\
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\17\ Employer Health Benefits 2008, Kaiser Family Foundation and
Health Research and Educational Trust, p. 141.
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Pre-existing condition exclusions. Many people have gaps in
coverage that result in pre-existing condition exclusions when they
join a new employer and new health plan. Individual health insurance
policies often have such exclusions. For someone with a pre-existing
condition such as cancer or pregnancy, the resulting out-of-pocket
costs can be very large.
Copays. A recent report by the Kaiser Family Foundation and the
American Cancer Society told the story of cancer patients whose
deductibles, combined with co-pays for doctor visits, outpatient visits
and prescription drugs led to high medical bills, in some cases
exceeding $100,000 despite having health insurance coverage.\18\ The
Medicare Part D doughnut hole is an example of a ``copay'' that is
designed into the benefit. New research shows that the doughnut hole
results in Medicare beneficiaries not getting the drugs that they need
in order to treat chronic conditions.\19\
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\18\ Karyn Schwartz and Gary Claxton, Kaiser Family Foundation and
Kristi Martin and Christy Schmidt, American Cancer Society, Spending to
Survive: Cancer Patients Confront Holes in the Health Insurance System,
February 5. 2009. 1.
\19\ Sebastian Schneeweiss et al., The Effect of Medicare Part D
Coverage On Drug Use and Cost Sharing Among Seniors Without Prior Drug
Benefits, Health Affairs--Web Exclusive, February 1, 2009.
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Out-of-network charges. When serious or chronic illness strikes, or
when emergencies occur, consumers may find that they need to seek care
from an out-of-network provider. In some cases, they may discover after
their own careful planning that while their surgeon is in network,
other doctors (e.g., radiologists or anesthesiologists) are out-of-
network. This can result in large uncovered costs. This can be a
problem also if a job change leads to a different network, if
physicians switch out of a network, or if an insurer drops a provider.
Bare-bones policies. All payers of health care are struggling with
the high cost and rate of increase of health care costs. Unfortunately,
States are allowing ``bare-bones'' policies which technically move
people from the ranks of the uninsured--but leave them being
underinsured. For example, the ``Cover Florida'' plan (which became law
in May 2008) allows policies that do not cover hospital or emergency
room care. While the premium may be low, the absence of this basic
coverage exposes any purchasers to the risk of facing high out-of-
pocket costs.\20\ Other exclusions in bare-bones policies can be mental
health, maternity services, cancer care, substance abuse treatment, and
prescription drugs.\21\ Bare-bones policies with limited benefits
impose special risks on low-wage consumers who are most likely to have
out-of-pocket costs that exceed 10 percent of income.\22\
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\20\ Judith Solomon, New Georgia and Florida Health Plans Unlikely
to Reduce Ranks of Uninsured, Center on Budget and Policy Priorities,
July 1, 2008.
\21\ Bare-Bones Health Plans: Is Something Better than Nothing?
Reform Matters, National Women's Law Center.
\22\ Sherry Glied, et al., Bare-Bones Health Plans: ``Are They
Worth the Money,'' Issue Brief, The Commonwealth Fund, May 2002.
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Individual health insurance market. While even employer-sponsored
health insurance plans often have limits that result in underinsurance,
the individual insurance market, a residual market that covers just 9
percent of the population, has far more problems that can result in
being underinsured.\23\ Unlike employer policies, in most States
companies that sell individual coverage can pick and choose who they
cover. Through underwriting, in many cases insurers can deny coverage.
They can attach riders, for example covering all body systems except
the system where there might be a pre-existing condition. Benefits can
be skimpy, excluding for example pregnancy or prescription drugs.
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\23\ Income, Poverty and Health Insurance Coverage in the United
States, U.S. Census Bureau, 2007, p. 61.
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faces of the underinsured
During 2008, Consumers Union sent a bus around the country to find
out what is happening to real people. More than 4,000 people told us
their stories.\24\ Below are some examples of our stories about real
people who are underinsured.
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\24\ More stories are available at prescriptionforchange.org.
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Pre-Existing Condition Exclusion in Individual Policy
Kim--Minneapolis, MN. Kim's husband was having a difficult time
sleeping so he saw his doctor who sent him home with a 3-week sample
pack of anti-depressants. Her husband had no previous history of
depression, but 5 weeks later he took his own life. After her husband's
death, Kim saw a therapist for grief counseling. Kim ended up leaving
her job in advertising to devote her time to drug safety advocacy and
do freelance work. She paid for 18 months of COBRA coverage and then
shopped around for an individual health plan. Since she had no serious
health issues in her past, she expected her coverage would be
affordable. But the insurer she had received coverage through
previously refused to issue her an individual policy because they said
that her participation in grief counseling was an indication of
possible mental illness. Kim was able to get coverage through a second
insurer but only on the condition that she would not file any claims
for counseling for 2 years.\25\
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\25\ http://link.brightcove.com/services/link/bcpid1544602725/
bclid1551048399/bctid1797029
791.
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Limited Benefits That Exclude Emergency Room Visit
Phuonglon--Denver, CO. While Phuonglon was traveling out-of-state,
she had a small seizure and was brought to a hospital emergency room
for treatment. When she returned home, she reviewed her health
insurance policy and it appeared that she was covered for the ER visit.
But then she started to receive bills for care that was not covered by
her policy. At times, it was really difficult for her because she had
not budgeted for these expenses. The experience opened her eyes to how
easily people can go bankrupt by unforeseen medical expenses.\26\
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\26\ http://link.brightcove.com/services/link/bcpid1544602725/
bclid1551048397/bctid1780555
026.
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High-Deductible Health Insurance That Creates Financial Barrier to Care
Gina--St. Joseph, MO. Gina and her husband own their own delivery
company and have purchased an individual health insurance policy for
their family. Gina recently had a miscarriage and decided not to seek
medical treatment because they have a high $3,500 deductible and she
couldn't afford to see the doctor. When Gina gave birth to her son a
few years ago, the insurance company refused to pay for her C-section
because they maintained it was elective (even though her son was born
breeched). She had to fight with the insurance company to get them to
pay for these medical costs. In the meantime, the insurance company
sent their bill to collections. The insurance company eventually paid 6
months after Gina had paid her full deductible.\27\
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\27\ http://link.brightcove.com/services/link/bcpid1460683554/
bctid1701199083.
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Out-of-Network Provider for Emergency Transportation
John--Pelham, AL. This 23-year-old young father had an accident on
a four wheel vehicle in a rural area. When the ambulance arrived, the
EMT decided he needed to be taken to the hospital by helicopter. John
spent 3 days in the hospital recovering from his injuries and left with
a $9,000 bill because his insurance company said the ambulance and
helicopter were not preferred providers.\28\
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\28\ http://link.brightcove.com/services/link/bcpid1460683554/
bctid1676207968.
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Cancer Patient Faced Delayed Care Because of ``Out-of-Network'' Issues
Charles--Alma, GA. Charles (``Buddy'') was diagnosed with prostate
cancer but his insurance company denied payment for the services from
the doctor who diagnosed him. While the doctor's office on the first
floor is part of his insurance company's network, the second floor
where biopsies are done is not part of the network. When Charles needed
surgery he had a very difficult time finding doctors that belonged to
his insurer's network who could perform the surgery in hospitals that
were also part of the network. It was only after his State legislator
intervened on his behalf that Charles was able to resolve his issues
with his insurance company. ``It's not the cancer that is going to kill
me, it's the insurance company.'' \29\
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\29\ http://link.brightcove.com/services/link/bcpid1460683554/
bctid1674044182.
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Limited Benefits Don't Cover Needs of Disabled and Result in Medical
Debt
Sandra--Portland, ME. Sandra is disabled with chronic fatigue
syndrome and needs a scooter to get around. At first, her insurance
company decided to only provide partial payment for her scooter and
then later said it would only pay for a manual wheelchair. Sandra had
to provide further documentation from her doctor that she couldn't use
a wheelchair. The appeals process with her insurance company took more
than 1 year. Sandra continues to incur major out-of-pocket medical
expenses, including $25,000 last year.\30\
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\30\ http://link.brightcove.com/services/link/bcpid1460683554/
bctid1662507287.
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Self-Employed, Can Only Afford Individual Coverage With Limited
Benefits
Bea--Charlotte, NC. After she was laid off from her county social
worker job, Bea opened her own practice but has struggled to afford
adequate health insurance. She can only afford catastrophic coverage
which does not cover her pre-existing conditions, including her
arthritis. I quickly realized that the American dream of owning your
business is only for the young and healthy.'' \31\
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\31\ http://link.brightcove.com/services/link/bcpid1460683554/
bctid1648122600.
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Catastrophic Insurance Policy did not Cover $25,000 of Care for Cancer
Patient Who Incurred Medical Debt
Molly--Nashville, TN. After being diagnosed with uterine cancer
last year, Molly had to undergo three surgeries and 6 months of
chemotherapy and was unable to work for about 8 months. Her insurance
policy covered catastrophic medical expenses, but she still had about
$25,000 in out-of-pocket medical expenses for the care she received.
Her friends were able to help her pay many of her bills, but she was
left with about $12,000 in unpaid medical debt and a damaged credit
record. The stress of my illness was enough for me to deal with, but
then seeing all the bills I had to pay was just too much for me to
handle,'' Molly says.\32\
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\32\ http://link.brightcove.com/services/link/bcpid1460683554/
bctid1640102888.
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Limited Benefits of Individual Policy: Policy Does not Cover Pregnancy
Expenses
Tina--Pittsburgh, PA. When Tina was pregnant a couple of years ago
she found out that her individual health insurance policy did not cover
any of her maternity expenses. She developed reclaims and diabetes
during her pregnancy and none of the care she required for these
conditions was covered. Tina faced the prospect of having to pay nearly
$50,000 in pregnancy-related expenses out-of-pocket. Fortunately, a
local journalist took up her cause and contacted the insurance company.
Her insurer agreed to cover her expenses through her son's 1-month
appointment. Her policy was then cancelled but now her husband has a
new job that provides coverage for her family.\33\
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\33\ http://link.brightcove.com/services/link/bcpid1460683554/
bctid1607328839.
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Limited Benefits Result in Delayed Care
Tom--Hutchinson, MN. Tom and his wife own their own pottery studio
and have paid for their own health insurance over the years. About 5
years ago, Tom developed a debilitating hip condition. The pain got so
bad that his doctor recommended that he undergo hip replacement
surgery. Under his insurance policy, Tom would have had to pay $10,000
for the surgery, which he could not afford. He ended up putting off his
surgery for 3 years until he qualified for Medicare. Two days after he
turned 65, Tom had his surgery and his costs under Medicare were just
one-third of what he would have paid under his individual insurance
plan. Delaying the procedure had its own cost: his muscles atrophied
considerably and it took him longer to recover from his surgery.\34\
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\34\ http://link.brightcove.com/services/link/bcpid1544602725/
bclid1540999549/bctid1549643
949.
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Out-of-Network Doctor Care in Emergency and Inadequate Network for
Hospital Emergency Room Care
Andrea--Murphy, TX. Andrea's son was having difficulty breathing
shortly after he was born and was rushed to the hospital's Neo-Natal
Intensive Care Unit (NICU) for treatment. Two days later he was doing
fine and was discharged to go home. Andrea was then informed by her
insurance company that the Doctor who treated her son in the NICU was
not part of the insurer's network. Less than half of the $1,145 NICU
bill was covered by her plan even though he needed emergency care. When
she had to bring her son back a second time to the ER, she was charged
$600 for his care. Andrea discovered that there are no hospital
emergency rooms in Texas that will take her insurance. Her family
spends $7,000 annually on health insurance.\35\
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\35\ http://link.brightcove.com/services/link/bcpid1544602725/
bclid1540999549/bctid1561157
743.
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toward the solutions
Solving the problems faced by the underinsured will require
fundamental reforms of our health care system. It is relatively easy to
review the situation of the individuals' plights that are profiled
above and conclude that deductibles should be lower, benefits should be
more comprehensive, networks should provide appropriate access, and
caps in annual or lifetime benefits should be prohibited, for example.
But the underlying problem is that health care costs are high as a
percent of GDP and continue to grow at a rate faster than the rate of
other goods and services. This differential growth rate translates to
higher premiums, higher co-payments, and higher burdens on individuals
and families. As long as this growth in health care costs continues
unabated, we will struggle as a nation to address the very difficult
challenge of coming up with how to best pay for health care.
Consumers Union believes that the problems faced by the
underinsured can best be addressed by health reforms that provide for
broad risk pooling, with comprehensive, quality coverage for all. A
health care system that allows for pre-existing condition exclusions,
caps in benefits, and underwriting can not address the underlying
problems. Another element of reform must be payment reform that
increases the chance that appropriate treatment is provided--not too
much treatment, not too little treatment.
A key building block that will make this kind of coverage
affordable is increased comparative effectiveness research. Congress
took an important step by including funding for expanded comparative
effectiveness research in the stimulus bill.
Consumers Union developed a program--Consumer Reports Best Buy
Drugs--that demonstrates why this type of research is so important. We
have translated the unbiased systematic reviews--comparative
effectiveness studies--for 21 categories of drugs. The source of our
studies are reviews prepared by the Drug Effectiveness Review Project,
which is based at Oregon Health and Science University. Our reports
show that individuals can often save between $1,000 and $2,000 a year
simply by switching from a high-priced drug to a best buy drug that is
equally safe and effective. A simulation study of potential savings of
switching from high priced drugs to best buy drugs in four categories
of drugs used for heart conditions resulted in potential annual
nationwide savings of $2.7 billion, 8 percent of drug expenditures for
those four categories.\36\
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\36\ Julie Donohue, Michael A. Fischer, Haiden A. Huskamp, and Joel
S. Weissman, Potential Savings from an Evidence-Based Consumer-Oriented
Public Education Campaign on Prescription Drugs, Health Services
Research, November 2008.
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Our project has demonstrated that health care outcome is not
compromised when value is taken into account in making drug choices. We
commend Congress for including this important provision in the stimulus
bill and urge you to work toward reforms in the future that create a
system where coverage decisions can be based on the results of such
unbiased research.\37\
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\37\ We note that we strongly support assuring the research address
the needs of individuals of various races, ethnicity, age and sex. In
addition, there should be an exceptions process that is timely and
appropriate.
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Health insurance coverage should assure that consumers do not face
financial barriers to getting needed health care. Coverage should be
comprehensive so that needed health care does not result in financial
burdens such as debt and hardship.
The reality is that in this country--and in this economy--just
about all of us are at risk of becoming underinsured. The cause might
be a pink slip, a major accident, a birth defect, serious illness such
as cancer, pregnancy, or being eligible only for a limited, loophole-
laden individual policy. The issue for your consideration is not
whether the count of the underinsured is 15 million or 25 million. The
real issue is the growth of health care costs, at a rate much higher
than GDP, and the responses of payers to increase deductibles and
decrease coverage. The problem of the underinsured must be addressed in
the context of overall system reform that helps move to a system that
rewards prevention, bases decisions on evidence, and is committed to
getting better value for our health care dollar, whether that dollar
comes from taxpayers, consumers, or employers.
Mr. Chairman, members of the committee, the growing problem of the
uninsured and underinsured cries out for your prompt attention. We look
forward to working with you to shape solutions that will assure that
the United States rises to the challenge of transforming our health
care system so that we are no longer at risk of facing financial
hardship or financial barriers to care just when we need care the most.
Thank you for considering our views.
Senator Bingaman. Thank you very much.
Ms. Rowland, go right ahead.
STATEMENT OF DIANE ROWLAND, D.SC., EXECUTIVE VICE PRESIDENT,
THE HENRY J. DAISER FAMILY FOUNDATION AND EXECUTIVE DIRECTOR,
THE KAISER COMMISSION ON MEDICAID AND THE UNINSURED,
WASHINGTON, DC
Ms. Rowland. Thank you, Mr. Chairman and members of the
committee. My statement today will focus on why health
insurance in the scope of coverage matters for family's health,
well-being and financial security. We know from the experience
of the uninsured that health insurance helps to improve access
to basic, primary and preventive care and lowers the likelihood
of postponing or foregoing needed care and medications due to
costs.
It also helps to promote more stable health care
arrangements that can provide for ongoing medical care. Having
insurance is clearly better than being uninsured. But the scope
of health insurance coverage varies widely across plans.
Families face increasing health insurance premiums plus
higher deductibles and more cost sharing when they seek care
and increasing financial burden for families especially in
these tough economic times. How well health insurance protects
families from large medical bills is one measure of the
adequacy of health insurance. In surveys we have done, 3 in 10
adults reported problems paying their medical bills. And they
had health insurance to help them.
These families reported that they had to make difficult
choices including limiting paying for other necessities such as
food, heat or housing, using savings or borrowing money and
considering filing for bankruptcy. Such cost considerations
lead to skipped medical tests and failure to follow through on
needed treatment. Insured families facing health spending that
exceeds 10 percent of after-tax income can be considered as
underinsured and that the coverage they have is insufficient to
protect them from the financial toll of health spending.
In interviews we've held with diverse working families
across the United States in the spring of 2008, we found
families with health insurance were often struggling to afford
the combination of premiums, co-pays, deductibles and cost for
services not covered by their plan with these costs rising far
faster than their paychecks. One of the clearest examples of
the holes in health coverage is the experience of families
where cancer has taken a toll. In a report we just issued with
the American Cancer Society, we profile some of the cancer
patients who have fallen through the cracks in our private
health insurance system and have resulted in substantial
medical debts and detriment to their health and well-being.
Most families with cancer have private health insurance.
But many face high health care costs that alter their care.
Five percent of the uninsured said that they had delayed or
decided not to get care due to costs as cancer victims putting
their life and survival at risk due to their costs not being
covered by insurance.
These experiences document the challenges families face
today even those with private health insurance coverage when
seeking medical care. High levels of cost sharing and caps on
covered benefits can compromise the level of protection health
insurance provides and lead to both reduced access to needed
care and serious financial burdens and medical debt. As
consideration of health reform moves forward it will be
important to assess both the scope of coverage provided and the
level of financial assistance offered against a substantial
medical cost, especially for those with chronic and serious
illness and those with limited income.
As you move forward I would like to share with you now the
voice of one of the interviews we conducted in Wichita, KS, an
individual struggling with medical bills who was telling us at
his kitchen table about health care costs and the impact on
him. So with that I'll end my statement by turning to the video
from Ron Gaston. Thank you.
[Video presentation.]
Mr. Gaston. Those add up and then when you have other blood
tests.
Female speaker on video. Ron Gaston had his life mapped out
and then he got sick.
Mr. Gaston. I was going to work 5 more years. Then I was
going to retire and let Medicare and all of that stuff take
care of it. Maybe even pick up a little supplemental insurance
to cover what it doesn't care. A lot of people do. But, man,
this is going to wipe us out.
Female speaker on video. Like most working Americans, Ron
gets coverage through his employer, in this case a local paper
supplier in Wichita. But he's like many Americans in another
way too.
Mr. Gaston. You only pay a $15 co-pay. And those add up.
And you have another blood test and stuff, a total of $125.
Female voice on video. The annual deductible for Ron and
his ailing wife has skyrocketed to almost $4,800 a year.
Premiums have doubled to $1,200 a year. All the while his
income, $30,000 annually has remained fairly static.
The Gastons couldn't squeeze anything more out of their
family budget. And that's why Ron delayed seeing the doctor.
Mr. Gaston. I didn't have any problems. I mean, I just told
them all, my wife and my daughter said, ``Hey, you need to go
get a physical.'' I said, ``No, I don't. I feel just fine.''
And then, gosh, a year and a half ago I got up one morning
and my stomach hurt so bad. I was like screaming in pain. I
couldn't walk, couldn't sit, couldn't lay down.
Female voice on video. A mass was discovered on his kidney.
But even then Ron waited another 6 months to get treatment.
Mr. Gaston. He said, ``You have cancer.'' I said, ``Wow.''
I said, ``What is this going to cost me?''
Female voice on video. Finally surgery revealed it was not
cancer. Still Ron ended up with $15,000 in out-of-pocket
medical expenses, debt that he is now paying off in $10 or $15
increments to various providers. Years ago when his wife was
sick, Ron dipped into his retirement savings to pay off medical
debt. But he is too close to retirement now to do that again.
Mr. Gaston. I wake up at night. How am I going to pay this?
What am I going to do?--Lifting heavy boxes. What will I do?
What am I going to do for a second job anyhow?
Female voice on video. A postscript. Since our interview
Ron was laid off from his job of 27 years. He hopes he will be
able to find a new job with health benefits.
Ron and his wife won't qualify for Medicaid and they are
several years away from qualifying for Medicare. The life Ron
had mapped out now seems a distant hope.
Ms. Rowland. I think Ron's story reflects some of the
challenges you face in crafting health care reform. I think the
people like Ron are waiting for this Congress to help bring
them some of the protection they need. Thank you.
[The prepared statement of Ms. Rowland follows:]
Prepared Statement of Diane Rowland, D.Sc.
Summary
Health insurance helps to improve access to basic primary
and preventive care and lowers the likelihood of postponing or
foregoing needed care and medications due to costs by promoting more
stable health care arrangements.
While having insurance is clearly better than being
uninsured, the scope of health insurance coverage varies widely across
plans. Families face increasing health insurance premiums plus higher
deductibles and more cost-sharing when they seek care resulting in a
growing financial burden for families.
How well health insurance is working to protect families
from large medical bills is one measure of the adequacy of health
insurance. Among the insured non-elderly population, 3 in 10 adults in
October 2008 reported problems paying medical bills (compared, however,
to 60 percent of the uninsured). Families are often forced to make
difficult choices, including limiting paying for other necessities such
as food, heat, or housing; using savings or borrowing money; and
considering filing for bankruptcy; cost considerations lead to skipped
medical tests and failure to follow through on needed treatment.
Interviews held with diverse working families across the
United States in the spring of 2008 showed families with health
insurance often struggled to afford the combination of premiums,
copays, deductibles, and costs for services not covered by their plan,
with these costs rising faster than their paychecks.
Insured families facing health spending that exceeds 10
percent of after-tax income can be considered as ``underinsured'' in
that the coverage they have is insufficient to protect them from the
financial toll of health spending. By 2004, researchers estimated that
45.4 million non-elderly people met this definition of underinsured
compared to 39.5 million people in similar circumstances in 2001.
One of the clearest examples of the holes in health care
coverage is the experience of families where cancer has taken a toll.
Most have private health insurance, but many face high health care
costs that alter their care--5 percent of the insured (and 27 percent
of the uninsured) said they had delayed or decided not to get care due
to costs, putting their life and survival at risk due to costs not
covered by insurance.
These experiences document the challenges families face
today--even those with private health insurance coverage--when seeking
medical care. High levels of cost-sharing and caps on covered benefits
can compromise the level of protection health insurance provides and
lead to both reduced access to needed care and serious financial
burdens and medical debt. As consideration of health reform moves
forward, it will be important to assess both the scope of coverage
provided and the level of financial assistance offered against the
substantial medical costs especially for those with chronic and serious
illness.
______
Mr. Chairman and members of the committee, thank you for the
opportunity to be with you today to discuss the status of health
insurance coverage in America and the gaps and limits to coverage that
leave millions of Americans poorly protected when confronting illness.
I am Diane Rowland, Executive Vice President of the Kaiser Family
Foundation, and Executive Director of the Foundation's Kaiser
Commission on Medicaid and the Uninsured. I am also an adjunct
professor of Health Policy and Management at the Bloomberg School of
Public Health at The Johns Hopkins University.
My statement today will focus on why health insurance and the scope
of coverage matters for a family's health, well-being, and financial
security. The evidence is clear and strong showing that being without
health insurance affects the health care people receive and leaves the
uninsured with diminished access to health services and poorer health
than their insured counterparts. The consequences of inadequate
insurance for the many ``underinsured'' Americans are less well-
documented, but both affordability and adequacy of coverage are major
challenges to be addressed in reforming our health care system.
health insurance matters
Health insurance is a key link to receiving health care when
needed. Having coverage helps to improve access to basic primary and
preventive care and lowers the likelihood of postponing or foregoing
needed care and medications due to costs. It helps to promote more
stable health care arrangements leading to early detection and
preventive care. The uninsured use fewer preventive and screening
services, are sicker when diagnosed, receive fewer therapeutic
services, have higher mortality and disability rates, and lower annual
earnings because of poorer health than those with health insurance
(Figures 1 and 2).\1\ The uninsured are less likely to have a usual
source of care and be connected to the health care system for ongoing
preventive and primary care. They are also at greater risk of being
hospitalized for preventable conditions and less likely to receive
critical screening services that could lead to early detection and
better treatment options for cancer (Figures 3 and 4).\2\ \3\ On all
measures, those with health insurance have better access to care than
the uninsured.
While having insurance is clearly better than being uninsured, the
scope of health insurance coverage varies widely across plans and can
result in costs and limits that leave some of the insured ill-equipped
to afford the care they or a family member needs. Rising health care
costs for families have continued to outpace increases in salaries and
wages over the last decade, greatly increasing the financial burden for
health care for families. In the past decade premiums for employer-
sponsored group coverage have more than doubled, with a cumulative
growth rate of 119 percent, compared to only a 34 percent growth in
worker's earnings (Figure 5).\4\
Today, families face not only increasing health insurance premiums,
but also pay higher deductibles and more cost-sharing when they seek
care. In 2006, 10 percent of workers with employer-sponsored health
insurance were enrolled in a plan with a general deductible of $1,000
or more for single coverage; 2 years later in 2008, 18 percent of such
workers and over a third of covered workers in small firms (defined as
under 200 workers) had high deductibles (Figure 6).\5\ Both the premium
workers pay for coverage and their out-of-pocket costs are increasingly
a financial burden for families. From 2003 to 2007, the share of non-
elderly people in families with medical bill problems increased from 14
to 18 percent for insured families (Figure 7).\6\ Out-of-pocket costs
have been climbing as cost-sharing, deductibles, and limits on covered
benefits grow.
problems paying medical bills
How well health insurance is working to protect families from large
medical bills is one measure of the adequacy of health insurance.
