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Issues facing America: The uninsured

By Alok D. Sharan, MD; Samir Mehta, MD; Ryan M. Nunley, MD; and the Washington Health Policy Fellows

In an election year, health care takes center stage

The year 2008 will be a defining moment in American health care. The United States has always been proud of its robust healthcare system, yet it has not been able to provide access to this system for all of its citizens. By providing access to health care for the elderly and the poor, Medicare and Medicaid are landmark programs, but the rising cost of these programs makes it difficult to sustain their benefits.

During the presidential election debates, several candidates have proposed various solutions to the current healthcare crisis. This year, “Ahead of the Curve” will highlight various healthcare issues and detail some of the proposed solutions. Our hope is to educate the orthopaedic community on these issues so that everyone can make well-informed decisions when voting in November.

The uninsured
In 2006, 46.6 million Americans were without health insurance. Most had incomes above the poverty level, and thus, did not qualify for government entitlement programs. More than 80 percent of the uninsured were employed or came from working families.

The effects of this uninsured patient population can be felt across the economic spectrum—in hospital emergency departments where patients seek primary health care; in government and private hospitals that absorb the cost of providing care to these patients; in the budgets of academic medical centers that provide a large proportion of charity care; and in the countless lives lost when these individuals do not follow routine health maintenance activities.

$100 billion is spent on healthcare services for uninsured individuals annually.

The history behind the increasing number of uninsured individuals provides a brief glimpse into the history of modern U.S. health care. As soldiers returned to the United States after World War II, they faced multiple job opportunities. The economy was booming and businesses used many different means to attract employees. Because of limitations imposed by Congress on wages, businesses began to offer healthcare benefits as a recruiting tool.

In 1954, Congress created tax subsidies for companies that offered health benefits to their employees. Very quickly, employer-based coverage became the primary means of health insurance in the United States. By 2004, the tax expenditure for healthcare benefits had grown to $188.5 billion.

The passage of Medicare and Medicaid legislation in 1964 and 1965 initiated the first government-sponsored healthcare programs. Many elderly retirees as well as unemployed individuals gained access to the healthcare system via these programs. Through the years, the number of individuals covered by government healthcare programs has increased incrementally.

The next significant increase in coverage by government-sponsored health care plans occurred in 1997 with the passage of the State Children’s Health Insurance Program (SCHIP). During the last decade, enrollment in government-sponsored programs has increased and the number of individuals covered by employer-based programs has decreased.

In 2006, 60 percent of the nonelderly population was covered by employer-based insurance. Medicaid and nonemployer-based insurance covered the rest of the population. The cost of providing insurance coverage has become a significant expense for employers, with healthcare insurance premiums rising at a rate faster than inflation. For many businesses, this represents a significant portion of their budget. Many small businesses cannot afford this expense and thus have stopped offering health benefits as part of their compensation packages. In addition, businesses that once offered benefits to the employee’s family as well as to retirees are facing significant costs as individuals live longer.

During the most recent strike by employees of Detroit auto manufacturers, one of the most significant issues at stake was the corporate financing of healthcare benefits for current employees and retirees. As U.S. firms compete with international companies that do not have to pay for healthcare benefits because they are provided under government-sponsored programs, many businesses have been forced to cut expenses by limiting or eliminating healthcare coverage.

Possible solutions
This year, presidential candidates from both parties have offered solutions to the uninsured problem. These solutions address one or more of the following three main problems relating to the increase in the number of uninsured individuals:

  • Employers are decreasing or dropping the healthcare benefits they offer.
  • High healthcare premiums make it difficult for small businesses and the self-employed to afford coverage.
  • Employers receive a tax advantage when purchasing health care for their employees, but individual purchases currently have a tax disadvantage.

Many of the Republican solutions consist of changing the tax codes to allow for the establishment of a tax benefit for individuals who purchase their own health insurance. They also propose a change in the tax incentive for employers that would shift individuals away from employer-based programs to individual programs.

Supporters claim this could increase competition among insurance providers and allow market forces to decrease healthcare costs. In addition, many of the candidates would like to offer tax credits to individuals for out-of-pocket healthcare expenditures.

Various methods have been proposed to help contain costs, including paying for health information technologies (IT), passing tort reform, encouraging coordinated care and cost transparency, and promoting free market competition among insurers. Many Democratic proposals consist of creating national “Health Marts,” pools of health insurers that would provide coverage for individuals who cannot obtain it through their employers or the government. These programs would be funded either by a tax to insurers or by tax deductions.

Supporters claim that the government can pool together insurance for these individuals at a reasonable rate. These ideas are similar to the program that has been created in Massachusetts. Some candidates have proposed expanding the coverage offered by Medicare, Medicaid, and SCHIP. Cost-containment ideas focus on preventive care, adoption of IT and electronic medical records, medical liability reform, and reducing administrative costs for insurance companies.

The future
Many individuals and candidates believe the problem of the uninsured in the United States is reaching a “tipping point.” The increasing number of uninsured, the decreasing reimbursements to healthcare providers, and the rising costs of healthcare delivery may force all parties to come to a reasonable solution. Past legislative sessions have resulted in short-term patches, rather than a long-term plan to address these problems. A solution to this problem may come only if the next president makes a significant commitment to developing a more comprehensive solution.

The Washington Health Policy Fellows include A. Alex Jahangir, MD; Ryan M. Nunley, MD; Samir Mehta, MD; Alok D. Sharan, MD; Sharat K. Kusuma, MD; James Genuario, MD; Anil Ranawat, MD; Aaron Covey, MD; and John Flint, MD.

Did You Know?

  • 46.6 million individuals did not have any health insurance in 2006
  • 38.3 million adults and 8.3 million children did not have health insurance in 2006
  • 80 percent of the uninsured come from working families
  • 39 percent of the uninsured are between the ages of 19 and 34
  • 32 percent of the uninsured are between the ages of 35 and 54
  • $12,000 is the average annual cost of a family health insurance policy
  • $100 billion is spent on healthcare services for uninsured individuals annually

AAOS Now
February 2008 Issue
http://www.aaos.org/news/aaosnow/feb08/reimbursement2.asp