Workers Feel Pinch of Rising Health Costs

[Guest guest]

http://www.nytimes.com/2003/10/22/business/22CARE.html?th

 

October 22, 2003Workers Feel Pinch of Rising Health CostsBy MILT FREUDENHEIM

 

As health care costs head into a fourth consecutive year of double-digit

increases, employers are shifting a growing share of the burden onto people who

make the heaviest use of medical services.

 

The trend — evident as companies begin informing workers of their benefit

choices for the coming year — takes the form of fast-rising co-payments and

deductibles, higher payroll deductions to cover spouses and children and new

kinds of health plans that give workers a fixed sum to spend.

 

On average, the annual out-of-pocket costs for employees of large companies have

more than doubled since 1998, to $2,126 this year, according to Hewitt

Associates, a benefits consulting firm. Hewitt is expecting a 22 percent jump

next year, to $2,595.

 

Costs are up sharply, too, for workers who pay a monthly insurance premium but

rarely see a doctor. However, employers have sought to temper those increases,

so healthy workers are not tempted to drop their coverage, experts say.

 

" Employers didn't want to discourage the take-up of insurance, " said Paul B.

Ginsburg, an economist who is president of Health System Change, a

Washington-based research center. " They have made a very conscious decision to

increase the patient's cost-sharing rather than increase the employees' share in

the premium. "

 

Employers still pay the bulk of their workers' health care bills, but their

contribution has slipped over the last five years, to 70 percent of total health

care costs from 75 percent, according to Hewitt's latest survey of 300 employers

with 5,000 or more workers, released last week.

 

And more workers are going without insurance, even at large companies. According

to a report issued yesterday by the Commonwealth Fund, which studies health

policy issues, 9.6 million workers and family members at companies with more

than 500 employees did not have employer-provided health coverage in 2001.

 

At the nation's largest private employer, Wal-Mart Stores, only about half the

roughly one million domestic employees are in a company health plan, said Mona

Williams, a Wal-Mart vice president. Of the 500,000 others, half are ineligible

because they were hired too recently; many depend on parents, a spouse or a

government program for coverage, Ms. Williams said.

 

The figures for big companies reflect a broader shift in the American economy

away from mechanisms that for decades have spread the burden of health care

costs onto more shoulders.

 

Largely because of the booming cost of prescription drugs, for example, Medicare

covers less of its beneficiaries' health care expenses than at any time since

the program was established in 1965, according to Robert M. Hayes, president of

the Medicare Rights Center, a patient advocacy group.

 

As a result, the elderly paid 22 percent of their average median income, or

$3,757, for health care last year — a larger proportion than the 20 percent of

income they spent before the advent of Medicare.

 

The number of Americans without insurance has, meanwhile, grown to 43.6 million

at last count, the highest since 1998, according to the Census Bureau. Billions

of dollars of their health costs are absorbed by hospitals or federal programs,

and experts say that the uninsured skimp on care, compared with people who have

workplace coverage. Still, uninsured families this year are averaging $772 in

out-of-pocket spending, said Jack Hadley, a health care researcher at the Urban

Institute, a policy research group in Washington.

 

All these trends fall most heavily on people who are sick or who otherwise are

heavy consumers of medical services. They are also fueling national policy

debates, like the push for a Medicare drug benefit, the campaign for loosened

restrictions on imported drugs and calls for expanded public programs by most of

the Democratic presidential candidates.

 

" Shifting costs to patients, particularly in the form of higher deductibles for

hospital care, disproportionately affects the sickest Americans, " said Karen

Davis, president of the Commonwealth Fund. " It is not an acceptable response to

rising health care costs to make care so expensive that those who need it fail

to get it. "

 

Some health care economists — and many insurance companies — argue that costs

will never come under control until the users of medical services feel the

financial sting. Generous coverage, they contend, long gave Americans and their

doctors a perverse incentive to indulge in wasteful consumption of expensive

drugs and diagnostic tests. In its more restrictive forms, managed care made

patients jump through bureaucratic hoops to obtain treatment, but experts say

it, too, did little to expose consumers to the true costs of health care.