Millions of Americans--both insured and uninsured--worry about their
ability to obtain and pay for health care. The uninsured are more
likely to be worried about their ability to afford the health care
services and medications they need than those with insurance. Yet,
among the insured non-elderly population, one in four adults say they
are very worried about their ability to afford needed care and over a
third of the insured are very worried about having to pay more for
health care or health insurance (Figure 8).\7\
Their concerns too often cause them to cut back on care due to
cost--with many of the insured putting off or postponing needed health
care (34 percent), skipping a recommended medical visit or treatment
(30 percent), not filling prescriptions (27 percent) or skipping doses
and cutting pills (21 percent) due to cost (Figure 9). Failure to get
needed care can lead to adverse health outcomes and the need for more
intensive and often costly care.\8\
In our October 2008 survey, almost one in three adults (32 percent)
reported that their family had problems paying medical bills in the
past year and nearly one in five (19 percent) reported that these bills
had a major impact on their family. Even among the insured non-elderly
population, 3 in 10 adults reported problems paying medical bills with
almost one in five of those with problems (17 percent) reporting that
these bills are having a major impact on their families. As expected,
the uninsured non-elderly population has had a particularly hard time
in paying medical bills with three out of five (60 percent) reporting
that they have had problems paying medical bills in the past year and
over two out of five with problems (43 percent) reporting that these
medical bills have had a major impact on their family (Figure 10). Most
notably, those over 65 with Medicare coverage are less likely to report
problems with medical bills.\9\
Medical bills can severely impact a family's ability to pay for
household necessities. Individuals in families with problems paying
medical bills are often forced to make difficult sacrifices, including
limiting paying for other necessities such as food, heat, or housing;
using savings or borrowing money; and even considering filing for
bankruptcy. Over the last 5 years, among non-elderly insured adults, 21
percent reported they had been contacted by a collection agency, 15
percent said they had used all or most of their savings, and 3 percent
reported they had declared bankruptcy because of medical bills (Figure
11).\10\ Again, the uninsured faced even greater challenges.
looking at how health care costs impact family budgets
In order to understand more about the circumstances and the
financial and health care challenges facing low- and middle-income
working families, the Kaiser Family Foundation interviewed the heads of
household in 27 diverse working families across the United States in
the spring of 2008 to learn more about their ability to pay for health
care. Our study found that health care costs are indeed a strain on
family budgets, even for families with insurance coverage. In numerous
cases, families had monthly health care bills totaling hundreds of
dollars--a significant share of their earnings.
A case from our family interviews highlights how medical bills can
mount and leave a family struggling with medical debt. Ron, 59, and his
wife from Wichita, KS have had significant health problems and struggle
to pay their bills on a monthly income of $1,815--or about $30,000 a
year. She suffers from congestive heart failure and diabetes and he was
diagnosed with diverticulitis. Subsequently, a sonogram and CAT scans
revealed a mass on his kidney, raising concern that he had cancer and
resulting in surgery. Although Ron has worked for the same company for
26 years and at the time of our interview had health insurance through
his job, health care costs had taken a toll on his family finances. A
$4,750 deductible; $90 a month in copays for his wife's six
prescription medications for diabetes, heart disease and glaucoma; and
unexpected and costly medical needs for himself and his wife have meant
very high out-of-pocket costs and substantial medical debt for previous
hospital and doctor care. Facing aggressive collection, Ron borrowed
money from his 401(k) plan to pay thousands of dollars owed for a
hospitalization 6 years ago when his wife got pneumonia and currently
is paying $25 a month to reduce the $1,800 medical debt. Ron's
experience demonstrates the financial consequences of limits on what
insurance covers and the impact of health bills on the overall
financial well-being of a family. Unfortunately for Ron and his wife,
life has gotten even more precarious: in December of 2008, Ron was laid
off from his job of 27 years.\11\
Families with health insurance, like Ron, in our study often
struggled to afford the combination of premiums, copays, deductibles,
and costs for services not covered by their plan, with these costs
rising faster than their paychecks. Frequently, private insurance did
not cover dental and vision care, and dental care, in particular, had
saddled families with large expenses. Some insured families, despite
having coverage, avoided using services because they could not afford
the out-of-pocket costs. Costs often mounted up quickly, especially
when a member of a family had ongoing needs for chronic care or
prescription drugs. Even in generally healthy families, one-time health
crises like a broken arm or hospitalization resulted in large,
sometimes staggering, bills. Families without insurance were still
worse off, having to pay all their medical bills out-of-pocket.
Our interviews found both insured and uninsured families had
substantial unpaid bills for medical care--some owed tens of thousands
of dollars. Most families with medical debt were trying to pay it off
in small amounts like $5 or $25 or $50, month by month or when they
could; they were unsure how they would manage to pay it all back. The
couple above had begun to use retirement savings to pay down their
medical debts; another family had considered filing for bankruptcy.
Beyond the burden of the medical debt itself, the debt also prevented
those who were relatively new to the workforce from getting established
financially, and compromised families' credit and ability to borrow and
save, jeopardizing their hopes and plans for the future--for example,
to purchase a home, or retire. Iris, who is only 23, has severe back
pain from a car accident, asthma, and severe allergies, but relies on
over-the-counter medications and an old asthma pump. She has $7,500 of
medical debt she cannot afford and is already concerned that the debt
from her medical conditions at a young age will hurt her credit, which
may prevent her from buying a house or a car in the future.
Families especially turn to cost-cutting measures when health care
costs and medical debt have already strained their family resources.
Families with private insurance and medical debt were three times as
likely to skip tests as those with private insurance and no medical
debt and in fact behave more comparably to the uninsured in how they
access the health care system (Figure 12). Most notably, over a quarter
of both privately insured individuals with medical debt (28 percent)
and uninsured individuals (29 percent) postponed care due to cost
compared to only 6 percent of the privately insured without medical
debt.\12\ The inadequate coverage and financial burdens for health care
are leaving families to make choices based on their pocketbook rather
than their health care needs.
financial burden for health care
The share of family after-tax income going to pay for health care
services is a measure of the adequacy of health insurance protection.
Analysis by researchers at the U.S. Department of Health and Human
Services documents the increase in out-of-pocket burdens and health
spending relative to income for families from 2001 to 2004 (Figures 13
and 14). Health care costs for a family's share of premiums, cost-
sharing, and out-of-pocket spending that exceed 10 percent of after-tax
income are considered a high financial burden. Families facing health
spending at this level can be considered as ``underinsured'' in that
the coverage they have is insufficient to protect them from the
financial toll of health spending. It appears that the number of
families falling into this group is growing. By 2004, the researchers
estimated that 45.4 million non-elderly people lived in families with
health care costs greater than 10 percent of their after-tax income
compared to 39.5 million people in similar circumstances in 2001.\13\
The nature of one's health insurance is a critical component of
determining whether a family faces high expenditures for health care.
Public insurance through Medicaid for low-income families offers the
broadest protection with low cost-sharing and comprehensive benefits.
Employer-based coverage varies widely, but offers coverage that
protects the majority from high costs. However, in 2004, nearly one in
five (17 percent) families with coverage through their employer faced
substantial out-of-pocket costs exceeding 10 percent of income.
The least protection and greatest burden was among those purchasing
non-group private insurance with over half of these families (53
percent) encountering health spending in excess of 10 percent of their
after-tax income. Those in the non-group market pay the full share of
the premium and generally have benefits that are less generous with
higher deductibles and more cost-sharing than in coverage available
through employer-based group policies. On average, their out-of-pocket
costs for premiums are more than twice as high as that paid by persons
with job-based group coverage, and their out-of-pocket spending for
health services is almost 50 percent greater.
Most notably those with the fewest financial resources as well as
the greatest health needs face the greatest health care burdens. In
2004 over half (54 percent) of the non-elderly in families with incomes
below the poverty level and more than a third (37 percent) of the near-
poor faced spending that exceeded 10 percent of after-tax income
compared to 1 in 10 from families with incomes over 400 percent of
poverty (roughly $88,000 for a family of four today) (Figure 14). One
in three non-elderly people in fair or poor health or with a disability
are dealing with medical costs above 10 percent of their incomes.
Persons with chronic conditions are at an even greater risk--almost 40
percent of non-elderly diabetics and over half (56 percent) of families
affected by stroke fall into the high costs burden group (Figure
15).\14\
Again, in our interviews of families, we found that out-of-pocket
costs can be steep even for families with private coverage. Families
that had private coverage through their jobs or had purchased it on
their own, in several cases, faced copays, deductibles, and out-of-
pocket costs for care not covered by the insurer that posed a severe
financial strain. While copays for prescription drugs and doctor visits
were often nominal on a unit basis, families who had ongoing or
multiple needs were confronted with large cumulative costs. Deductibles
reaching as high as $6,000 exposed some families to medical costs their
budgets could not absorb, resulting in large medical debts. When
private insurers limited coverage, as for mental health care or
prescription drugs, or excluded particular services, such as dental
care, families--although insured--were uninsured for this care, and
like the uninsured, avoided seeking care due to cost.
cancer: a high cost diagnosis
One of the fears that many American families have is that the
illness of a family member and the desire to provide the fullest and
best treatment will lead to financial ruin. When someone we hold dear
is ill, being able to provide treatment and hopefully a cure is
paramount, but unfortunately today even those with health insurance may
face devastating medical bills that both compromise treatment and sap
financial resources. One of the clearest examples of the holes in
health care coverage is the experience of families where cancer has
taken a toll.
The majority of cancer patients under age 65 have private health
insurance. Yet, despite having private health insurance some face high
health care costs that can put both their treatment and physical and
financial well-being at risk. In our 2006 Kaiser/Harvard/USA Today
survey of households affected by cancer in 2006, 13 percent of people
who said the person with cancer was insured (and 45 percent of those
who were uninsured at some point during cancer treatment) reported that
the cost of cancer care was a major burden on their family (Figure 16).
Among those with insurance, nearly a quarter reported the plan paid
less than expected for a medical bill for their family member and 1 in
10 reached the limit the plan would pay for cancer treatment (Figure
17).
As a result, nearly a quarter of those with insurance reported that
as a result of the financial cost of dealing with cancer they had used
up all or most of their savings and 1 in 10 turned to relatives for
help. Although those without insurance faced significantly more
challenges, 7 percent of people who said the person with cancer was
insured reported being unable to pay for basic necessities and 3
percent said they needed to declare bankruptcy (Figure 18).
Cost considerations not only affected financial stability for the
family but in some cases compromised treatment for the cancer--5
percent of the insured and 27 percent of the uninsured said they had
delayed or decided not to get care due to costs (Figure 19). These are
people who stopped or postponed treatment for a deadly disease, putting
their life and survival at risk due to costs not covered by
insurance.\15\
Our recent report conducted jointly with the American Cancer
Society profiles the situations faced by 20 cancer patients who had
called in to the American Cancer Society Health Insurance Assistance
Service. Their stories show that even with private insurance a
diagnosis of cancer can lead to large medical debts, filing for
personal bankruptcy, and going without potentially lifesaving
treatments and point out the shortcomings of their private health
insurance coverage. Even when cancer patients have relatively
comprehensive coverage through their private health insurance coverage,
the sizeable costs from co-payments, deductibles, and co-insurance can
easily mount up.\16\
One of the profiled patients, Keith Blessington, has been in and
out of the hospital since he was diagnosed with stomach cancer. When
his COBRA ran out his only option was to join a high-risk pool that
includes a monthly premium of $1,100, a $1,000 deductible, and 20
percent cost-sharing. Keith has already gone through his 401K, has not
paid his mortgage for a few months, and is borrowing money from a
credit card to pay for care for his ailing mother and his various
medical bills. As Keith mentions in his own words,
``[W]hen you have medical problems, a lot of people think
it's just their doctor and the hospital. But that is not the
case. There are so many outside groups that you get bills from
. . . you could have five different doctors bills for one
treatment that you had and you don't even know who the four
others are. But, they touch base and they submit a bill and you
don't know for sure if they will accept your insurance until
they actually submit.''
Keith is now $60,000 in debt and that figure climbs an additional
$6,000 every month.
In addition to the cost-sharing and deductibles, many patients find
maximum caps on their benefits or that their policy does not pay for
treatments recommended by their doctor. Among our profiled patients,
some faced a cap of $250 for coverage of radiation and $10,000 for
outpatient costs--amounts easily exceeded in the course of treatment
for many cancers. For example, Debra Gauvin, 52, diagnosed with stage
II breast cancer had employer-sponsored insurance that covered 80
percent of her lumpectomy. However, she quickly met the $20,000 annual
maximum on her insurance plan, which left her responsible for her
treatment costs. She currently owes $18,000 for surgery and
chemotherapy. Although she was able to receive a 61 percent discount
for the radiation she still needs, the remaining costs of the radiation
treatment were too significant of a financial burden for Debra so she
decided to postpone her radiation until 2009, when her insurance would
help cover the costs.\17\ Such cost considerations can both compromise
treatment objectives and health outcomes.
implications for health reform
These experiences document the challenges families face today--even
those with private health insurance coverage--when seeking medical
care. High levels of cost-sharing and caps on covered benefits can
compromise the level of protection health insurance provides and lead
to both reduced access to needed care and serious financial burdens and
medical debt. As our family budget study shows for low- and moderate-
income people, especially those with chronic health problems, even
modest levels of cost-sharing can mount up, impeding access to care and
resulting in financial burdens. Likewise, as the cancer patient
profiles demonstrate, those with serious illnesses can have their care
and outcomes jeopardized by limits and gaps in coverage even when they
have health insurance.
In the struggle to bring affordable health insurance coverage to
all Americans, budget constraints and the high cost of health insurance
will undoubtedly put pressure on policymakers to limit the scope of
coverage and impose substantial cost-sharing to hold down Federal
costs. Cost concerns, however, need to be balanced against the
expectation that health reform will bring improved coverage and lower
health spending for families. As consideration of health reform moves
forward, it will be important to assess both the scope of coverage
provided and the level of financial assistance offered against
substantial medical costs especially for those with chronic and serious
illness.
Thank you for your consideration.
References
1. Kaiser Commission on Medicaid and the Uninsured, ``The
Uninsured: A Primer,'' October 2008.
2. Kozak LJ, Hall MJ, and MF Owings. 2001. ``Trends in Avoidable
Hospitalizations, 1980-1998,'' Health Affairs, 20(2):225-232.
3. Ward E, Halpern M, Schrag N, Cokkinides V, DeSantis C, Bandi P,
Siegel R, Stewart A and A Jemal. 2008. ``Association of Insurance with
Cancer Care Utilization and Outcomes.'' A Cancer Journal for
Clinicians, 58:9-31.
4. Employer Health Benefits 2008 Annual Survey, Kaiser Family
Foundation and Health Research & Educational Trust (HRET), September
2008.
5. Ibid.
6. Cunningham PJ. ``Trade-Offs Getting Tougher: Problems Paying
Medical Bills Increase for U.S. Families, 2003-2007,'' Center for
Studying Health System Change, #21, Sept. 2008.
7. Kaiser Health Tracking Poll: Election 2008, ``October
Tracking,'' (conducted October 8-13, 2008).
8. Ibid.
9. Ibid.
10. Kaiser Health Tracking Poll: Election 2008, ``Economic Problems
Facing Families'' (conducted April 3-13, 2008).
11. Paradise J, Schwartz T, Perry M, and J Cummings, ``Snapshots
from the Kitchen Table: Family Budgets and Health Care'' Kaiser
Commission on Medicaid and the Uninsured and Lake Research Partners,
February 2009.
12. Hoffman C, Rowland D and E Hamel, ``Medical Debt and Access to
Health Care,'' Kaiser Family Foundation, September 2005.
13. Banthin J, Cunningham P, and DM Bernard, 2008. ``Financial
burden of health care, 2001-2004,'' Health Affairs, 27(1):188-195.
14. Banthin J and DM Bernard. 2007, ``Changes in Financial Burdens
for Health Care.'' Journal of the American Medical Association,
296(22): 2712-2719.
15. USA Today/Kaiser Family Foundation/Harvard School of Public
Health National Survey of Households Affected by Cancer (conducted Aug
1-Sept 14, 2006).
16. Schwartz K, Claxton G, Martin K, and C Schmidt, ``Spending to
Survive: Cancer Patients Confront Holes in the Health Insurance
System,'' Kaiser Family Foundation and American Cancer Society,
February 2009.
17. Ibid.
Senator Bingaman. Thank you very much.
Ms. Turner, why don't you go right ahead?
STATEMENT OF GRACE-MARIE TURNER, PRESIDENT,
GALEN INSTITUTE, ALEXANDRIA, VA
Ms. Turner. Thank you, Senator. I am grateful to Senator
Kennedy and to Ranking Member Enzi for inviting me to testify.
And thank you to Senator Bingaman for chairing this hearing
today. As a native of the land of enchantment it's a special
privilege to be here today.
I want to thank the committee and your dedicated staff for
the incredibly hard work you are doing to bring the issue of
health reform to the forefront of the national debate. I
founded the Galen Institute in 1995 because I believe that this
issue is so important. And we focus exclusively on health
reform.
As today's witnesses and many other experts have shown, the
growing number of Americans, even those with insurance, are
facing health costs that put serious financial pressure on
them, especially during the Nation's economic crisis. But
solving this problem must be integrated with other
considerations, especially the cost of health insurance and the
likelihood of causing other distortions inside and outside the
health sector. If the government were to require all Americans
to have comprehensive health insurance that protects them
against all but routine medical expenditures, the requirement
would lead to higher cost for health insurance.
The full cost of employment-based health insurance is often
hidden from workers. But the consequences are not. Economists
have demonstrated that an increase in health insurance premiums
results in lower wages and lost jobs for workers and increases
the ranks of the uninsured.
Large and small companies as well as families must balance
spending on health insurance with other needs. A number of
employers have found that creative benefit designs that engage
employees as partners in managing health cost allow them to
continue providing health insurance and to continue to contain
costs for both the company and employees. Maintaining this
flexibility in benefit design is crucial to keeping health
insurance affordable and therefore to keeping as many people as
possible insured.
In my testimony I describe the positive results of several
companies in increasing access to health insurance for their
workers and containing costs. Deloitte Center for Health
Solutions found, for example, that the cost of consumer
directed health plans increased by only 2.6 percent in 2006,
about a third the rate of increase in the cost of traditional
insurance plans.
Some innovative benefit designs give people and companies a
way to couple spending accounts with affordable health
insurance. The account is used to pay for routine health
expenditures such as doctor's visits. The high deductible
insurance covers larger medical costs, especially
hospitalizations, surgeries and cancer care.
Many also cover preventive care. And several surveys have
shown that the use of preventive care actually increases with
the use of these consumer-directed plans. Health savings
accounts in particular also have stop loss provisions that
protect policy holders against major medical costs.
They are statutory requirements that allow only $5,000 in
out-of-pocket expenditures for individuals and $10,000 for
families. While that may seem like a lot, much of that can be
funded through savings in the policy accounts as well as
protecting them against $100,000, $200,000, even larger medical
bills. A growing number of people are choosing to buy this type
of policy to protect them against large medical expenditures.
President Obama has said many times during the campaign if
you've got health care already then you can keep it, if you're
satisfied with it. A government-mandated benefits package with
lower deductibles would rob tens of millions of Americans of
this choice.
Expanding access to health plans like Medicare and Medicaid
is not a solution since they also often fail to meet the test
of providing comprehensive coverage and access to care.
Medicare has limits on hospital care and many other gaps in
coverage that force seniors to seek additional insurance
through retiree health plans, through Medigap plans or by
selecting Medicare advantage plans that provide them access to
more comprehensive coverage than traditional Medicare pays.
Medicaid pays physicians so little that recipients often have
to go to hospital emergency rooms because they can't find a
private physician just to seek routine care.
Making sure that everyone has health insurance to protect
against large medical bills is a wise and worthwhile policy
goal. Then we can focus on how to provide access to routine and
preventive care, especially focusing on those with the greatest
needs and the most limited resources. Otherwise we could find
that the ranks of the uninsured have grown through an effort to
make health insurance more generous for a dwindling few.
Thank you very much. I look forward to your questions.
[The prepared statement of Ms. Turner follows:]
Prepared Statement of Grace-Marie Turner
Executive Summary
There is little debate about the need to make sure that all
Americans have the security of insurance that protects them from
medical bills they can't afford and that provides them access to the
care they need. But no part of the health sector, and no one goal, can
be considered in isolation from the impact it will have on other goals
and aspects of health care and coverage. That is particularly true when
considering the issue of the underinsured and of requiring more
generous, more comprehensive coverage. Solving this problem must be
integrated with other considerations, especially the risks of driving
up costs and causing other adverse consequences.
If the government were to require all Americans to have
comprehensive insurance that protects them against all but routine
medical expenses, the requirement would lead to higher costs for health
insurance. The full cost of employment-based health insurance is often
hidden from workers, but the consequences are not. Economists have
demonstrated that an increase in health insurance premiums results in
lower wages and lost jobs for workers and increases the ranks of the
uninsured.
Expanding access to public plans such as Medicare and Medicaid is
not a solution. These programs have defined benefit packages, but they
also often fail to meet the test of providing comprehensive coverage
and access to care.
Large and small companies as well as families must balance spending
on health insurance with other needs. A number of employers have found
that creative benefit designs that engage employees as partners in
managing costs allow them to continue providing coverage and to contain
costs for both the company and employees, often while also providing
access to preventive care and wellness programs. Maintaining this
flexibility in benefit design is crucial to keeping health insurance
affordable.
President Obama said many times during the campaign, ``If you've
got health care already, and probably the majority of you do, then you
can keep your plan if you are satisfied with it.'' A government-
mandated benefits package would rob tens of millions of Americans of
this choice.
There is no question that health costs create financial hardship
for millions of Americans. Making sure that everyone has health
insurance to protect against large medical bills would seem to be a
wise and worthwhile policy goal. Then we can focus on how to provide
access to routine and preventive care, especially focusing on helping
those with the greatest needs and most limited resources. Otherwise, we
could find that the ranks of the uninsured have grown through an effort
to make health insurance more generous for a dwindling few.
______
Addressing Underinsurance in National Health Reform
I am most grateful to Chairman Kennedy and Ranking Member Enzi for
inviting me to testify this morning before your committee on
``Addressing Underinsurance in National Health Reform.'' And thank you,
Mr. Bingaman, for chairing this hearing today. As a native of the Land
of Enchantment, it is a special privilege to speak here today.
I also want to thank the committee and your dedicated staff for the
incredibly hard work you are doing to bring the issue of health reform
to the forefront of the national debate. I founded the Galen Institute
in 1995 as a research organization devoted to the study of health
reform because I believe that making progress on this issue is so
crucial to our Nation's future. We focus at the Galen Institute on
policy initiatives to expand coverage to the uninsured and provide
incentives to achieve more affordable care and coverage.
I would like to focus on several issues involving the underinsured
as they pertain to the larger goal of providing health insurance to
all.
There is little or no debate about the need, in a country as
wealthy and compassionate as ours, to make sure that all Americans have
the security of coverage that protects them from medical bills they
can't afford and that provides them access to the care they need. But
no part of the health sector, and no one goal, can be considered in
isolation from the impact it will have on other goals and other aspects
of health care and coverage. That is particularly true when considering
the issue of the underinsured.
As Catherine Schoen and many other experts have shown, a growing
number of Americans, even those with insurance, are facing health costs
that put serious financial pressure on them, especially at a time when
the financial security of tens if not hundreds of millions of Americans
are threatened by the Nation's economic crisis.
But solving this problem must be integrated with other
considerations, especially the cost of health insurance and the
likelihood of causing other distortions inside and outside the health
sector.
In my testimony, I will make two key points: (1) Flexibility in
benefits is crucial in keeping health insurance affordable. (2) If the
government were to require all Americans to have comprehensive
insurance that protects them against all but routine medical costs, the
requirement would lead to higher costs for insurance, resulting in
lower wages and lost jobs for workers and in increasing the number of
uninsured.
flexibility in insurance
Ms. Schoen defines in her writings in Health Affairs\1\ and
elsewhere that those who are insured are considered underinsured ``if
they experienced at least one of three indicators of financial exposure
relative to income: (1) out-of-pocket medical expenses for care
amounted to 10 percent of income or more; (2) among low-income adults
(below 200 percent of the Federal poverty level), medical expenses
amounted to at least 5 percent of income; or (3) deductibles equaled or
exceeded 5 percent of income.''
This third provision would mean that if a family with an income of
$60,000 a year had purchased a health insurance policy with a $3,000
deductible, they would be considered underinsured, even if they chose
that option--as they very well might do in order to save on insurance
premiums and make sure they are protected against major medical
expenses.
A growing number of people are struggling to pay for health care
and health insurance. Millions of them are choosing to buy a more
affordable, higher-deductible policy, yet under this definition, they
would be considered underinsured.
This gets to the fundamental definition of health insurance: Should
it provide financial protection against major medical bills or protect
against most expenditures on health care?
The policy debate in Washington and State capitals around the
country often is confused by what we mean by ``insurance.'' In other
sectors of the economy, insurance means protection against costs that
people could not afford to pay without considerable financial
difficulty, if at all. That is why we buy automobile insurance to
protect us against collision, injury, and loss of our vehicle, or
homeowner's insurance to protect against the risk of fire, theft, or
other serious and expensive damage.
But with health insurance, we start with the premise that it should
protect us against exposure to all but minimal costs, with copayments
for doctors' visits of $15 or $20 and $5 or $10 for prescription drugs.
The rest of the costs of the office visits or medicine are run through
insurance, driving up the cost of the coverage. In the trade-off,
accessing care for more serious illnesses may be more difficult and
people may be exposed to expensive copayments for larger medical bills.
Returning to the true meaning of insurance would help reduce this
problem. Making sure that everyone has health insurance to protect
against large medical bills would seem to me to be a wise and
worthwhile policy goal. Then we can focus on how to provide access to
routine and preventive care, especially focusing on helping those with
the greatest needs and most limited resources.
The two stories of Wal-Mart and General Motors tell the much larger
picture of the opportunities and challenges facing health policymakers
today.
Wal-Mart reported last week that all but 5.5 percent of its
employees now have health insurance, compared with a nationwide
uninsured rate of 18 percent. The Washington Post reported in a
February 13, 2009, article \2\ that an important tool that Wal-Mart has
used to reduce its uninsured numbers is flexibility in its benefit
offerings. ``Employees said they wanted more choices, especially low-
cost emergency coverage options. Wal-Mart responded with a menu of
deductibles, co-payments and maximum out-of-pocket costs. It teamed up
with the Internet site WebMD to simplify enrollment, created electronic
health records and expanded its $4 generic drug plan from the 350
medications available to customers to more than 2,000 for employees,''
the Post reported. ``Many workers have chosen low-premium, high-
deductible plans that analysts say provide less coverage for preventive
and primary care. The company tries to mitigate that with an upfront
credit of between $100 and $500 that can be used on any medical
expense.'' And for major surgeries and other major medical treatments,
Wal-Mart negotiates with providers to get the best prices on high-
quality care. For example, the company has teamed up with the Mayo
Clinic to provide care for employees needing transplant surgery.
There are hundreds of stories like this from around the country as
employers seek to find the best care at the most affordable prices so
they can continue to provide their employees with health insurance.\3\
Flexibility in health benefit offerings helps employers achieve those
goals.
One tool is Health Savings Accounts (HSAs) that permit individuals
to combine health insurance with a tax-free health spending and savings
account. The account is used to pay for routine health expenses, such
as doctors' visits, for services not covered by insurance, and to
create a cushion to pay premiums in lean economic times. The high-
deductible insurance policy covers larger medical expenses, especially
hospitalization and surgeries. Federal law also allows the insurance
contract to cover preventive care, such as cancer screenings,
mammograms, and prostate tests. Several surveys have shown the use of
preventive care actually increases with these plans.\4\ And HSAs do
have a built-in stop-loss that protects policyholders against major
medical costs.
