12 January 2006

The Cost of Private Health Insurance

What does it cost to provide private health insurance through Anthem to a 19-29 year old single, healthy adult without employer provided insurance?

For $1,152 a year, you can get a plan with a $5,000 deductible and four office visits a year (with at $20-$40 co-payment). For $1,308 a year you get the same four visits with a co-payment and a $3,000 deductible. For $1,584 a year, you get unlimited office visits with a co-payment and a $1,500 deductible. About a third of the uninsured people in Colorado would qualify for the plan.

What does this pay for? I have an acquaintances who recently had to make uninsured ER visit after being bitten by a poisonous spider. The bill, for an outpatient ER visit and a follow up visit at an area hospital: $3,000.

Bill Johnson, a columnist at the Rocky Mountain News, related the $14,500.54 ER bill he incurred on Christmas Eve at the lower rates which are charged to people who have health insurance. He also notes that:

[T]he nation's cost for treating its estimated 46 million uninsured citizens to nearly $2 trillion in 2004, according to a report released Monday by the Centers for Medicare and Medicaid Services.

He got it wrong. The total, actually $1.9 trillion figure, is the total amount spend by everyone in the United States on health care according to the press release from the Centers for Medicare and Medicaid Services. The bulk of public spending came in the form of Medicare ($309 billion) and Medicaid ($291 billion), neither of which provides coverage for people who are included in the ranks of the uninsured. These two programs account for about 32% of all health care spending in the United States, and in addition to these amounts, governments spend money to provide health care for their own employees (almost twenty million of them) and a considerable sum on direct provision of health care services through programs like public hospitals, often at the state or county level. The bulk of the rest is paid for indirectly through private employers who purchase health insurance for their employees (or self-insure) and as employee insurance contributions, co-pays and deductibles paid by people who have some form of health insurance.

In fact, determining the amount spent to care for the uninsured under the existing system is a little difficult to back out of the total. Some of it is simply made up of direct private payments that get mixed in with the direct private payments made by those who have health insurance. Some of it is a mix of charity care and written off charges for services rendered to people unable to pay for their own care, that gets passed along in the form of higher prices for those who can afford to pay. Some of it is at clinics and public hospitals. And, this doesn't even begin to address more subtle costs of caring for the insured like high health care costs paid by government agencies or private health insurers later because of deferred care while people don't have health insurance.

Given the Anthem rates quoted above, and statistics that I've seen about the cost of providing Medicaid coverage to the non-elderly, non-disabled part of its beneficary base, it is fair to say that one could provide the kind of bare bones coverage that Anthem's high deductible plans and Medicaid's less the stellar coverage provides, for under $100 billion a year (Colorado's share would be about $1.4 billion). (I previously discussed how this could be done for $76 billion a year.) This would $334 per person in the United States (less than 5% of what we spend per person in this country for people who do have health insurance). And, the net cost would be lower, because providers would no longer have to provide large quantities of charity care, write off mountains of bad debt, and care for people who should be in doctor's offices in far more expensive emergency room settings. Even net of these cost savings which will not suffice to provide universal care in the short term, this still isn't cheap, and someone has to decide how those costs are allocated. How much should be paid by the covered individual, how much by their employers, and how much by government through some form of taxes (upon whom)? But, it is something that can be done if we have the political will to make it happen.

So, we can make it happen even at current prices, and this doesn't even begin to address the other huge health care problem in the United States, which is the out of control prices charged by providers noted by Johnson in his column, and the immense burden of administrative costs imposed by a semi-private sector health insurance system that is anything but efficient. Cost control, adminsitrative streamlining and a regime in which everyone can afford to pay for their share of health care costs with insurance (eliminating charity care and bad debt) combined, could bring the total cost of significant health care coverage and provider cost control reform to well under $100 billion.

No comments: