Thank you for opportunity to join you today. I was asked to provide an overview of health care, health policy and health politics both here in Oregon and nationally, with an emphasis on how it relates to business. Let me start by saying that most of the controversy and conflict around health care has to do with cost — the cost on individuals, the public sector and private sector employers. And this is not a new problem. In 1974, in an address to Congress, President Nixon said: “For the average family, it is clear that without adequate insurance, even normal care can be a financial burden while a catastrophic illness can mean catastrophic debt.” Three decades later, the problem was getting worse.
Between 2000 and 2008 the cost of family premiums for those with employer-sponsored group insurance had increased ninety seven percent, while out-of-pocket expenses had increased one hundred seven percent. The number of workers with deductibles over $1,000 had increased from ten percent in 2000 to eighteen percent in 2008—thirty five percent for those working for small firms. Nearly a third of all Americans reported facing a serious problem paying for health care and health insurance; and the inability to pay a medical bill was the second leading cause of personal bankruptcy. This was the situation that prompted the passage of the Affordable Care Act in 2010.
I point this out because it is important to recognize that this problem existed before the Affordable Care Act was passed in 2010. The ACA did not cause the problem, but it also did not resolve it. What this legislation did do was to significantly increase the number of people who had health insurance coverage. It did this in three ways. First, it expanded access to public insurance (in this case Medicaid) to everyone with an income up to 138% of the federal poverty level. Second, it expanded access to private commercial insurance with an individual and employer mandate; and premium subsidies for those purchasing insurance through the exchange. The employer mandate applies to business with more than 50 full time employees. Finally, the ACA precluded insurers from denying coverage because of preexisting conditions.
In other words, the major focus on this legislation was to make health insurance more affordable; which is not the same as making health care more affordable. This is an important distinction, because it is the cost of health care that drives up the cost of insurance in the first place. Likewise, efforts to repeal and replace Obamacare do not address the underlying cost issue either … and cost is the elephant in the room. So, what I want to focus on today is how we might move beyond the partisan debate that has gripped congress for seven years and create the path to a real solution.
The impact of the rising cost of health care on business and business competitiveness is widespread, but generally more burdensome for smaller businesses. For example, between 2004 and 2015 almost all businesses with 1000 or more employees offered health insurance coverage. However, there was a ten percent reduction in the number of businesses with 25 to 99 employers offering health insurance coverage. This reduction in coverage was twenty-six percent for businesses with 10-24 employees; and thirty-six percent for companies employing fewer than to people.
There is a reason for this. Last year the average cost of employer-sponsored coverage was $6,435 for and individual and $18,142 for a family. The cost of employee health benefits averages $2.70 an hour, which is on top of recent legislation to increase the minimum wage. Businesses respond to increased health care cost primarily by shifting cost to their employees by either increasing copayments and deductibles or simply deciding not to offer health insurance at all. In addition, some larger employers, subject to the mandate, increase the number of part time workers, since the mandate does not apply to those working less that 30 hours a week.
The rising cost of health care affects the public sector as well. The cost of Medicaid—which was significantly expanded under the ACA—is expected to grow 6-7% annually through 2025. This is one of the reasons that the Republican efforts to repeal and replace the ACA have been focused on shifting much of this cost burden to the states. States, in turn, shift costs to individuals by reducing enrollment. The operative word here is cost shift. Whether costs are shifted by private sector employers or by legislative action, shifting cost does not reduce cost.
And the dark secret of the U.S. health care system, however, is that people who cannot afford care can still go to the emergency department where federal law requires that they be seen and treated. So, we end up paying to treat strokes in the hospital rather than managing blood pressure in the community; or denying affordable access to prenatal care, then paying tens of thousands of dollars to resuscitate 500-gram infants in the neonatal intensive care unit. This makes no sense economically or as a social policy because these uncompensated costs are shifted back to employers who, in turn, pass them on to individual consumers through premiums and deductibles so high that, for all practical purposes they are uninsured—perpetuating the cycle.
My point is that we are arguing about the wrong thing. We are arguing about who pays the bill, rather than why the bill is so high in the first place. And when the bill—the total cost of care—is simply unaffordable, this is a very unproductive argument. Until we can refocus this debate from how to make insurance more affordable to how to make health care more affordable, a solution will continue to elude and divide us. Read full speech here.