US lags in access, cost and insurance problems due to insurance design

The Commonwealth Fund study on How Health Insurance Design Affects Access to Care and Costs, by Income, in Eleven Countries found that:

• "One-third (33%) of U.S. adults went without recommended care, did not see a doctor when sick, or failed to fill prescriptions because of costs, compared with as few as 5 percent of adults in the United Kingdom and 6 percent in the Netherlands.
• One-fifth (20%) of U.S. adults had major problems paying medical bills, compared with 9 percent or less in all other countries.
• Thirty-one percent of U.S. adults reported spending a lot of time dealing with insurance paperwork, disputes, having a claim denied by their insurer, or receiving less payment than expected. Only 13 percent of adults in Switzerland, 20 percent in the Netherlands, and 23 percent in Germany—all countries with competitive insurance markets that allow consumers a choice of health plan—reported these concerns.
• The study found persistent and wide disparities by income within the U.S.—even for those with insurance coverage. Nearly half (46%) of working-age U.S. adults with below-average incomes who were insured all year went without needed care, double the rate reported by above-average-income U.S. adults with insurance.
• The U.S. lags behind many countries in access to primary care when sick. Only 57 percent of adults in the U.S. saw their doctor the same or next day when they were sick, compared with 70 percent of U.K. adults, 72 percent of Dutch adults, 78 percent of New Zealand adults, and 93 percent of Swiss adults.
• U.S. , German, and Swiss adults reported the most rapid access to specialists. Eighty percent of U.S. adults, 83 percent of German adults, and 82 percent of Swiss adults waited less than four weeks for a specialist appointment. U.K. (72%) and Dutch (70%) adults also reported prompt specialist access."

Fifty Nine Million

59.1 million people in the US were uninsured for at least part of the prior year.

7 times as many adults without health insurance last year forgo health care due to costs.

6 times as many hypertensive and diabetic adults without health insurance last year forgo medical care.

5 times as many asthmatic adults without health insurance last year forgo medical care.

9.7 million adults with incomes 2-3 times above poverty level were uninsured for at least part of the year.

CDC estimates are based on interviews conducted during the first quarter of 2010 as part of the CDC's National Health Interview Survey (NHIS) and cover the year prior to the interview.   CDC concluded:

From CDC Vital Signs - November 2010

"...An increasing proportion of persons aged 18--64 years in the United States lack health insurance, even for brief periods, and that gaps in insurance coverage are associated with delaying or forgoing health care, irrespective of family income level. These findings are particularly important for persons with chronic diseases. Approximately 40% of persons in the United States have one or more chronic diseases, and continuity in the health care they receive is essential to prevent complications, avoidable long-term expenditures, and premature mortality..."

"The data in this report support previous findings that continuous insurance coverage is an important factor in reducing delayed or forgone health care, which other studies have associated with avoidable hospitalizations for persons with chronic conditions. In addition, the data demonstrate that cost can be a barrier to health care, even for those with insurance coverage..."

"Like insurance coverage, family income is an important influence on receipt of health care. The data show that among persons aged 18--64 years with continuous insurance coverage, those with lower family incomes are twice as likely to forgo needed care because of cost when compared to those with higher family incomes. This disparity in health-care utilization might result from multiple factors outside the scope of this analysis, including personal choice, underinsurance, more difficulty making copayments, and barriers to accessing care (e.g., transportation costs and physician acceptance of publicly insured patients). This report focuses on persons aged 18--64 years and particularly those with chronic conditions, because these populations are large and their ability to receive all needed care has decreased substantially in recent years. As a result of near-universal coverage of persons aged ≥65 years through Medicare and expansions in coverage for persons aged ≤17 years through Medicaid and the Children's Health Insurance Program, coverage for these age groups has improved or remained relatively stable in recent years."

Will More Insurers Control Health Care Costs Better?

by Uwe E. Reinhardt

A common theme among health reformers has been that the small-group and individual markets for health insurance are too concentrated and thus inadequately competitive. The proposed remedy is to have more independent insurers compete within local markets.

Reformers left of center on the ideological spectrum – President Obama prominent among them – advanced this thesis frequently in their advocacy of a new, public health plan, or of insurance cooperatives, for Americans under age 65.

Reformers right of center appear to subscribe to the same thesis when they argue for allowing insurers to sell health insurance across state lines. An alternative interpretation, however, is that they merely wish to permit what finance people call “regulatory arbitrage” – that is, shopping by consumers among different regimens of health-insurance regulation and their associated costs.

Widgets versus health insurance. As someone who has long taught micro-economics I understand, of course, why competition among multiple producers in the market for the legendary widget will drive down the price of widgets to minimum feasible production costs, plus a small profit margin, if widget makers buy the inputs they use in similarly competitive input markets. This is the standard textbook case of perfect competition.

