Health Care in Pennsylvania and the U.S.

The U.S. health care system is the most expensive in the world. Yet as a system, it fails to come close to providing the best health care in the world. Evidence of this can be found in our life expectancy, which is shorter than people living in other advanced economies.

Medical costs currently consume 16 percent of our national income and are expected to grow to 20 percent by 2015. This has become a heavy economic burden that adds significantly to the cost of virtually every product and transaction in our economy. Many employers are trying to shed this cost by shifting the cost of health insurance to their employees or by abandoning health insurance coverage altogether. Thus, a growing percentage of people living in the United States are uninsured.

Who has access to medical care in Pennsylvania and who does not?

Upper-income Pennsylvanians have excellent health insurance and excellent access to medical care. Many veterans have good access through the network of physicians and services administered by the Veterans Administration. The elderly and the disabled have adequate access to medical care through Medicare and in recent years, most children have gained adequate access to medical care through the expansion of the Children’s Health Insurance Program (CHIP). Around 485,000 very low-income adults who suffer from a chronic illness, are disabled or pregnant, or who have young children have limited access through Medical Assistance. Another 55,000 low-income adults have limited access through the AdultBasic Program.

Who’s left out? Around 800,000 adult Pennsylvanians below age 65 (around 11 percent) do not have any health insurance and are not eligible for government-funded insurance. They have no approved pathway to medical care and so access it via emergency rooms, which they utilize when medical problems are acute. If they suffer from a chronic disease, their treatment is not managed by a medical professional who sees them on a regular basis. They often do not fill their prescriptions or, if they do, they do not take prescription drugs in the recommended dosages. Usually they are charged retail prices for the medical services they receive. When costs pile up, many choose bankruptcy as the way out.

Another big chunk of the population has insurance that is not adequate to provide the protection they need. Over 2.2 million Pennsylvanians (21 percent of the under-65 population) live in families that pay at least 10 percent of their pre-tax income for health care. Because of high deductibles, co-pays, payment limits and exclusions in their health insurance plans, these individuals find themselves responsible for thousands of dollars of health-related costs. For families on a tight budget, this kind of insurance prompts policy holders to avoid medical care until they are in crisis.

How will expanded access to health care affect the cost of medical care?

Using a version of supply-and-demand theory, some have the mistaken view that expanded access will translate into higher prices for medical care. In fact, the opposite is true.

Remember that in our society, everyone can access medical care in some form if they are sick enough. Those with the least access to medical care often receive the most expensive care because they are prone to emergency treatments and expensive hospitalizations. The cost of this care is shifted to paying customers within the health system, adding nearly 7 percent to their costs. Far better – both for individual health and for everyone’s pocketbook – is a system that encourages healthy lifestyles, provides routine access to a physician for preventive care, and identifies medical problems before they become life-threatening.

What can be done to reduce waste within the health insurance system?

Insurance companies have high administrative costs because they try to avoid insuring people who are likely to need medical care. This “cherry-picking” approach to health insurance is the way insurance companies maximize profits. But it introduces complexity and expense throughout the health system.

These administrative costs can be reduced by adopting insurance reform standards into law. (Pennsylvania has done less of this than almost any other state.) Here are examples:

• We can restrict the practice of “medical underwriting” whereby companies deny coverage to individuals who have a chronic illness such as diabetes or hypertension.
• We can adopt “community rating” as the method to set insurance rates, thereby simplifying the process by which rates are set for employee groups.
• We can require insurance companies to operate efficiently by requiring the pay-out (in payments to medical providers and reductions in premium payments) of at least 85 percent of the premiums they collect.
• We can increase competition among insurance companies by requiring standard benefit packages for small groups and individual policies.
• We can give the PA Insurance Department greater authority to review rates, scrutinizing them to ensure that savings from the reduction of hospital-acquired infections, reduced hospitalizations for chronic conditions, and decreased uncompensated care are reflected in lower premiums.