Effect of Pricing of Health Costs on the Poor - Dissertation Example

? The Pricing of Health Costs and its Effect on the Poor in the United s Introduction The term health care relates to the prevention and treatment of diseases in ailing individuals. Almost 60 years ago in 1948, the World Health Organization (WHO) gave a very comprehensive definition of this term, where it stated that health is a “complete state of physical, mental, and social well-being and not merely the absence of infirmity.” Thus, to enjoy an overall good health and a general good quality of life, all three factors must function normally for an individual. Various research papers reveal that in US, the health care segment sees the highest expenditures amongst all other service sectors, with a consistent rise in health care costs in the last decade. This has resulted in a dilemma within the families that fall below the Federal Poverty Line, or are just above it. These families must forcibly cut down on their health care costs, which may ultimately lead to dangerous health consequences. In this context, the researcher will conduct a qualitative study (secondary research), that will explore the aspect of the monetary costs and quality of life, as regards the present US health care system. Monetary costs and quality of life in the context of US health care: in US, health care occupies an important position within the U.S. economy graph (Fig 1). Observations by various experts reveal that every year the health related expenditure keeps on growing, often moving ahead of the expenditure made on the other service sectors. This implies that each year the percentage of the health expenditure within the overall US economy pie keeps on growing. As the cost prices within the health care system increase, there is bound to be some sort of a repercussion within the average household, especially amongst the families that fall below the federal poverty line. “Rising health care costs make health insurances less affordable for individuals, families, and businesses, contributing to the over 45 million Americans who are uninsured and to the costly problem of extending coverage to them” (Health Care Costs- A Primer, 2009, 1). Besides, making insurance less accessible to the common man, it also creates a tremendous pressure on the insurance companies, that may result into large financial burdens for the families of the patients. Even for those people that have insurances, rising health care costs translate into getting less benefits each year, for the same amount of money. Fig 1: The US spends more healthcare than any country in the world. The figures as shown in the graph above represents health care expenditure for the year 2006, and during this year it was observed that an average US person spends more on health care than on food, oil, or even gasoline (Source: Mckinsey & company, 2008, 13). At an average estimate, America spends nearly $7,400 annually on health care per person, which comprises of about a 16% share within U.S. economy pie (fig 2). A look at the year 2007 will show us that US health care spending was then nearly $2.2 trillion, which when evenly spread over the entire population amounted to about $7421 per head expenditure (Figure 2). This $2.2 trillion represents 16.2 percent of the nation’s total economic activity, referred to as the gross domestic product or GDP. While the spending figures are by themselves impressive, however the chief area of concern is their rate of rapid growth over the last few years. Fig 2: National Health Expenditures per Capita and Their Share of Gross Domestic Product, 1960-2007 (Source: Health Care Costs- A Primer, 2009, 2). The graph (fig 2) shows the rising cost of health care per person in US. The growth in the last decade, starting from around 1990, and has been exponential. In 2009, the $7421 per head spending increased to more than $8000 per head, showing a jump of more than $500 per person, in just 2 years time (Centers for Medicare and Medicaid Services, 2010). Observations show that the rapidly increasing health care expenditure in US is becoming a financial problem for the average American families, and is turning into a nightmare for those classified as the ‘poor families.’ The results of a 2009 Kaiser Health Tracking Poll (fig 3) reveals that more nearly than 50% of the American families had to cut down on their medical care costs in the last 1 year, and are now mainly relying on natural or traditional homemade antidotes for curing various diseases. Records show that over-the-counter medications are also increasingly gaining more popularity, as this is one way using which one can avoid the doctor and the subsequent large bills (around 35% of the Americans aired this view). Another 34% of the US citizens revealed that they missed their dental care schedule simply to avoid the high costs; while another 27% added that were postponing their health checkups and treatments to avoid incurring huge expenditure (Health Care Costs- A Primer, 2009, 9). Fig 3: Results of rising health care costs in US. More and more people (especially those considered as poor), are inventing various ways to cut down on their healthcare costs (Source: Health Care Costs- A Primer, 2009, 9). Here one has to consider the fact that persistently increasing health care costs does not necessarily translate into relevant and equal changes in the eligibility standards for public health care programs such as Medicaid and CHIP. It is generally observed that public health care programs proffer health insurance coverage for families and individuals who are considered