Middle-class losing health care coverage at record pace
In September of 2009, I published a piece here on True/Slant entitled “The Inevitability of an American Single Payer Health System.”
In that article, I argued that the pressures on the health insurance companies, from the ever rising costs of medical services to the profit expectations of Wall Street, would necessarily raise the price of coverage to the point where the middle-class would no longer be able to afford it. When that happened, there would be no choice but for government to step in and fill the void, making single payer, government health care the law of the land – whether we like it or not.
A study released today by the Robert Wood Johnson Foundation confirms that this prediction is well along the way to becoming reality as the working middle class is now losing health coverage faster than any other income group in the nation.
According to the Johnson Foundation report,
Three million fewer middle-income earners obtained health insurance through their employers in 2008 than in 2000. Overall, 66% of people in families earning between $45,000 and $85,000 annually were insured through their employer in 2008, down 7 percentage points from 2000. In total, 13 million middle-class people were uninsured in 2008, an increase of 2 million people since 2000, according to the report.
While the vanishing opportunity for middle-class health coverage is no surprise to me – and does match my earlier predictions – the rate and velocity of its disappearance does come as something of a shock. At a drop of almost 1% a year, it can’t be long before we reach the tipping point where too many in the nation’s middle-class find themselves without adequate health care insurance, something no politician can afford to ignore.
Why is this happening? Because the cost of family insurance policies rose 81% between 2000-2008 while household income dropped 2.5%. The necessary result of such a huge rise in premium costs at the same time income levels are dropping is that fewer employers are able to provide their employees with coverage at the same time fewer employees can afford their share of an employer provided plan, even when the employer makes it available.
Still, this disturbing trend will not relieve the private insurance companies of their obligation to please their shareholders by maintaining annual increases in profits. The profits will be sustained right up until the moment they cannot be sustained any longer.
And then it must all come crashing down.
When contemplating this situation, I am always reminded of singer/songwriter Neil Diamond. I know this seems a bizarre comparison but stay with me.
In the late ’70s, Neil Diamond was the hottest thing since sliced bread. The guy was everywhere…selling millions of records, filling massive arenas and earning huge bundles of money. Then, along came the summer tour where he decided that the only way to meet the expectations of his fans was to put together a stage show that was so awesome, his vast legion of followers would not be disappointed. But to do that, he was going to have to charge a ticket price that well exceeded anything that had been charged before.
The fans wanted to come – the problem was, they couldn’t afford the ticket price. Inevitably, the fans got angry over the high ticket costs, the tour was a flop and that was it for Neil Diamond. He had literally priced himself out of being the hottest music star in the country – not because of greed but because of his inability to deliver a product that his customers wanted at a price they could afford while maintaining a reasonable profit for himself, his agent, his manager, etc.
That’s where health insurance is today. As much as we might want it, when the cost of purchase hits that price where we just can’t afford it, it’s all over.
Based on the numbers presented in today’s Johnson Foundation study, we are rapidly approaching that moment.
And it gets worse.
According to the study, 66 percent of people in families earning between $45,000 and $85,000 are insured through an employer plan, the ‘bedrock’ of the American health care payer system. That percentage represents 52.7 million people – down from 55.5 million eight years prior.
This is a drop of nearly seven percentage points over the eight-year period and does not include the 2009-2010 numbers that will certainly worsen due to skyrocketing unemployment.
Because of the amounts of money earned by those still employed but forced out of health care benefit programs, few end up qualified to join in a Medicaid program – leaving them at the mercy of the individual market. And we all know what that means – exorbitant prices, denial for pre-existing conditions, etc.
For those in the group who have lost enough of their income to qualify them for Medicaid, things aren’t going to be any easier. While annual enrollment in Medicaid programs increased a record 3.3 million last year, bringing the total number of Medicaid participants in the nation to 47 million, physicians are increasingly refusing to accept Medicaid patients due to a rate of payment that leaves them actually losing money on a per patient basis. Where will these patients end up as they find it increasingly more difficult to locate a physician?
They will be flooding into an emergency room near you.
While I am certainly rooting for the health care reform bill to make it into law, we should not be deluded into believing that the legislation addresses the largest problem in the health care system – the coming end of the payer model that has long been the primary payment source for health care services in America, the private insurance companies.
Individual coverage policies are well along the way to pricing themselves out of existence. Small group policies are now beginning to show serious price strain forcing more and more employers to drop the coverage they extend to their employees. And as today’s Johnson Foundation Report reveals, a huge number of middle-class Americans are being forced out of even the large group policies.
All of this adds up to increasing evidence that, try as the political parties may, this is not an ideological issue and it should not be the subject of an ideological battle. This is a problem rooted in economic reality and requires being treated as such – not as a political piece of propaganda.
But, hey, Neil Diamond did return to the public stage in 2008 with a number one album produced by rap record legend Rick Rubin. So who knows? Maybe there’s a Rick Rubin out there somewhere who will bring back a private health insurance model that just might work.