 

" Employees who were paying $20 for a doctor visit had no idea that the average

cost was really $93, " said Liz Rossman, vice president for benefits at Sears,

Roebuck & Company. In the current sign-up period, Sears is hoping that many

employees will select new plans that require them to pay 20 percent of the full

cost of doctor visits, hospitals and brand-name drugs, or 25 percent for going

outside the Sears network.

 

Hewitt said that a few large employers were offering a new type of health plan,

sometimes called consumer directed, that gives workers an unfiltered view of

health bills — and often increases their costs. Employees get an allowance to

spend on medical expenses. If they exhaust it, they use their own money until

they reach a limit, typically $3,000 to $5,000, when the plan starts paying.

 

" The whole point is to change their purchasing behavior, " said Kenneth Sperling,

a consultant with Hewitt.

 

More commonly, some employers have shifted costs by offering limited basic

coverage that employees can enhance by paying more in premiums.

 

But cutbacks in coverage can be brutal for some patients.

 

" I'm having to beg for my insulin, " said Cathy Barkovich, 33, a diabetes patient

in Harmony, Pa.

 

She said her husband's health plan stopped paying for her brand-name

prescriptions in July; the American Diabetes Association says that no generic

equivalent exists. When she applied to a manufacturer's free insulin program,

she was told that only uninsured patients were eligible. Her husband, a

$40,000-a-year interstate bus driver, is considering dropping their coverage so

she can get the drug, Ms. Barkovich said.

 

Last year, shifting costs to patients — mainly in drug coverage — " probably took

a percentage point off " the increase in the use of medical services, which has

been rising at about 9 to 10 percent a year, said Mr. Ginsburg, the health

economist. Almost two in three employers now require patients to pay higher

co-payments for drugs not on a preferred list: flat rates as high as $30 per

prescription, or sums as high as 29 percent of the actual cost.

 

" People view that as a success in discouraging the use of the most expensive

drugs, " said Gary Claxton, a vice president of the Kaiser Family Foundation,

whose survey of employer health benefits was published last month. Whether

recent increases in deductibles and co-payments for hospitals will also reduce

the use of services is not yet clear, he added.

 

One in 20 self-employed workers dropped their coverage last year, according to

the Employee Benefit Research Institute, a nonprofit research center in

Washington. But almost all employers held onto their insurance, by shifting more

costs to workers.

 

Precision Pattern, an aerospace industry supplier in Tacoma, Wash., with 135

employees was facing a 16 percent increase in premiums, said Bonnie Olson, the

company's human resources director. Precision switched to a new provider, BENU,

which offers small and medium-size employers a range of six health plans from

Cigna Healthcare and Group Health of Puget Sound, a Seattle health maintenance

organization.

 

The company's premiums rose less than 10 percent, she said, but now employees

must either accept the restrictions of a basic H.M.O. at Group Health or pay

more to maintain or exceed their former benefits.

 

The company pays the entire premium for about 50 employees who chose the basic

plan; these workers then pay $15 for office visits, 20 percent of other costs

and $263 a month to cover a spouse.

 

Most Precision workers chose a Cigna plan offering a broader choice of doctors

through a preferred-provider network, at $359 a month for an individual and

either a spouse or children. This option includes an $800 family deductible for

services obtained outside the network, up from a $200 deductible in the old plan

that applied only to visits to specialists.

 

" The huge rise in health care costs has to be paid by somebody, " said Alain C.

Enthoven, a health economist at Stanford University. " If some employers had to

pay it all, it might push them into losing money. "

 

Copyright 2003 The New York Times Company

 

 

NEW WEB MESSAGE BOARDS - JOIN HERE.

Alternative Medicine Message Boards.Info

http://alternative-medicine-message-boards.info

 

 

 

The New with improved product search