Target offers its employees a range of health insurance choices.
One HSA option costs them as little as $20 a month, and Target
contributes $400 a year to health spending accounts for individuals and
$800 for families.\5\ John Mulligan, Target's vice president for pay
and benefits, says, ``These plans engage our team members in a
decisionmaking process that gives them greater ownership and control of
their health care dollars.'' The company offers its 360,000 employees
Decision Guides to help them compare prices and quality and to estimate
their costs, plus access to wellness programs, a nurse hotline, and
other support tools.\6\
Whole Foods' CEO John Mackey toured the country talking to
employees about health benefits options. Afterward, employees voted to
switch to new account-based health plans with higher-deductible
insurance coverage, Health Reimbursement Arrangements (HRA). Whole
Foods puts up to $1,800 a year into a spending account for each
employee, with Mackey pointing out that this is not charity but part of
the employee's compensation package. If they don't spend the money on
medical care, it rolls over and the company adds more the next year.
Some workers have as much as $8,000 in their accounts. Whole Foods
saves money and still covers 100 percent of its employees' health
insurance premiums.\7\
Companies that have introduced health plans with new incentives for
consumers to be engaged as partners in managing health costs generally
have seen lower-than-average health cost increases. Annual premium
increases for employment-based coverage averaged about 6 percent for
the last 3 years, down from double digits earlier in the decade.\8\
The most impressive results have come from consumer-directed plans
such as HSAs and HRAs. Deloitte's Center for Health Solutions found
that the cost of consumer-directed health plans (CDHPs) increased by
only 2.6 percent in 2006 among the 152 major companies it surveyed.
This is about a third the rate of increase for traditional plans.\9\
The fact that these employers are able to manage costs through
flexibility in structuring health benefits gives them more control over
costs and makes it more likely they will be able to continue offering
coverage.
Contrast that with General Motors and the other major automobile
manufacturers. High health costs associated with extremely generous
health benefit packages are major factors in the companies' severe
financial distress.
Nonetheless, there are discussions in the health policy debate
about a proposal from President Obama and others that all plans
participating in his proposed Health Exchange would have to provide
insurance equivalent to the generous and comprehensive BlueCross
BlueShield Standard Option Plan.
Rather than a mandate that could cause more employers to drop
coverage, continued flexibility in benefits will allow individuals and
employers more choices in shaping their health benefit packages to fit
their needs and their budgets and is likely to lead to more people
having insurance than if government were to direct all plans to meet a
high benefits threshold.
challenges in public plans
Employers and private insurers are not the only ones struggling
with the trade-offs between costs and benefits. Public plans such as
Medicare and Medicaid have defined benefit packages, but they also
often fail to meet the test of providing access to comprehensive
coverage. Expanding access to public programs is not a solution.
Medicare, for example, was the last major health plan in the
country to offer a prescription drug benefit, long after private plans
recognized that this was an essential part of quality medical coverage.
Medicare also has limits on hospital care and other gaps in coverage
that force seniors to seek additional insurance through retiree health
plans, private Medigap plans, or by selecting Medicare Advantage plans
that offer more benefits and more comprehensive coverage than
traditional Medicare. Many Medicare patients also are having a
difficult time finding a physician as payment rates fail to keep pace
with providers' costs.
Medicaid also looks like a generous benefits package on paper, but
when I served on the Medicaid Commission (2005-2006), we heard dozens
of testimonies about the problems recipients have in actually accessing
care. In many States, Medicaid pays physicians so little that they
cannot afford to see Medicaid patients, forcing patients to go to
hospital emergency rooms to seek even routine care. And seniors who are
dually-eligible for Medicare and Medicaid often face the greatest
difficulties as they are switched from one program to another depending
upon where their care is being delivered. This often results in loss of
medical records, duplicative tests, over- or under-treatment with
prescription drugs, and a serious lack of coordination among the many
medical professionals providing them care. My colleague Robert Helms of
the American Enterprise Institute and I offered a recommendation, which
was adopted by the Commission, calling for more State flexibility in
coordinating care for dual eligibles.\10\
Therefore, I believe the evidence supports the need for greater
flexibility in benefit structures for both public and private health
plans, not in rigid benefit structures, to provide greater access to
coverage.
cost is the issue
In decades of opinion surveys about health care, the cost of care
and coverage is inevitably at the top of the list of concerns. If
health coverage is to be more generous, someone must pay.
Professor Mark Pauly of the University of Pennsylvania's Wharton
School has done extensive research on employment-based health
insurance,\11\ and he concludes that workers ultimately pay for their
insurance through lost wages and sometimes through lost jobs.
The Kaiser Family Foundation reported in its latest employer
benefits survey \12\ that the average cost of an individual policy
offered through the workplace is $4,704, with the worker contributing
$721 and the firm, $3,983. The average job-based family policy costs
$12,680, and the worker's contribution is significantly higher, at
$3,354 (a large reason that many employees decline the family
coverage), with the employer paying $9,325.
Tax law provisions shield health insurance from income and payroll
taxes. While health insurance is part of the compensation package of
workers, this provision means that the full cost of employment-based
health insurance is most often hidden from workers. However, rising
health costs are a major factor in depressing worker take-home pay.
If Washington were to direct all employers and consumers to obtain
comprehensive health coverage, workers ultimately would pay in lower
wages and even lost jobs.
Economist Katherine Baicker and others have demonstrated that an
increase in health insurance premiums also increases the ranks of the
uninsured and the unemployed.\13\ ``Understanding the relationship
between health insurance costs and labor markets is of growing policy
importance,'' write the authors. ``Together [our] estimates demonstrate
that the labor market effects of rising health insurance are far from
neutral.''
They suggest that the cost of employer mandates is likely to be
passed on to workers in the form of lower wages. They also suggest that
if some groups of workers are exempt from an employer mandate, such as
part-time workers or employees in small firms, then employers may
increase their reliance on these workers, undermining the goal of the
mandate.\14\
The authors conclude that ``rising health insurance premiums will
place an increasing burden on workers and increase the ranks of both
the uninsured and the unemployed.''
It is important to recognize that requiring health insurance
packages to be more generous than they are today will have other
consequences. In order to provide the opportunity for balance between
pay and insurance, it is essential that employers and health insurers
continue to have flexibility in trying to keep costs down through
benefit design. Otherwise, we could find that the ranks of the
uninsured have grown through an effort to make health insurance more
generous for a dwindling number of insured workers.
And at the micro level, individuals and families must balance their
need for access to needed medical care and protection against large
medical bills with other demands on their resources, including food,
housing, transportation, training and education.
Having a health insurance policy with a $1,000 or $2,000 deductible
may seem high until a family is faced with $50,000 to $100,000 or more
in medical bills that they cannot pay.
President Obama said during the second presidential debate, Oct. 7,
2008,\15\ and many times during the campaign, ``If you've got health
care already, and probably the majority of you do, then you can keep
your plan if you are satisfied with it.''
A government-mandated benefits package would rob tens of millions
of Americans of this choice.
conclusion
There are many, many problems to be addressed in health reform in
the United States. The need for protection against major medical
expenses is high among them. But the goals of health reform cannot be
considered apart from their cost. I am concerned about focusing on the
issue of underinsurance in isolation from the costs, resource
limitations, and complexities of our health sector. A requirement from
Washington that all policies must be generous and comprehensive could
lead to other distortions, including loss of jobs, wages, and
insurance. In addition, there are serious medical workforce issues
which also must be considered. If people are to be able to obtain care,
we must address these shortages, especially the need for more primary
care physicians. Finally, the Federal and State governments need to
find more creative ways to reduce their health expenditures so these
growing costs do not crowd out other needed functions of government.
Thank you for the opportunity to testify before you today. I look
forward to your questions.
Endnotes
1. Cathy Schoen, Sara R. Collins, Jennifer L. Kriss, and Michelle
M. Doty, ``How Many Are Underinsured? Trends Among U.S. Adults, 2003
And 2007,'' Health Affairs, June 10, 2008, at http://
content.healthaffairs.org/cgi/reprint/hlthaff.27
.4.w298v1.
2. Ceci Connolly, ``At Wal-Mart, a Health-Care Turnaround,'' The
Washington Post, February 13, 2009, at http://www.washingtonpost.com/
wp-dyn/content/article/2009/02/12/AR2009021204096_pf.html.
3. Grace-Marie Turner, ``The Value of Innovation in Health Care,''
Galen Institute, January 13, 2009, at http://www.galen.org/component,8/
action,show_content/id,13/category_id,2/blog_id,1145/type,33/.
4. ``Chronically Ill Continue Receiving Needed Care When Enrolled
in a Consumer-Driven Health Plan,'' UnitedHealth Group, April 23, 2007,
at http://www.unitedhealthgroup.com/news/rel2007/
Quality_of_Care_Summary_0407
.pdf.
5. ``Target Offers Employees Health Savings, Reimbursement
Accounts, Plans to Eliminate Traditional Health Plans, USA,'' Medical
News Today, May 18, 2006, at http://www.medicalnewstoday.com/articles/
43453.php.
6. ``Thought Leaders: John Mulligan, Vice President, Pay &
Benefits, Target Corporation,'' hub Magazine, Summer 2008, at http://
www.hubmagazine.net/printer.php?ID=180.
7. ``Whole Foods Market Benefits,'' Whole Foods Market, at http://
www.wholefoodsmarket.com/careers/benefits_us.php.
8. Total U.S. health benefit cost rose by 6.1 percent in 2007.
``Mercer National Survey of Employer-Sponsored Health Plans,'' Mercer
LLC, November 19, 2007, at http://www.mercer.com/
summary.jhtml?idContent=1287790.
9. ``Reducing Corporate Health Care Costs: 2006 Survey,'' Human
Capital Practice of Deloitte Consulting LLP and the Deloitte Center for
Health Solutions, 2006,
at http://www.deloitte.com/dtt/cda/doc/content/
us_chs_red_cor_hea_costs_
0106.pdf.
10. Grace-Marie Turner and Robert B. Helms, ``Medicaid Advantage: A
Medical Home for Dual-Eligible Beneficiaries,'' March 30, 2007, at
http://www.galen.org/fileuploads/MedicaidAdvantage.pdf.
11. Mark V. Pauly, Health Benefits at Work: An Economic and
Political Analysis of Employment-Based Health Insurance, University of
Michigan Press, 1999.
12. Gary Claxton, Jon R. Gabel, Bianca DiJulio, Jeremy Pickreign,
Heidi Whitmore, Benjamin Finder, Marian Jarlenski, Samantha Hawkins,
``Health Benefits in 2008.'' Health Affairs, September 24, 2008 at
http://content.healthaffairs.org/cgi/reprint/hlthaff.27.6.w492v1?
ijkey=yYSZwPeyQ0oyU&keytype=ref &siteid=healthaff.
13. Katherine Baicker and Amitabh Chandra, ``The Effect of
Malpractice Liability on the Delivery of Health Care,'' NBER Working
Paper Series, Working Paper 10709, August 2004, at http://
www.dartmouth.edu/?kbaicker/BaickerChandra
MedMal.pdf.
14. Katherine Baicker and Amitabh Chandra. ``The Labor Market
Effects Of Rising Health Insurance Premiums,'' Journal of Labor
Economics, 2006, v24(3,Jul), 609-634, at http://www.nber.org/papers/
w11160.
15. Barack Obama in the second presidential debate, October 7,
2008, at http://www.cnn.com/2008/POLITICS/10/07/
presidential.debate.transcript/.
Senator Bingaman. Thank you all for your good testimony.
Let me start with a couple of questions.
Ms. Schoen, in your view it's important to establish a
minimum benefit level, as I understand it in your insurance
design principles. I just heard Ms. Turner say that would be a
big mistake to have a government-mandated benefit level. You
also made reference to Massachusetts. Could you describe what
they've done in Massachusetts on this issue of establishing a
minimum benefit level and how it's worked?
Ms. Schoen. Yes, thank you for the question. I think the
emphasis on minimum is important. Ms. Turner talked about HSAs
setting a standard of $5,000 out-of-pocket as the maximum.
We're talking about putting a minimum and to--that would be
credible insurance.
In fact, if you think of requiring people to have insurance
or if you think if using a tax credit to buy insurance you need
to define what would qualify. What Massachusetts did is took
the decision on what exactly those benefits should be and said
this is a very difficult issue. We want multiple stakeholders
to be part of that decision.
There were general principles on access and financial
protection. Then a group after the legislature acted came
together and looked at various benefit designs on thinking
about what the minimum would be. You could be more generous,
but you couldn't go below.
They came up with several standards. Benefits should be
very broad in scope. You shouldn't have an insurance package
which simply doesn't cover something that you need.
There should be financial protection. There should be a
point at which the plan starts picking up out-of-pocket costs
above a certain level. There was a discussion on how high that
threshold should be and worrying about lifetime limits.
When you talk to actuaries right now it's very difficult to
compare plans. One says 500,000. Another says a million. It
costs pennies to put some of these lifetime maximums in them.
Evening it out makes it possible to compare.
So what Massachusetts did was put a floor under it in their
connector which makes it very easy to compare. They have a
bronze, silver and gold set of benefit designs. But they're not
rigid. There's quite a bit of variation within actuarial
equivalents. So they said we want principles of access and
protection.
The other thing that was important was they looked at
essential care. Preventive care is out from underneath the
deductible to encourage primary care. Some of the designs we've
seen private companies use that say if we have essential
medications like insulin, you don't want to discourage use of
it, so that went into the consideration.
That was the effort. It did in fact rule out some of the
insurance that was being sold on the market. There were
policies with artificial limits, didn't cover days of hospital,
didn't cover doctors, didn't cover drugs. Those are no longer
considered credible insurance. There is a floor when you're
buying insurance that's protective.