I have some trouble, however, grafting this model onto the market for health insurance, which is not quite like the market for the legendary widget.

To arrive at the premium a commercial health insurer will charge for a particular policy and risk class, the insurer’s actuaries will first project the expected per capita outlays (X) for the covered health care products and services that insured members in that risk class are likely to trigger over the insured period. This is by far the largest cost component embodied in the premium.

To these actuarially expected outlays on purely medical benefits (X), the insurer will then add allowances for the cost of marketing the policy (M) (advertising and broker commissions), administering it (A), and the desired profit margin (P) needed to stay in business over the long term. The sum of these components will equal the premium.

What Component Of Premiums Would Be Reduced By Increasing The Number Of Insurers?

The question then is which of these components – X, M, A and P – would be driven down by having more insurers compete for enrollees in a given market area.

The prime candidate would seem to be P, the profit margin. In practice, however, that margin is smaller than seems widely believed – typically much below 10 percent and often below 5 percent.

There might be some economies in administrative costs (A) per insured in the case of large insurers allowed to sell policies across state lines in the small-group and individual markets. However, these economies would pale compared to the savings that might be achieved in the market for medical benefits.

The marketing costs (M) would, if anything, increase with the number of insurers competing in a local market.
The same, it seems to me, applies to the largest outlay insurers make — medical benefits (X). The bulk of the medical benefits procured by an insurer for residents in a given market area are produced by providers within that market area. In general, both private and public insurers have only limited, if any, control over the volume of the medical benefits that local clinical decision makers ask insurers to purchase for the insured.

Furthermore, the larger the number of insurance companies active in a local market, the smaller any insurer’s market share will be — other things being equal — and the less leverage any insurer will have in bargaining with area providers over the prices of health care.

Growing supply-side concentration. Over the past decade, the supply side of the health care sector in many localities has become ever more concentrated, as hospitals formed systems and physicians joined together in larger groups. The current nouvelle vague – so-called Accountable Care Organizations (ACOs) – will only further encourage that concentration. I find it hard to believe that, in the face of this trend, fragmenting the buy side of health care even more would serve the goal of cost containment.

Ideally, in my view, the market for health insurance would be oligopolistic, which means that only a few insurers — each with some market clout vis à vis providers — would compete for enrollees in a local market. What the ideal number would be is an interesting question on which economists can have a lively debate.

So what am I missing here? Why do so many otherwise sensible people believe that fragmenting the buy side of the health care market even more than it already is will help contain the rising cost of health care? I would argue just the opposite.
__________________________

Uwe Reinhardt, noted Princeton economist, originally published this article in the Health Affairs (copyright).  This article is subject to a Creative Commons license.

The Uninsured Crisis

Health Care Reform is a critical and central topic to our national financial well-being, the health of the population at large and the health of our industry. As such, Healthcare Technology News will cover news on Health Care Reform

The Institute of Medicine has released the pre-publication version of America's Uninsured Crisis: Consequences for Health and Health Care. The IOM Committee on Health Insurance Status and Its Consequences found that the country is "caught in a downward spiral: health insurance coverage is declining and will continue to decline."

Some of the committee's key findings include that

• "Health insurance coverage in the US is declining and the situation will get worse. The crisis is engulfing employer-sponsored insurance, the cornerstone of private health coverage, and also threatens expansion in public coverage.
  
• Despite the availability of some safety net services, there is a chasm between health care needs and access to effective health care services for uninsured children and adults. Health insurance coverage in the United States is integral to individuals' personal well-being and health.
• Local health care delivery appears to be vulnerable to the financial pressures associated with high community-level uninsurance rates. Analyses commissioned by the committee and other recent research strongly suggest that when community-level insurance rates are relatively high, insured adults are more likely to have difficulties obtaining needed health care."

This last finding is counter-intuitive and the process by which this occurs is not well understood by the committee. Nevertheless the committee found that "higher community uninsurance is negatively associated with several well-validated indicators of access to and satisfaction with health care for privately insured adults including having a place to go when sick, having a doctor's visit, visiting a doctor for routine preventive care and seeing a specialist when needed..."

The report also refers to the Center for Studying Health System Change which found that "problems in local health care delivery - not necessarily attributable to uninsurance - can be intensified by higher uninsurance rates. For example, providers and capital investment tend to locate ... away from communities with high uninsurance...", among other factors.

The committee concludes that the US must work "on an urgent basis to achieve health insurance coverage for everyone and, in order to make that coverage sustainable, to reduce the costs of health care and the rate of increase in per capita health care spending."

Link here to IOM's report brief on "America's Uninsured Crisis".