Affordability - the Hidden Issue in the Health Care Reform Debate

Written by: Vicki G on Jul 6, 2009 9:31 AM EDT

As the fight to achieve health care reform heats up, we can't lose sight of the real goal: providing every American with access to high quality, medically necessary, health and medical services. To make reform work, the new health program must be affordable for the federal and state governments, for employers, and, most importantly, for health care consumers.

Affordable premiums:

Insurers will no longer be able to deny coverage to people based on pre-existing conditions or to charge them more based on health care conditions, health care usage, or gender. But they will be allowed to charge higher premiums based on age. The House of Representatives Tri-Committee draft bill allows insurance companies to charge older people twice as much as younger people. The Senate Finance Committee is contemplating letting insurance companies charge up to five times as much based on age. In other words, the health plan that costs a twenty-something $100/month or $1,200/year could cost a fifty-something $500/month or $6,000/year.

Both the House and the Senate are considering "affordability credits" or subsidies to assist people with limited incomes pay for the cost of insurance - and hence improve their ability to access medical care. In order to reduce the cost of its health bill, however, the Senate Finance Committee is contemplating limiting subsidies to people with incomes up to 300% of the federal poverty level. While that sounds pretty high, it works out to about $32,490 for a single person. That's not a lot of money for people who live in high cost areas like Washington, D.C., New York, Miami, and Los Angeles.

If you couple the reduction in premium subsidy levels with the ability of insurance plans to age rate premiums, you get an older person earning $35,000 a year being asked to purchase health insurance costing $6,000. That person will be paying about 17% of his or her income on premiums alone. Sure, he or she may be eligible for a hardship waiver and not be required to buy health insurance - but then the person remains uninsured.

Affordable cost-sharing:

In addition to having affordable premiums, the health insurance packages need to have affordable cost-sharing. The New York Times reported on June 30, 2009, "… an estimated three-quarters of people who are pushed into personal bankruptcy by medical problems actually had insurance when they got sick or were injured."

http://www.nytimes.com/2009/07/01/business/01meddebt.html?_r=1&scp=5&sq=bankruptcy&st=cse

It's not just that high cost-sharing can lead to bankruptcy. People who have to pay a lot out-of-pocket don’t get medically necessary care. We know that older people who reach the coverage gap in their Medicare prescription drug coverage stop filling prescriptions. In regard to the under 65 adult population, the Commonwealth Fund estimates that, in 2007, approximately 25 million of them were underinsured. More than half of this group did not go to a doctor when sick or pursue follow-up treatment that was ordered.

As the New York Times article said, giving people access to health insurance won't ensure that they can see a doctor when sick or fill a prescription when necessary. But will the benefit packages Congress is considering address the issue of underinsurance, i.e., affordability of cost-sharing?

It is unclear. Rather than define benefit packages per se, both Houses of Congress are considering setting actuarial values for the benefits that must be offered. This means that health insurance plans would have to pay for a specified portion of the cost of care, and the consumer would pay for the rest as a co-payment or co-insurance. The levels at which the actuarial values of health plans are set is key. Someone who is required to pay 25% for the cost of a doctor's visit might be able to afford that amount, but what about 25% of an expensive surgical procedure or of a biological drug that costs thousands of dollars?

And, while the total benefit package may have to meet a certain level, that doesn't prevent a health insurance plan from charging very low cost-sharing for routine items and very high cost sharing for more costly services – as a way to discourage people with chronic conditions from enrolling in the health plan. Some of the Medicare HMOs and other Medicare Advantage plans employ that tactic. These plans charge very little for doctor's visits, but then impose very high out-of-pocket costs for more expensive items like hospital stays, nursing home stays, and wheelchairs.

Prohibiting cost-sharing for preventive benefits, including in Medicare, will help make some medical services affordable for everyone. But it doesn't address the problems of underinsurance and large out-of-pocket costs for people with chronic conditions who need regular medical care.

In sum, affordability is the hidden issue in health care reform. If premiums are too high some people will remain uninsured. And having health insurance won't improve people's lives if they still can't afford to go to the doctor to fill a prescription.

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