Senator Bingaman. So, if I understand correctly, the system
that was adopted in Massachusetts under Governor Romney,
provided that everybody has to get coverage. And it provided
that everyone, every insurance company that sold coverage in
Massachusetts had to meet that minimum benefit level that was
established by this board.
Ms. Schoen. I actually live in western Massachusetts. The
requirement is on me to show I have an insurance policy that
meets the standard. All the carriers send us very simple
letters to say, we were insured. And we were insured on a
package that meets the standard.
We could do this through the tax code, the Federal tax code
for exemptions could say this meets the standards.
Senator Bingaman. Let me ask Ms. Turner. What is wrong with
that kind of approach as you see it?
Ms. Turner. Actually, the Federal Employee Health Benefit
Plan has very comprehensive coverage. But it is even less
specific in what coverage. It has to make sure the doctor
visits are covered, that hospitalization is covered, emergency
room care is covered.
But within that parameter there is even more flexibility
and benefit design. And competition among the market, in the
marketplace, can actually lead to the companies being forced to
provide more comprehensive coverage because people aren't going
to want to buy a policy that doesn't cover cancer care.
Senator Bingaman. Well let me just ask, though, is it in
the public's interest to encourage competition between insurers
as to whether or not they're going to cover a particular
ailment that people come up with? If there's a general
consensus, as I guess there is in Massachusetts, that a
particular ailment is common enough that it ought to be
covered.
Why would we want to allow or encourage insurance companies
to compete on the basis on whether they cover it or not? Why is
that a good thing for the public?
Ms. Turner. There are 1,900 mandates of what policies must
cover in the States now. And there's evidence that that is
driving up the cost of health insurance by as much as 30, and
in some States even 50 percent.
Senator Bingaman. Is this in Massachusetts?
Ms. Turner. Cost is a huge issue with the Massachusetts
plan. Specific mandates and the problem that I believe members
would have in specifying what needs to be covered and what
isn't. Everybody needs something. And if you wind up deciding
what's going to be covered and what's not then what is going to
be left out.
It's very difficult to leave anything out because in a
political world, you know, you really don't want to leave
anyone out. So, the question is what's covered? It's much
better to do this, I believe, on an actuarial basis and to make
sure people are covered and that there are dollar thresholds
rather than benefit design thresholds because there's really no
end to the number of benefits that can and should be covered by
policies.
Senator Bingaman. I've used my time.
Senator Enzi.
Senator Enzi. Thank you, Mr. Chairman. I appreciate the
tremendous testimony and charts, that are now a part of the
record, from you. It was very helpful.
One of the things I always think about with health
insurance is that when I buy my car insurance I know that I'm
not paying for the oil changes or the tire replacement. When I
buy my health insurance I am buying the change of oil and maybe
the tire replacement. And I know that drives up the cost
because there's a profit that's built into that part of it.
Minimum benefit level seems to leave enough flexibility to
do just about anything that we want to do until we start
putting in the details of what that minimum benefit level is.
I've done some looking in the preventive care, that we all
emphasize, is covered by a lot of insurance, but only used by
25 percent of the people that have it. What are we going to do
to drive up the usage if they're paying for it, when they're
not using it?
In the area of competition, I've been watching that a
little bit. I do see some benefits to competition in the health
insurance market. I know you don't have to look any further
than the Medicare Part D.
Seniors are getting the drugs they need. The program has 85
percent satisfaction rate. And it costs 37 percent less than
originally expected.
One of the reasons for that is we have a lot more companies
vying for it than we ever anticipated. Pre-Part D in Wyoming
there were two firms providing prescription drug coverage. Now
there are 48. And yes that does make it difficult for our
seniors to make the comparisons.
We did some programs that make that a little bit easier.
But that's what happens with choice. But we have found that one
of the reasons for the 85 percent satisfaction rate is because
they can choose something that they actually like.
I'll ask Ms. Turner, based on Part D experience, what kind
of market reforms can be made to increase that competition? How
do we get it increased?
Ms. Turner. I do think that Part D is a really wonderful
example of how market competition can not only drive broad
choice, but also get costs down. That the Part D benefit is
coming in at 40 percent under expected expenditures at this
point. Seniors have done it. You know, they've been offered a
range of plans and seniors have picked the plans that provide
the best care and the best coverage for the drugs and the
services that they need at the best price.
So the companies have been forced to provide not only
comprehensive coverage, but also affordable coverage or they're
going to be left out of the market. I think that model is
something that not only could work in other public programs,
but it's a model that could, I think, be utilized in other
parts of the economy as well, health sector. Thank you.
Senator Enzi. Thank you. I do think that the current tax
treatment of health insurance is unfair. The Federal Government
subsidizes the health insurance premiums for those who get
health insurance through their job. The highest tax subsidies
go to the people with the highest incomes and the most generous
plans.
Replacing the current tax exemption with a tax deduction, a
tax credit or a combination of the two would make insurance
more affordable for the uninsured and those who are shopping on
the individual market. I know that with my time, I don't have
time for all of you to answer that question right now. Thank
you, Mr. Chairman.
Senator Bingaman. Thank you very much. Let me call on
Senator Casey at this point.
Senator Casey
Senator Casey. Thank you very much. I want to thank each of
you for your testimony today. You've highlighted a problem that
I think persists across the country.
I know, like a lot of States, in Pennsylvania we have a lot
of the challenges that you've outlined today, a growing number
of uninsured and underinsured. I'm told that if the national
number is more than one in four of the uninsured or
underinsured of incomes greater than 200 percent of poverty,
that in our State that number is actually 36 percent. So we
have in many ways a larger challenge.
I wanted to highlight a letter that our office received
from a constituent and see if there's a reaction you have in
terms of how we can meet this challenge. A woman from Berks
County, PA from the eastern side of our State, Trisha Urban
wrote to us. And I'm summarizing what she wrote.
Her 30-year-old husband died of a heart attack the day
after she delivered her first child. Her husband had a child
heart defect and missed his doctor's visit because their health
insurance had been dropped and their medical bills were over
$100,000. As you can tell from the brief information, his death
may have been preventable.
She wrote to us offering to testify. She wanted us to share
her story with Members of Congress. Medical bills currently may
soon take the family's home.
What do we say to an American with that story, an American
family in light of the challenge we face overall? Any of you
want to take a stab at that? I know it's a tough question. It's
overly broad. But I wanted to get your reaction.
Ms. Rowland.
Ms. Rowland. I think all the stories that we have from our
cancer study, of profiles of cancer individuals as well as our
kitchen table snapshots that we released today really reveal
that Americans are struggling with these health care bills. I
think the thing that we have to focus on is that when people
have cost concerns they delay care even when it's really
important to get it. To have up-front and comprehensive care
that provides for preventive services and gets the cancer
victim in when they're there at stage one instead of stage
three, that allows the family that you're talking about to know
that they should be in a medical home and a good treatment
setting to get ongoing monitoring for this heart condition
would be an important part of any health care reform.
As you look at the principles for health care reform, I
think it's both the benefits that are being offered, the level
of financial protection and gearing so that families at the
lower end of the income spectrum don't have too great a burden.
So it really is doing cost-adjusted cost sharing. If you're
going to put cost sharing in, remember $5,000 for a family
earning $30,000 is very different than $5,000 for a family
earning $150,000.
Senator Casey. Ms. Shearer.
Ms. Shearer. It's hard to add to that answer. But I think
that the most important thing is that Members of Congress and
members of the Administration redouble their efforts and their
commitment to solving this problem. You know, as the Chairman
mentioned this came up at the summit yesterday. It's going to
be discussed at another summit next week.
I think that the message that we're all hearing is that
people were hurting before. But as of October people are
hurting, you know, the level of hurt has just expanded
exponentially. And I think that this really cries out for this
Congress, this Administration to just redouble their efforts
and pass some legislation to relieve this suffering.
Ms. Turner. Can I also say, in my written testimony talk
about Wal-Mart. The Washington Post had an article last Friday
on some of Wal-Mart's benefit design, really trying to get more
of its employees covered. And they actually have a benefits
package that would have been enormously helpful to the urban
family.
They, for less than $50 a month, have a package that covers
preventive care. The company puts $500 into an account to make
sure that people don't miss on routine doctor visits. But then
it covers everything over a certain threshold. So they would
absolutely not have been exposed to $100,000 or anything even
remotely close to that.
What I think we need is a package that provides access to
routine care, but that doesn't skimp on the larger end of the
extraordinarily important medical services that really can be a
difference between life and death for someone.
Senator Casey. I know we're almost out of time, but Ms.
Schoen, anything that you wanted to add?
Ms. Schoen. I think just to underscore what's been said.
Senator Casey. Fifteen seconds.
Ms. Schoen. I think it's vitally urgent. And we're often
penny wise and pound foolish. Medicaid is now paying for cancer
deaths.
We wait until the tumor is at stage four, then you spend
down. We are not saving money by the way we've designed our
benefits. We are in fact, incurring adverse outcomes.
We're hurting people's health. So I think this is part of a
larger issue. We need to get control of the way that we pay as
well as our insurance system.
Senator Casey. I know we're out of time. But I guess the
other scenario is people that actually have coverage may not go
for treatment. They may not engage in any kind of preventive
strategy. So that's a whole other set of questions.
I'm out of time. Thank you very much.
Senator Bingaman. Senator Alexander.
Senator Alexander
Senator Alexander. Thank you, Mr. Chairman. And thank each
of you for coming. Very interesting testimony.
I attended the Health Summit yesterday that President Obama
held which I appreciated. I think all of us there want to work
with him, and there's a consensus in the room that we need to
have a solution where every American has access to health
insurance.
There seems to be a broad consensus, that while harder to
implement, that that included a significant involvement by the
private sector. We'll see how that works as we go, but we have
that objective.
But the focus of the meeting was not how do we deal with
the uninsured, it was how do we control health care costs. That
was the purpose of the meeting. And the testimony that the
President wanted to present to us which we've heard before is
that if we don't do something about controlling the growth of
health care costs we're going to bankrupt the country.
Today, 45 percent of our Gross Domestic Product is the
amount of our debt. On the course we're going according to
testimony yesterday, it would be two to three hundred times the
amount of our debt. So everyone also agreed that, we need to
control the growth of costs.
So my question is, how do we reconcile making sure that
every American is insured, which is also our goal on the
Republican side and also the goal on the Democratic side, with
controlling health care costs. I was intrigued with Ms.
Turner's comment about the definition of insurance. And wonder
if others on the panel agree with it.
I mean, your suggestion is that the definition of insurance
might be to provide financial protection for major medical
bills rather than protect against most expenditures on health
care. Or as Senator Enzi put it, that insurance might be for
the catastrophe or the serious medical problem and that there
might be a different attitude toward the oil changes or the
tire changes. So my question--and Senator Bingaman asked the
question well--what would be the public interest in allowing
competition for that?
Well, maybe the question might be, that the answer might be
controlling all costs--which we have to do. Is it not a
possible solution or maybe this is what you all recommend any
way that we have a minimum benefit for these major expenses?
And that we encourage competition for everything else.
Is that practical? Would that control cost? And does that
differ significantly than the way Massachusetts did it? Ms.
Turner, then maybe Ms. Schoen, your comment on that.
Ms. Turner. Thank you, Senator. I absolutely agree that the
debate gets confused--thinking about routine costs and major
medical expenditures and putting them into the same package.
Whole Foods, another example, decided that it wanted to
move to one of these account-based plans. It said we can save
on insurance costs if we move the deductible up to say, $2,000.
But we're going to put $1,800 into an account to make sure
people have money to see the doctor to get routine care, to get
the medicines they need. But anything above $2,000 is going to
be covered by the insurance policy.
Whole Foods pays 100 percent of the premium for the
insurance. So, if you have that kind of a partnership in which
you're really working with employees to help them monitor their
own use of the system, but give them the resources to access
routine care. And they're going to know more what that is than
somebody at the health and human services. Then they also are
protected against the larger costs.
But I would strongly encourage that it be a dollar
threshold and not a benefits package because we just can't know
what everyone is going to need.
Senator Alexander. Now Ms. Schoen, what's wrong with that?
Ms. Schoen. I think for starters we need to look at where
our spending is. We absolutely need caps, out-of-pocket
protection. But if 50 percent of the healthiest people in the
United States stopped going all together, just didn't use a
single service, it counts for only 3 percent of the spending
dollars.
Almost all of our national spending is among sicker
patients, chronically ill and acute care. So, we want to
address that long-term cost curve--it's not at this front end,
it's at the high end. The same cost we're trying to protect
people against.
We are going to have to do payment reform. We have a set of
incentives that reward doing more with our volume rather than
our outcomes and more prudent use of resources. A hospital that
does extremely well taking care of someone and prevents a re-
admission stands to lose money compared to--and does handoffs
to primary care, stands to lose money over time because of
volume of services in the hospital goes down.
I think we need to couple insurance reform with protecting
patients and families. Thinking of those front-end costs around
preventive care with positive incentives, a lot of the company
examples are actually saying, how can we encourage and provide
incentives to get preventive care, particularly for diabetics
and chronically ill to engage them. And then say what is
happening in the insurance system that we are not paying
differently.
The private sector has a lot of flexibility. But when you
look closely they have no leverage. They are a very small share
of the sicker population in any of their cities. We don't have
coherent payment policies. Everyone is paying differently. We
have layers and layers of cost, administrative cost, at
insurance companies and hospitals.
I absolutely agree that costs are essential. And I think
insurance, if designed well, will provide you a platform to
start thinking much more creatively about the way we pay for
care.