to be poor (the income must be below a specific poverty line, known as the federal poverty line or FPL), and cannot afford to pay the premiums for the entire insurance package, or foot their own medical bills. A closer look at the expenditure figures over the past 10-15 years will show us that the cost of health insurance and health care in US, have risen more rapidly than the increase in FPL over the same time period (Figure 11). For families whose income is just above FPL, now finds it exceedingly difficult to fund the private health insurance coverage premium, while footing medical bills from their own pocket is also another expensive option, which also remains quite unviable. Thus, the only way for these poor families, as we have seen, is to avoid the entire health care system and go for alternate treatments, like home remedies. Thus an increase in US health care costs is slowly translating into lowering the quality of lives of the poor people, who in order to avoid the pressure of large medical bills are avoiding proper treatment and thus putting their lives to risk. Conclusion: US health care rising costs are turning into a cause for serious worry for the general American people and more so for the families that fall below the FPL or are just above it. Since the public health care programs do not give complete coverage for the medical bills, while private health insurance coverage are extremely expensive, it is the poor families in US that are suffering the most and are being forced to resort to various alternative treatments or medications. These alternative processes are often quite risky, and comprise of like prescribing medicines over the counter or using homemade remedies, and they increase the chances of an individual falling prey to various illnesses or diseases. Impact of insurance premiums and out of pocket payments: Health insurance, like any other insurance, is a sort of fund where people collectively pool their risks against acquiring high medical bills. The collective fund may be privately owned, or it may government sponsored, that is, public funded. Thus health insurances may be given to all the citizens by the state, as a form of ‘social solidarity’ or it may also be given as charity for the benefit of the poor families in the form of aid programs. Insurances can be bought for a large group, as is seen in companies buying insurance policy covers for all their employees; or it may also be bought by an individual for his family. Insurance covers entail that each beneficiary pays a premium to avail the protection of this coverage, while it is the high premium rates that deter most of the average Americans from acquiring private insurance covers. The recent 2010 law passed by the Obama government is the Patient Protection and Affordable Care Act which addresses the hotly contested topic of unequal access to US health insurance coverage, and the bill gives a guarantee that all Americans who are in dire need of health insurance coverage will be duly covered. However the bill does not clearly delineate, as to how the act will affect the health insurance costs that include out of pocket expenses borne by the family, and the especially high premiums that must be paid for availing the insurance cover, and there is every possibility that these costs will keep on increasing in the near future. Fig 4 gives us an estimate of the high premium rates that are seen in the various states in US in 2009. Fig 4: (Source: Individual Health Insurance 2009: A Comprehensive Survey of Premiums, Availability, and Benefits, 2009, 6). the table shows the 10 states whose insurance premiums for health coverage rank amongst the highest in US. For a family of 2-3 members the annual premium rates vary from $13296 to $ 6383, a rather high amount for the families that fall below the FPL or are just above it. Various studies reveal that the already high premiums for the health insurance policies, at present, are increasing persistently; and rare rising faster than the rate of inflation and the increase in salaries of the family’s wage earners. As health care costs go up, it becomes more difficult for the average US families, individuals, and the various business firms to buy health insurance coverage, as the premium keeps on increasing each year. Often the employers that provide insurance covers for their employees, increase the level that the workers must necessarily pay out of their own pockets (the cost sharing), when they go to the doctor or are admitted into the hospital, which in turn will put undue pressure on the family purses. Besides, paying extra for the health care from their own salaries, there is also a deductible amount, which an individual covered under a health insurance must pay annually out of his own pocket, before the insurance policy actually starts paying back. Deductibles are very often seen in PPOs, for medical services received from the facilities that do not belong to the PPO network. In Medicare, the insured individual or family must pay a deductible amount for the availed health care facilities, and again another separate deductible amount must be paid again for the medicines taken under Medicare (Part D). There are also some health plan insurances under which the insured person or family has to pay a certain % of the cost of medical services covered by the plan, even after he has paid the annual deductible amount. This extra amount is termed as the ‘coinsurance’ and is generally around 20% of the total amount approved by the health insurance program. Another out of pocket payment is known as the ‘copayment’ which is a flat charge, or a fixed amount that an individual has to pay for availing certain medical services. Copayments are generally seen as a part of the various US managed health care programs like the PPOs or HMOs, as regards to medications under the Medicare part D. Fig 5: This graph shows the yearly “increase in employer premiums to both worker earnings growth and overall inflation” (Source: Health Care Costs- A Primer, 2009, 10). Here it is evident that the increase in insurance premiums is more than the average increases in the workers’ annual salaries. Insurance premiums have increased by 5 to 14 % annually from 2000 onwards, while we find that increases in salaries and inflation rate hovers around 2-4%. This will translate into the simple fact that workers will have to shell out more money from their salaries each year to maintain the coverage on their health insurances. “These effects may either be direct – through increased worker contributions for premiums or reduced health benefits – or indirect – such as when employers reduce wages or limit wage increases to offset increases in premiums” (ibid). Thus, we find that increasingly people are paying out-of-pocket for their health care costs. Out-of-pocket expenses mean what an individual or family must pay for the incurred medical bills and availed health care services, which is above and beyond the monthly premium of the health insurance coverage. Depending on an individual’s personal health conditions, these extra out of pocket payments range from paying annual deductibles, to co-insurance money, and copayments, as physician consultation charges and for buying medications. Thus what we perceive is an added burden of health care costs on the average American, and a very heavy burden on the families that come under the FPL or are just above it. To comprehend the amount of burden that these increasing health care costs are inflicting on the poor families and their households budgets, one will have to take the payments made as health insurances premiums and the factor of cost sharing (generally with the employer or the government) for availing the health care facilities, as a percentage of the total family income (Congressional Budget Office, 2007). Fig 6: “Shows that the percentage of non-elderly individuals whose family out-of-pocket expenses for health care exceeded 10 percent of income increased from 16 percent in 2001 to 18 percent in 2004. Not surprisingly, the increase in the burden of premiums and out-of-pocket costs for care was even larger for those below the federal poverty level (FPL) (30 percent in 2001 and 28 percent in 2004)” (Health Care Costs- A Primer, 2009, 11). Conclusion: From the above discourse it is very clear that the poor families are increasingly find it difficult to the pay the premiums for the health insurance coverage, while paying out of pocket is an added burden that is again eating into the salaries of these poor people. Thus, it is of little wonder that at an average estimate 45 million Americans today remain uninsured (owing to the high premiums charged) while those covered under insurance (private or government sponsored ones) prefer to avoid going for any health checkups, as in all probability they would end up paying out of their own pocket. Thus, such high health care costs are leaving a large section of the poor population in US completely vulnerable to ill health and sickness, and depriving them of a certain quality of life, as had been insured for all human beings under the Universal Declaration of Human Rights of (UNDR) of 1948. Thus we find that the present poor population of US does not enjoy an overall health, as per the guidelines set by WHO in 1948. So, it is essential for the American policymakers to create a health care program that would be developed on a philosophical, ethical, and political framework. This is necessary to create a beneficial package especially for the poor people, and the government “will have to balance the benefits of future advances with our ability to pay for them is one of the next great challenges for health policy” (ibid, 15). References Centers for Medicare and Medicaid Services. (2010). National Health expenditure data-Overview. Historical; NHE summary including share of GDP, CY 1960- 2007; file nhegdp07.zip). Retrieved from, http://www.cms.hhs.gov/NationalHealthExpendData/ Congressional Budget Office. (December 2007). Research on the comparative Effectiveness of Medical Treatments: Issues and Options for an Expanded Federal Role. Retrieved from, http://www.cbo.gov/doc.cfm?index=8891; Health care costs: (A primer) Key information on health care costs and their impact. (2009). Kaiser Family Foundation. Retrieved from,  http://www.kff.org/insurance/upload/7670_02.pdf. Centre for research and policy. (2009). Individual Health Insurance 2009: A Comprehensive Survey of Premiums, Availability, and Benefits. Retrieved from, http://www.ahipresearch.org/pdfs/2009IndividualMarketSurveyFinalReport.pdf Mckinsey & Company. (2008). Accounting for the cost of US helathcare: a new look at why amercans spend more. Retrived from, http://www.mckinsey.com/mgi/reports/pdfs/healthcare/US_healthcare_report.pdf WHO. WHO definition of health. Preamble to the Constitution of the World Health Organization as adopted by the International Health Conference, New York, 19- 22 June, 1946; signed on 22 July 1946 by the representatives of 61 States (Official Records of the World Health Organization, no. 2, p. 100) and entered into force on 7 April 1948. Retrieved from, http://www.who.int/about/definition/en/print.html Read More