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A Penny for Your…Health?

RecessionWith the presidential election season now over, the grim reality of the economic crisis confronts us with increasing ferocity.

When it comes to health care, what impact is the recession having?

Many Americans are finding it harder to afford their prescription drugs.

  • When forced to choose between making car and housing payments, buying groceries and purchasing drugs, folks choose not to fill their prescriptions.
  • Or they cut their pills to make them last longer.

How widespread is this problem?

  • A survey conducted in July, 2008, by the National Association of Insurance Commissioners found that 11% of residents have reduced the number of medications taken or decreased the dosage.
  • While some of these individuals may be giving up unnecessary drugs, anecdotal evidence suggests that folks are also stretching or relinquishing vital maintenance drugs that keep them healthy on a day-to-day basis.
  • Taking these necessary medications can prevent more serious conditions that are costlier to treat from developing, especially when it comes to chronic diseases like diabetes.

Health consumers are foregoing preventative medical care as well.

  • According to this Kaiser Family Foundation survey, 36% of residents have delayed medical care in the past year, 31% have skipped a test or treatment, and 22% have reduced their number of visits to a physician.

These studies on prescription drug purchasing and doctor visits do not distinguish between insured and uninsured consumers.

  • While we might expect uninsured individuals to have trouble paying for basic services, and especially so during a recession, it seems that the insured are also struggling.
  • This is partly because employers are increasing the amounts of worker contribution for employer-sponsored health plans.
  • Employers are offering plans with reduced benefits and higher deductibles, meaning that workers are increasingly on their own when it comes to primary care.

As workers have less ability to pay, insurance premiums, co-pays and out-of-pocket contributions continue to rise.

  • An annual employer survey found that the average co-pay for “preferred” prescription drugs increased from $15 in 2000 to $25 in 2007.
  • The average cost of an employer-sponsored, family health plan increased 119%, from $5,791 to $12,680, between 1999 and 2008. Worker premiums during that time increased 117%, from $1,543 to $3,354.
  • This occurred as real wages stagnated or fell for the majority of workers after 2003.
  • Employers are switching to plans with higher deductibles that require an increased out-of-pocket contribution from workers before comprehensive coverage kicks-in.
  • And those with Medicare, the popular government program for individuals age 65 years and older, are not protected from price increases.  On average, seniors face a 25% increase in monthly premiums for Medicare prescription drug plans.
    • Premium increases often pose a significant burden for this group, as many are retirees who live on a fixed income.

There are also a growing number of uninsured individuals as the unemployment rate rises.

  • As jobs are lost, folks are losing their insurance as well. This adds to the ranks of the nearly 47 million already uninsured.
  • The unemployment rate is now 6.5%, up from 4.7% a year ago. This is the highest unemployment rate since 1994. Economists predict that the rate will rise to 8% by the middle of next year.
  • The Kaiser Family Foundation estimates that for every 1% increase in the unemployment rate, the number of uninsured individuals grows by 1.1 million and results in an additional 1 million (600,000 adults and 400,000 children) enrolling in Medicaid.
  • This is increasing total state Medicaid spending by $1.4 billion at a time when state tax revenues are falling by 3-4%.
  • In October, the National Governors Association called for an economic stimulus package with direct and immediate assistance for the states, including a 5% increase in federal Medicaid matching payment for two years.
  • Governor David Paterson (D-NY) represented the governors Association before the House Ways and Means Committee and said that “Governors can only cut so much before we begin to jeopardize our fundamental responsibilities to our constituents, such as providing health care for the most vulnerable.”

Prognosis

  • President-Elect Barack Obama campaigned on a platform of wide health care reform, but the economic conditions being caused by the recession could limit the extent to which he can propose sweeping policy changes.
  • Given the budget shortfalls facing state governments as they attempt to cover the newly uninsured, it is more likely that Obama will focus on expanding the SCHIP program and on eliminating the subsidy to private providers of Medicare Advantage plans, amongst other changes to Medicare, in his first year.
  • Perhaps the biggest impact that the recession will have on health care, then, is to limit proposals for widescale reform.  Instead, small changes in policies that fit the “pay-as-you-go” criteron are more likely.
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