Senator Alexander. Thank you, Mr. Chairman.
Senator Bingaman. Thank you.
Senator Hagan.
Senator Hagan
Senator Hagan. Thank you, Mr. Chairman. I think this is a
very good meeting that you've put together. And I thank the
panelists.
Just listening to the questions and the discussions, I
think what you were just talking about, Ms. Schoen?
Ms. Schoen. It's actually pronounced Shane. Pronounced
Shane, if you think of the cowboy movie.
Senator Hagan. Shane.
Ms. Schoen. But beyond that, it doesn't look like that.
Senator Hagan. It just seems like we're reiterating the
need for the health information technology system so that we
can, No. 1, have records available. And then be able to analyze
the data from individual chronic diseases to individual
institutions and across the country to see. Obviously we want
the best outcome. But we also have got to have a better control
on cost of health care in this country.
I was going to ask a question having to do with the risk
segmentation. We're talking about a survey that showed that a
number of adults in the United States are either uninsured or
underinsured, either 41 or 42 percent which seems like an
extremely high number. But I was just wondering about the
breakdown of that, whether it is because there are not
affordable options for health insurance for individuals or if
it had to do with the young and healthy adults who feel like
there's just no need at that point in their life to actually be
covered.
Ms. Schoen, could you address that and anybody else?
Ms. Schoen. In the study that we did the underinsured were
predominately low and modest incomes. So what you're seeing is
an affordability. It's a mixture of young, middle-aged and
older trying to figure out how to get a premium within an
affordable range and then often having the packages available
to them.
This would include people working for the small business
market which often have very high deductibles, extraordinarily
high and they've been going up or the individual insurance
market. I want to stress Diane Rowland's testimony and Gail's
also have it in, that it's not just the deductibles. But people
are running into what I call insurance surprises.
There was a cap on total amount of radiation covered. No
follow up care for cancer fully covered. It's something you
wouldn't even know about until you get in that situation.
That's where you get the risk segmentation.
There are prescription policies that don't exist at all
that restrict insulin use. It's a subtle signal on who we want
and who we don't. There are a lot of opportunities for risk
segmentation that are quite subtle.
It's both this benefit limitation not covering it all or
literally running out. My drugs are covered up until x dollars.
And then I'm on my own.
It's this whole mix that people find themselves in the
underinsured world.
Ms. Rowland. We've talked a little bit about mandated
benefits. Well one of the mandated benefits in many States is
mental health care. So that there are a lot of services that
you would want to have as part of a package that are not just
routine, but that can be very important for certain groups.
I think the real test of the adequacy of a health insurance
plan is how well it covers someone with ongoing chronic
illness. That's one of the places where if we can provide
better early care and better coordinated care, we may actually
save on the hospitalization side and be able to afford some of
the other preventive services we need.
Ms. Shearer. If I could just add to that one other problem
that people have. Everybody doesn't have access to a wonderful
employer based policy. Now State regulation varies.
But most people are in States where they will apply for an
individual policy. If they have any pre-existing health
conditions, if they've had a gap in coverage, they're probably
going to end up either without a policy or with a policy filled
with gaps that the gaps are designed around their needs. So
it's a major part of the problem.
Ms. Turner. I do think, that again argues that the
thresholds for protection really do need to be dollar-
denominated rather than sort of having a game. OK, we're going
to cover what regulations say we must and then not cover other
things.
I think that making sure people are protected financially
is really the important consideration. Then doctors and
patients can be more and have a greater role in making
decisions about what care they need.
Senator Hagan. Thank you, Mr. Chairman.
Senator Bingaman. I believe Senator Hatch was the first one
at the hearing. So we should probably let him ask his questions
at this point. Thank you.
Senator Hatch
Senator Hatch. Well thank you, Mr. Chairman. Welcome. We
appreciate all of you being here and trying to help us with
these very, very difficult issues and questions.
Let me go to you first, Ms. Shearer. In your testimony you
stated,
``A necessary building block will be expanded
research of comparative effectiveness so that we
increase the knowledge base from making treatment and
coverage decision. It would be better to cut the growth
of health care costs and get better value for our
health care dollar in order to be able to afford the
coverage improvements and expansions necessary to
eliminate the risk of being underinsured.''
Now I agree with the value and merits of doing comparative
effectiveness studies, however only in terms of looking at
clinical effectiveness and not for making treatment and
coverage decisions based on costs. There's too much variability
from patient to patient that directly affects the treatment
outcomes. Therefore such decisions should be left up to the
physician and patient who are most knowledgeable in their
situation.
In fact, using comparative effectiveness to make broad-
based coverage decisions has the potential to add unnecessary
costs to the system. So my question is, do you agree that we
should focus our comparative effectiveness efforts to ensure
patient choice and protect medical innovation?
Ms. Shearer. Well I think that the main focus is
appropriately un-clinical research where there's a real need.
But I'd like to tell you a few little stories about why I think
that there is potential to save a lot of money through this
kind of research. We have a program called Consumer Reports
Best Buy Drugs where we identify alternative drugs that are
equally effective and safe and less expensive.
Our researchers have found in looking at four categories of
drugs for heart use, ace inhibitors, high blood pressure drugs
and statins that if people switched from drugs that are more
expensive to drugs that provide better value with no impact on
health benefit, the potential savings are $2.7 billion a year
which is about 8 percent of the drug spending. So we think that
even if the studies don't include cost there is the possibility
for other groups, such as ours, to look at the data and find
ways to bring these effectiveness results to the point of being
able to help the system save money.
If you look at what happened at the drug effectiveness
review project based in Oregon, they did not include Vioxx.
Most of the States did not include Vioxx on their preferred
drug list because of the comparative effectiveness research.
That yielded tremendous benefits in terms of health care and
cost.
So it's hard to make a blanket statement. I think there's a
lot of potential for getting better value from this kind of
research.
Senator Hatch. Well thank you.
Ms. Turner, in your testimony you make a point to state the
flexibility in benefits is crucial to maintaining
affordability.
Now last week Wal-Mart reported that almost 95 percent of
its employees now have health care coverage due to a menu of
coverage options with a variety of out-of-pocket costs and
deductibles that meet each individual's unique needs. I don't
know whether you've been asked this question or not because I
had to be over on the floor. But what would be the impact on
health care coverage, wages and jobs in these tough economic
conditions if this flexibility is not preserved?
Ms. Turner. That's really the crucial point, Senator Hatch,
that companies are doing so much. It's under the radar really
because it's not----
Senator Hatch. You talk about Fresh Foods. I mean, my gosh,
people I understand love their approach.
Ms. Turner. They do. And Wal-Mart for example takes very
seriously not only helping people with routine costs. But also
they're negotiating--they're working with the Mayo Clinic if
somebody needs transplant surgery. So they're using their
negotiating power to make sure that the large bills are covered
and that they're getting the best deal and the best care as
well on the small bills.
The flexibility of employers and the motivation of
employers to make sure that their employees are getting the
preventive and wellness care they need, as well as making sure
they're getting the best care on the high end is crucial. I
just think it would be such a shame to lose the incentive of
employers to really look at health costs across the board and
still make sure that their employees are healthy.
Senator Hatch. Well my colleagues on the other side hate
health savings accounts even though they're working amazingly
well on some of these companies. I guess it's because they
think it's a Republican idea. But I don't think Republicans can
take sole credit for that. I think it works.
Ms. Turner. That's right.
Senator Hatch. Do I have time to ask one more question, Mr.
Chairman?
Senator Bingaman. Sure, go right ahead.
Senator Hatch. Well let me ask one of Ms. Schoen. Your
testimony recommends setting a minimum floor and standard for
health insurance benefits. Having served in the U.S. Senate now
in my 33d year, I can safely predict that every decent provider
group out there will assert that their condition and service
must be part of the minimum benefit package.
I mean, I guarantee you, they're going to want everything
under the sun. And the end result will be a package that will
be far from ``minimum'' in its form.
Now this in turn will raise the cost of coverage for
millions of Americans and result in even greater numbers of
uninsured and underinsured. Now how do you propose to address
that challenge? And should we focus on actual value rather than
defining benefits?
Ms. Schoen. I think focusing on value is incredibly
important. The point I made in the testimony and I briefly
mentioned what Massachusetts had done is thinking when we're
talking about broad and scope it's not to limit for this
disease or capping you. If you have cancer you're going to get
no more than this, certain circumstances making it much more
transparent.
To even cap the total amount of expenditures as has been
suggested you have to say which expenditures would count toward
that cap. So I think there are ways of looking at the
interaction with premiums. Massachusetts went through a very
interesting exercise where people looked at the implication of
premiums for different decisions. Went broad and scope in terms
of we're not limiting it to people with only certain diseases
will get coverage and others will be excluded.
You won't have a surprise that if you need essential care--
and we're talking about doctors, drugs, and hospitals when I'm
talking about essentials. Because there were policies being
sold that had no drug coverage and no physician coverage,
literally none.
They had $100 a day toward a hospital. So saying there's
the floor. Then you can be more generous above it. And it's
what most companies do.
When you look at the kind of floor that Massachusetts put
in it was not below what any large company currently offers. So
it was a reasonable package. Because you do--actually people do
understand there's an implication for their premiums. I mean,
they're thinking in terms of, I want affordable health care.
And I also have to have affordable insurance.
Senator Hatch. My time is up. Thank you, Mr. Chairman.
Senator Bingaman. Senator Burr.
Senator Burr. Thank you, Mr. Chairman. If we haven't asked
unanimous consent for our opening statements to be part of the
record, may I ask that?
Senator Bingaman. We'll include any statement anyone wants
to include in the record.
Senator Burr. Thank you, Mr. Chairman.
Prepared Statement of Senator Burr
Mr. Chairman, thank you for holding this hearing today. I
want to thank our witnesses for joining us as well.
Mr. Chairman, this is a timely, if somewhat narrowly
focused hearing on an important aspect of health care reform. I
understand that President Obama will be making some remarks to
that point tonight and I look forward to hearing his thoughts.
As I said at Senator Daschle's confirmation hearing, our goal
should be to ensure affordable, high-quality health care
coverage for all Americans. I believe that by addressing
affordability, we can cure much of what ails our health care
system.
American families are straining against an uncertain
economic situation that is compounded by a health care system
that is expensive and doesn't always deliver value where we
need it. Because health care can be expensive, people tend to
forgo needed medical treatment, especially so when our health
insurance falls short of our needs.
What frustrates Americans about this situation is that we
spend trillions of dollars on health care in this country, yet
many feel like their coverage is inadequate if they have it.
Americans currently spend around $2 trillion on health care
annually (16 percent of GDP). By 2013, that number is expected
to double to $4 trillion (21 percent of GDP). This spending
trend is not projected to reduce the number of uninsured or
underinsured.
I believe that before we can embark on the search of a
solution, we need to understand why health care costs so much
in this country. I am hopeful that our witnesses can articulate
this for us today. In my view, we spend a lot of money on
health care in this country, but we don't always buy value.
The government though isn't always a good judge of value.
In our discussion today, we need to be careful about what
constitutes ``adequate'' coverage. Mandating adequate coverage
has not been especially effective, when looked at holistically.
Ideally, benefits mandates may ensure that people have adequate
coverage, but that can be a moving target. I believe that
experience with mandates has been a mixed bag and in some cases
mandates create a costly barrier too high for many low-income
Americans.
In the 110th Congress, Senator Coburn and I introduced the
Universal Health Care Choice and Access Act. This bill
contained several solutions to our health care problems--
solutions that are mindful about what works in our current
system. Whatever we do about the cost or availability of health
care I think we should commit to not up-end what actually does
work. Americans have the highest standard of care anywhere in
the world, unfortunately the delivery and financing of that
care breaks down from time to time. Our system is an engine of
innovation that produces the advancements that extend life,
defeat chronic diseases, and make minor health nuisances more
livable. These are things we shouldn't take for granted. We
should work to protect this country's crucible of medical
innovation--but we can only do that by addressing the costly
burden borne by American health care consumers.
Senator Burr. Mr. Chairman, I think most of us agree that
one of the tasks before us is to make sure that we provide the
resources in some way, shape or form so that every American can
access coverage. And when I say access coverage, my hope is
that we'll end up allowing them to construct what best meets
their income, their health conditions, their age. Clearly this
is going to be difficult, as we've seen, to try to achieve a
consensus package.
Ms. Schoen, let me ask you, how do Americans rank in terms
of out-of-pocket cost compared to counterparts in Canada and
Europe?
Ms. Schoen. If you do the actual dollars? Very high. The
only country that's up there with us is Switzerland in terms of
dollars.
Senator Burr. But from out-of-pocket costs of the
individual?
Ms. Schoen. Out-of-pocket costs. If you look at it as a
percent of our national spending it doesn't look as high.
Senator Burr. I'm looking at the report that the
Organization of Economic Cooperation and Development did where
the out-of-pocket cost of the United States is 13 percent.
Ms. Schoen. Right.
Senator Burr. In the UK it is 13 percent.
Ms. Schoen. That's why I want to just try and make the
distinction between the percent and the actual dollars. The UK
currently spends about 8 percent of their national income on
health care. We're at over 17 percent.
So when you take our 13 percent and multiply it times our
$8,000 to $9,000 per person, the dollars are very high. That's
the dilemma we've been in. Even when we protect people with
insurance, their actual out-of-pocket costs relative to their
wages are going up rapidly.
Senator Burr. The out-of-pocket cost for somebody in the UK
is in fact, not 13 percent because they're being taxed a large
amount to contribute to the cost of the government program. Yet
on top of the government program they've still got 13 percent.
In the case of Switzerland, 31 percent. In the case of Belgium,
22 percent. In the case of Poland, 28 percent.
