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Mar. 17 2010 - 4:03 pm | 299 views | 4 recommendations | 12 comments

Middle-class losing health care coverage at record pace

Senate Passes Insurance Industry Aid Bill

Image by Mike Licht, NotionsCapital.com via Flickr

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.

Via Modern Healthcare

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.


Comments

3 T/S Member Comments Called Out, 12 Total Comments
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  1. collapse expand

    My brother is a med student here in Texas. He’s currently enamored with the idea of a cash-only family practice (He’s also looked into some sort of mobile medical practice which we all find really weird). He’s also well aware that most of the rising cost of health care is spent on chronic diseases, the last two weeks of a person’s life, etc. He’s really hoping he can make a dent in the chronic diseases part by providing good preventative care and keeping them healthier longer.

    He told me he got a lecture from your typical hardworking Texas family doctor. The guy said his practice was about as efficient as one could get these days, and that when someone on Medicaid comes into his office, it would make more immediate financial sense for him to give the person $10 and drive him to an ER.

    • collapse expand

      Sounds about right. Doctors really do lose money now on Medicaid patients.
      As for a ‘cash only’ family practice – might work if he can get the interest of wealthy patients, which is not likely to be easy right out of med school. However, there is viability to the idea of a concierge practice where people pay an advance fee to become a patient.

      In response to another comment. See in context »
      • collapse expand

        I enjoy your blog and insightful comments and believe you are correct about the inevitability of a single-payer system, or possibly a highly regulated private Switzerland type model. I asked the following question over at Matt Taibbi’s blog: Although I don’t have the time or inclination to go through the 1990 page monstrosity of a bill (H. R. 3962) with a fine toothed comb, I did notice in Sec. 1186 (page 582 of the pdf version of Matt’s link) that there is language which appears to rescind the Medicare Part D rule against Medicare being able to negotiate for lower pharmaceutical prices. Not being an attorney I cannot confirm or deny this? Do you know?

        In response to another comment. See in context »
        • collapse expand

          Tharry-

          For starters, the House bill you are referencing is no longer in play. It is the Senate bill that is relevant and to be voted on by the House.

          As for your question, Medicare is not permitted to negotiate directly with pharmaceutical companies on Part D drugs. This was part of the original deal on Part D as passed during the Bush administration that gave control of Part D to the private insurance companies, where it remains. The deal that Obama made with the pharmaceutical companies pretty much ruled out any change in that.

          In response to another comment. See in context »
  2. collapse expand

    I am not surprised that your theory is becoming reality, since it made so much sense, the first time I read it. I am now disturbed (and soon to be distraught) that it is happening so fast.
    The small business I work for has been shopping for a new policy (while we wait impatiently on COBRA); I fear that their lack of ability to sign something within the last 4 months is a bad sign. And of course we are getting zero information.
    I am now in the process of rooting through the Bill (fun stuff) to figure out when the insurance exchange kicks in IF the damn thing passes at all.
    I hate to seem selfish on this, but I am pretty sure there are many others in my shoes. I am a cancer survivor who is afraid of losing health insurance for any period of time; this is consuming a lot of my time and thoughts lately; I hope our new policy has a stress rider!
    Thanks for your great insight as always.

    • collapse expand

      mike-
      as a cancer survivor myself, I think I can say “I feel your pain.” I do.
      It will be a few years before the insurance exchange kicks in. Further, it may not be crystal clear that you will qualify if you are still receiving health care from your employer. If you are not, then you would likely qualify, however, there is a lot of time between now and then that I understand is what worries you.
      The good news is that, if it passes, you will be able to purchase an insurance policy even with your prior health issues – but it may be expensive.
      If you don’t mind me asking, what do you do for a living as I might have some ideas I can pass along to you.

      In response to another comment. See in context »
      • collapse expand

        It is sort of a long story; but the company management recently came up with a plan that removed us as Contract Employees through a H.R. Company, and made us Regular Employees. We were told it was a cost saving measure (which using contract HR is expensive); however, we were then told we would be put on COBRA and the company would get the 65% stimulus discount. We protested, thinking it was borderline fraud to say we were temporarily unemployed so that we would qualify. They assured us everything would be fine; they were wrong and the discount was denied.

        We were then told they would get a new plan at the first of the year; it hasn’t happened and we are still on COBRA. They haven’t said, but we suspect they can’t get a reasonable small group policy. At this point we don’t know what is going to happen. It brings back the anxiety of waiting for those damn CT Scan results; I am sure you know what I mean. I may be worrying too soon, they have been a good company for 10 years, but like most companies, financial issues are upon them.

        I am not sure how far they look back for pre-existing, but I have been cancer free for 11 years. My concern is. I don’t know what, if any insurance I am going to have through the company in the near future. I am a Control Systems Technician for an Air Separation Plant service company.

        Thanks for the feedback Rick.

        In response to another comment. See in context »
        • collapse expand

          Well, hopefully it will work out.
          In the reconciliation measure we got a look at today, there will be a government high risk program created soon – assuming the bill passes- that makes insurance available for those who cannot get health care because of illnesses. I am glad to hear you’ve been ‘clean’ for 11 years. Mind if I ask what kind of cancer you were treated for? Are you still getting tests every three or six months?

          In response to another comment. See in context »
  3. collapse expand

    ‘Well, hopefully it will work out.’
    That is about where I am at with it; once again, brings back those anxious memories.

    I was diagnosed with Hodgkin’s Lymphoma IIIA in ‘94, treated with 9 cycles of ABVD. Re-occurred 6 months later; then had a Autologous Bone Marrow Transplant at Hopkins in ‘95. Everything was seemingly going well, then had an isolated relapse in ‘99, which was treated with Radiation. I did regular follow-ups with CT Scans for about 6 years, at which point Hopkins released me. I now do annual check-ups with my regular doctor and oncologist.

    I guess my main concern is as I get older (now 47), I suspect the treatments will eventually show its toll. But hey, let’s face it; I am damn lucky to be where I am today. I had good insurance, good doctors, good support, and a good employer. I can’t imagine going through it without just one of those, but I know there are many people doing it all the time. And I suspect there are too many with none of those.

    Thanks Rick.

    • collapse expand

      Well, you certainly had to do it the hard way! Great that you’ve been good for 11 years.
      Mine is (was- not sure) Non-Hodgkins Waldenstrom’s Macroglobulinemia. A fairly unusual one that is slow-growng (the good news) but not yet curable. The treatment was 6 rounds of chemo. No problems for two years now. Hopefully will stay that way.
      I think that given the length you’ve been clean, you should be in pretty good shape. No matter what your employment situation, you should only have to sweat it, at worse, for a couple of years. I realize that doesn’t make you feel any better as nobody wants to worry for a couple of years.
      Be sure to let me know how it works out at your job. If it turns out that they aren’t going to cover you, we’ll speak and I might be able to give you some ideas that might work.

      In response to another comment. See in context »
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    About Me

    I am an attorney in Southern California, and a frequent writer, speaker and consultant on health care policy and politics. To that end, I am active member of the Association of Health Care Journalists. Based in beautiful Santa Monica, California, I'm very pleased to have the opportunity to be a contributing editor to True/Slant. I've recently finished a book designed to make the health care debate understandable to the average reader, and expect it to be out in the next five months or earlier. In my 'spare time', I continue to write for television and, occasionally, for comic books.

    My checkered past includes stints in creative writing and production for television where I did strange things like founding the long running show "Access Hollywood" and serving, for many years, as the president of the Marvel Character Group where I had the distinct pleasure of being one of Spider-man's bosses.

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