As a percentage and not taking into account any of the
other countries that I'm looking at, that we're comparing----
Ms. Schoen. I agree with you on the percents. I would be
happy to give you the actual per person because what we're
seeing is we have a very expensive health care system. We spend
four times as much on insurance administration costs.
Senator Burr. A lion's share because we have allowed the
benefit package to be dictated and with very little choice on
the part of consumers. Consumers have a voice in many of the
cases as to how the construction of the project goes.
I am 53 years old. My wife has told me we're not going to
have any more children. But I can't buy a government program
under FEHBP that doesn't have maternity.
I'm not going to use it. I know it. And I know I pay for
it. But I can't buy a plan without it. And the reality is that
that's frustrating for a lot of Americans.
What's the out-of-pocket cost for Medicare beneficiaries?
Ms. Schoen. It depends on whether they've bought a
supplemental policy or they have Medicare only. It can be
extremely high.
Senator Burr. The average though is 20 percent, isn't it?
Ms. Schoen. Again, it absolutely depends. And Diane may
have more recent figures. When you take the Medicare only, the
basic package people are very highly exposed. Most seniors have
bought supplemental policies. So they limited their out-of-
pocket.
Senator Burr. Let me turn to Ms. Rowland, if I can. From
the perspective of adequate benefits, do you believe our
government health coverage--and I'm specifically referring to
FEHBP--program provides an adequate benefit?
Ms. Rowland. The FEHBP program clearly covers a full range.
So I would qualify that as an adequate benefit package.
Senator Burr. Now under FEHBP we have a lot of different
plans we can choose from. Some are high deductibles. But you're
confident in the way that you've stated it, that adequate is
that there's an entity that looked at it and if a member of
FEHBP chooses to have the high deductible verses to have the
thing that covers first dollar that that's adequate. That the
consumer, me, the Federal employee, have made that choice.
Ms. Rowland. Yes. And in the end someone who incurs their
high level of say, cancer treatment, may find that that policy
leaves them with a substantial financial burden. But the
benefit began as a standard benefit.
I would also point out that there's been a lot of
discussion here about competition and Medicare Part D. But
Medicare Part D does define what the benefit is so that it's
not just an undefined benefit.
Senator Burr. It does define the benefit. But it defines it
in the loosest terms. A minimum that must be met and for any
senior then they can choose a plan that has a more exhaustive
coverage that happens to, in the case of Ms. Schoen--or excuse
me, Ms. Shearer talked about equivalent drugs.
If, in fact, a particular plan doesn't carry the drug you
and your physician have decided is best suited for you, then
you can choose another plan that might substitute that heart
medication and might cover that particular drug. But the
individual at the end of the day chooses from those competitive
bid plans which one best suits their needs and their income.
Ms. Rowland. Correct. But the benefit there is providing a
service benefit, not just a dollar cap on spending for
prescription drugs, which is my point. That it does have a
definition of benefits which is similar to what we've talked
about for general health insurance.
Senator Burr. I thank the Chair.
Senator Bingaman. Senator Coburn, you're the last one up.
The vote has started. So go right ahead.
Senator Coburn
Senator Coburn. Thank you. I'm sorry I missed most of your
testimony. I did read it last night. It was my bed partner for
a good portion of the evening.
Let me just see if any of you disagree with the following.
Does anybody disagree that preventive care outside of the
deductible ought to be something that's important?
OK.
Does anybody disagree that there's a tremendous advantage
to the medical home model?
Does anybody disagree there needs to be payment reform?
Does anybody disagree that the insurance products that are
out there today are only less than two-thirds of the money that
is actually paid for the insurance goes for either preventive
care or treatment?
I'm asking the questions because the problem isn't access.
The problem is cost. There's no transparency in the market.
You all, through your testimony and every other thing with
the solutions that we're offering, the No. 1 problem is cost.
So without transparency, without real markets, one of the
reasons our costs are out of control is that there is no
competition. Now we heard a moment ago about caps on all of
these.
Medicare has got all sorts of caps. When people run out
it's on them. So we're not going to have a cap-less system. We
can't afford Medicare the way we have it today.
We need payment reform. I would absolutely agree with that.
But we can't also deny the fact that Medicare has got caps,
much more so than Medicaid does.
I'm interested, Ms. Schoen in the numbers in Massachusetts.
I'm just going to ask if this is accurate or not. It may not
be. But is it not true that the cost estimate that went up for
the per year increase last year for the Massachusetts plan was
10 percent?
Ms. Schoen. I actually can't speak exactly to the cost
estimate because the most recent numbers that John Kingsdale
presented last week indicate rates are coming in quite low this
year. They've actually had some reductions, particularly for
the low-income they were very----
Senator Coburn. I mean last year their cost increase, on
average, was up 10 percent for their care plan.
Ms. Schoen. For some of the plans, but not all. And they've
been coming down. They're modified.
The other thing they found is when they consolidated their
individual small group market and brought the healthy lives in,
they had a dramatic decrease in the premiums with an
improvement in benefit policies. So bringing risk pools back
together have been a big benefit.
Senator Coburn. I'm not against the risk pool concept. But
it is true that the average family policy in Massachusetts is
$16,897. And the rest of the country, it's $5,799, so 3\1/2\
times greater for a mandated set of benefits.
I want to talk for a minute with each of you about
comparative effectiveness because the thing that I worry about
is comparative effectiveness and there's no question we can do
it on drugs and all sorts aside. The thing that often times
isn't considered as a practicing physician is, I try to put
people on generics. But side effects are a significant
complication.
So some nongeneric drugs actually work better, even though
they're much more because the patient will take the medicine.
You know, I can give them another drug which costs a whole lot
less. But if they don't take it I'm not helping them.
The thing that worries me about comparative effectiveness
as a physician that's practiced 25 years or so is the art of
medicine is totally ignored, totally ignored in comparative
effectiveness. And what we see in England is the art is out.
But we don't have the art of medicine practice because they've
used comparative effectiveness based on cost.
I wonder if you all could address for me or at least
assuage some of my concerns about using comparative
effectiveness. And how you could use what I think is about 40
percent of the practice of medicine is art and 60 percent is
science. Are my concerns legitimate? I guess that's what I'd
ask.
Ms. Turner. We actually invited an expert of the National
Institute for Clinical Excellence in the UK to come over and
talk with us about it. There are huge concerns, particularly
about people who are outside the very center--20, 30, 40
percent of patients being able to access the medicines they
needed because it is a gigantic political issue then to get
those drugs covered. Many people wind up not actually having
access to the care they need.
The National Institute for Clinical Excellence research
shows it actually is driving up cost in the system. We can talk
about some of the reasons for that later. But it's even when
they use cost in the equation, it's still not helping to
contain cost. And it does interfere with the practice of
medicine, absolutely.
Senator Coburn. Other comments?
Ms. Shearer. Let me just talk a little bit about what we
have found. We have found that by providing information we can
open conversations between physicians and patients. Right now
often physicians are not aware that their patient is getting to
the drug store and not able to pick up their medicine because
they can't afford it.
We believe that the power of information is tremendous. We
also believe that we need to have a process, ultimately, that
provides for the exceptions. And maybe it's a question of step
therapy or a protocol where we don't necessarily start with the
most expensive. This Nation can't afford to keep starting with
the most expensive treatment.
Hopefully we can find a way to work toward a model where we
get better value and we achieve the information and the
communication and ultimately save money.
Senator Coburn. Is it your assumption that we start with
the most expensive initially?
Ms. Shearer. In many cases we do.
Senator Coburn. I'm sorry. I have not seen that in any of
the practice of medicine that I've been exposed to. I think
probably what you're referring to is that we've had such great
benefit from sub specialization. And then we use sub
specialists for primary care.
Example, you strain your back. You come to me. The first
thing I do is not order an MRI. I put you on muscle relaxers,
pain relaxer, bed rest and do a good clinical exam.
If you go to an orthopedist or a neurosurgeon, the first
thing they order is an MRI. So, you know, we have to sort some
of that out. But the benefits of sub specialization have
markedly given us greater health care. But also significantly
raise the cost because we don't have the differentiation.
Could I continue for 1 more minute?
Senator Bingaman. Sure. I think I may go over and vote. Why
don't you just conclude the hearing.
Senator Coburn. Alright. I will. Thank you very much.
Senator Bingaman. Thank you all. Let me thank all the
witnesses. Thank you.
Senator Coburn. My biggest worry, we've all talked about
health IT and how it can help us. We just spent a ton of money
on that in the Stimulus package which won't be spent until
after 2011, any of it. But health IT isn't going to help us any
time until we have interoperability where the health IT can
talk to everybody.
So that the pharmacist can e-mail back that the patient
didn't pick up the prescription. In other words so we have the
connection. We have the warning set up so that we can all talk.
Let me thank each of you. You know every American is
interested in this, no matter what it is. But I'll tell you one
thing they're interested in more, is that they want to know
that they get to choose who is going to care for them. And they
want to be involved in the decisionmaking.
That should be the rail that we run up against that we
should not violate as we move toward this. And with that I will
adjourn our hearing. Thank you.
[Additional material follows.]
ADDITIONAL MATERIAL
Prepared Statement of Senator Brown
Last week, the U.S. Department of Labor reported that there
are currently 11.6 million unemployed Americans and that the
unemployment rate has risen to 7.6 percent. Over the past year,
the number of unemployed persons has increased by 4.1 million
and the unemployment rate has risen by 2.7 percentage points.
In a country that provides health coverage predominantly
through employment, an economic decline not only causes jobs to
disappear, it causes health coverage to disappear.
Much-needed and deserved attention has been devoted to the
problem of uninsured Americans. In fact, the Institute of
Medicine (IOM) will be releasing a report today, entitled,
``America's Uninsured Crisis: Consequences for Health and
Health Care.'' As Congress, policymakers, and experts continue
to discuss and consider potential solutions to the crisis of
uninsurance, it is imperative that we also examine the crisis
of underinsurance--the ways that inadequate health insurance
affects American families and contributes to the deterioration
of our health care system.
Approximately 46 million Americans are uninsured. An
additional 25 million Americans are underinsured--living with
health insurance that does not adequately protect them from
catastrophic health care expenses. Underinsured individuals are
generally defined as adults between 19 and 64, whose out-of-
pocket health care expenses, excluding premiums, are 10 percent
or more of family income. It is estimated that 42 percent of
U.S. adults were uninsured or underinsured in 2007.
It is important to note that this definition, while
extremely useful, is actually incomplete. Other populations,
including children in underinsured families and seniors who
lack coverage to supplement Medicare, also face significant
challenges in our health care system. I believe that Chairman
Bingaman has rightly chosen to focus on one population at a
time; however, we would do well to remember that underinsurance
is common to every age group in all but the wealthiest segment
of our society.
It is not a niche issue; it is a national issue.
Inadequate health coverage leaves Americans exposed to
significant financial risk. Underinsurance can quickly undercut
the financial stability of middle class families and turn
financial stability into financial ruin.
Consumers Union found that 30 percent of the underinsured
had out-of-pocket costs of $3,000 or more for a single year and
a Health Affairs study found that one quarter of underinsured
people have deductibles of $1,000 or more. Other Americans have
coverage with lifetime caps on coverage that cut off support to
individuals with cancer and other catastrophic conditions. A
Commonwealth Fund survey found that 46 percent of the
underinsured report being contacted by collection agencies for
medical bills.
Those are the financial implications. The health care
implications are even more alarming. According to a Health
Affairs study, 53 percent of the underinsured forgo needed
medical care--they may not fill their prescriptions, they may
delay care or forgo a screening test. They may avoid health
care until the lack of it catches up to them, whether that
means the need for more expensive treatments or a diagnosis
that at one time was neutral and is now life threatening.
Underinsurance has not just hurt individuals financially;
it has harmed them physically--sometimes irreversibly.
I would like to tell you the story of Denny and Debbie
Byers from Columbus, OH. Denny worked construction for 34 years
before he and his wife Debbie, a bank teller, retired and tried
to purchase health insurance through the private market. While
Denny was able to secure private health insurance, Debbie was
unable to find coverage due to pre-existing allergies and
asthma.
However, Denny quickly found out that his newly purchased
health insurance did not cover his usual doctor's visits, nor
did his insurance cover his two high blood pressure medications
or his migraine medication. Denny has since chosen to pay out-
of-pocket for generic versions of the blood pressure
medications, but cannot afford the $30 per pill price-tag
associated with the migraine drug, for which there is no
generic.
Denny has insurance that doesn't cover the care he needs.
That's not coverage; it's a crock.
It's not enough to fight for affordable coverage, we must
fight for real coverage. Coverage that provides financial
protection for what people need, regardless of their current
health status, regardless of their past health care needs,
regardless of their income, regardless of their age.
Health insurance shouldn't be a vehicle for punishing the
sick and rewarding the healthy.
It shouldn't be a hammer that beats health care costs down
by arbitrarily denying care to those who need it.
Health insurance shouldn't be used to bring down costs;
logic and knowledge and research and health system
accountability and information technology and reasonable
expectations should be used to bring down health care costs.
We need a health care system that provides the right care,
at the right time, at the right level, and we need health
insurance that covers it.
We don't need health insurers who cherry pick or health
insurance that shortchanges its enrollees.
Underinsurance is a promise half-fulfilled, and when it
comes to the health of our children, our parents, and
ourselves--when it comes to the health of Denny and Debbie
Byers of Columbus, OH--half-way is not good enough.
Thank you for holding this hearing, Mr. Chairman. I look
forward to hearing from our witnesses.
[Whereupon, at 11:27 p.m. the hearing was adjourned.]