972 - Inside Rising Health Insurance Costs

Welcome to Public Health On-Call, a podcast from the Johns Hopkins Bloomberg School of Public Health, where we bring evidence, experience, and perspective to make sense of today's leading health challenges. If you have questions or ideas for us, please send an email to [email protected]. That's Public Health Question at jhu.edu for future podcast episodes. Hey listeners, it's Lindsay Smith-Rajers. It's open enrollment season for health insurance and the headlines are telling us that many premiums are going up significantly. Stephanie Desmond talks to Johns Hopkins Health Policy expert Jerry Anderson about why this is happening, what the future holds, and what it has to do with the US government shutdown. Let's listen. Jerry Anderson, thanks so much for joining me. It's always a pleasure. I keep seeing news about health insurance rates going up. It feels like this is a couple of events that's getting us higher and higher rates right now, and I'm curious what is going on. So the first thing I got to start with is I've been a failure for the past 45 years. I came to Washington in 1978 to control health care prices. I was in charge of President Carter's hospital cost containment legislation, stayed on for the Reagan administration and brought you Medicare perspective payments, which is essentially how the Medicare program operates today in setting hospital rates. And all these things made a lot of sense, but we haven't been able to actually control health care spending. We've taken a look at why and really its prices not quantity. It's not that you and I are getting more services. We're not going to the hospital more. We're not going to the doctor more. In most cases, we're not getting more pharmaceuticals. Those are the three big areas where spending occurs. It's that the prices for those services just keep going up. So I guess now this is being passed on more than before to consumers. It is, although it's still the fact that insurance pays most of the bills, but they are competing with each other on the basis of the price of the premium. Most of us who are consumers don't look at what the cost sharing is, what will happen when we go to the doctor, what will happen. We go to the hospital, how much of the drug price we will actually have to pay. We look at the premium and the insurers know that. And so they're passing more of the cost on to you and I because that's what we the consumer look at. So the Affordable Care Act that increased the number of people on insurance greatly and was able to keep health insurance costs low because of subsidies. Please explain that. Sure. So when I as an employee at Johns Hopkins, I get subsidized. The Johns Hopkins University pays a significant portion of the premium. This is true for Medicare. This is true for people in the past in Obamacare. What's happening now is those subsidies in Obamacare are being drastically reduced or going away. So it's like you and Obamacare have to pay the full rate of insurance. You don't pay just the employer rate of the insurance. And so it's going up by 25, 30% because not because the premium is going up that much, but it's predominantly because the subsidies are being reduced or eliminated. And so you're paying more and more of the full cost of health insurance. And that's why we're feeling it so much. Well, if you're insured by the Affordable Care Act, then of course you're going to feel it. But in the United States, every market is different. I mean, partially it's different geographically. What's going on in Baltimore is not necessarily the same as going on in San Francisco or in rural Kansas. But second of all, it all depends on what type of insurance you have. Some insurance is going up rapidly like the Affordable Care Act plans. And some are not going up very much and some are not going up at all. So it really depends on what type of insurance you have and how you're insurer is deciding to pay the bills. How many people are on subsidized ACA plans? About 30 million Americans are on it right now. Those are people who typically do not have employer-based insurance. These are people are in the Ging economy. These are people that work for small firms that don't offer insurance or they're self-insured individuals. So in the past, most of us have had employer-based insurance like I do with Johns Hopkins. But increasingly that is going away. We're having more and more people work independently. And we needed some kind of insurance, which the Affordable Care Act created, to cover those individuals in the past before that program existed. They would look at you and they would say, "Oh, are you sick?" Well, if you're sick, we're not going to cover you because you have cancer. You have had an heart attack. You have something wrong with you. And so we're not going to cover you. So what the Affordable Care Act did was put all those people into one bucket, both the healthy and the sick people. And then they weren't experiencing you. They weren't saying, "Are you sick or not?" Everybody was in the same pool. And so it became much more affordable for people that were individual or at a small group, like in a small firm, to buy insurance because not everybody's sick, but they knew in the past who was and they weren't going to give you a reasonable premium. But now they do it, but what's different is the government paid for part of the premium. That was the subsidy. Now they're cutting that away. So unlike Iat Johns Hopkins, who get Johns Hopkins to pay a significant part of the bill, now the government's not paying for those people. And so that's why premiums are going up so rapidly, currently. So why are these subsidies going away? Well, because the Republicans believe that they don't need to have subsidies anymore. They've been opposed to the Affordable Care Act from the beginning. And they tried to repeal it. They tried to modify it. And they made a few modifications, but nothing substantial. And now what they've gone decided to go after were the subsidies for the Affordable Care Act. And that is estimated to have a number of people drop out of the program because they can't afford 25, 30% premium increases. And that's part of why the government is currently shut down. Is that right? That's the debate right now between the Democrats and the Republicans. The Democrats, who were the ones who created the Affordable Care Act, they are trying to keep it going. And the Republicans who were opposed to it from the beginning, they've been trying to eliminate it for the last 15 years. And they're not eliminating it with this, but they're making it much more expensive. So more and more Americans will not be able to afford it. Could the final results of this be going backwards? Like before we had the Affordable Care Act? I think it's quite that draconian, but it is a step backwards. And the question is how many people will in fact drop out? The people that are most likely to drop out are the young and healthy people. And if they drop out of the Affordable Care Act plans, then you're leaving the older and sicker people in the plans. When that happens, the premiums go up and more and more people say, it's just not worth it to have health insurance. I just can't afford it. So we're in an economics is called the death spiral where you effectively get more and more sicker people into your health insurance plans. So again, I don't want to say that's going to happen, but there is definitely a concern that it might have. I know that we've heard a lot about people losing their jobs lately that takes them off of their company sponsored health plans. Does this make it far more difficult for them to get insured on the ACA? So the answer to your question is yes, but the first thing you got to recognize is that if you're insured through your employer and you lose your job, there's something called Cobra, which allows you to maintain your health insurance coverage for a certain period of time. So you're not immediately sent into the ACA plans, but ultimately if you don't have another job with an employer that offers health insurance, yes, you will be in that and yes, you will be paying a much higher premium than you typically paid when you had a job when you're employer paid a significant portion of the bill. I understand this is going to fall mostly on people who are making under $100,000 a year. So the people who really can't afford it. What happens when that happens? So you know, if at Johns Hopkins and large self-insured companies, the average premium is about $25 to $27,000 a year. Now if you're making $100,000 a year, that would be 25% of your post tax income. So you know, at $100,000 you're going to be paying taxes. Maybe you're going to keep $70,000. And so now $25,000 is essentially a third of your income for health insurance coverage. Well, I don't know about you, but I don't think most people can afford to pay a quarter to third of their income on health insurance when they have to pay rent, when they have to buy food, when they have to have clothes, when they have all sorts of other needs. So yes, somebody less than $100,000 without these subsidies is going to have to make a really difficult choice. And as I said, just a moment ago, if you're young and healthy, you're more likely to, or go getting health insurance coverage in. If you're sick and have cancer and something, you can't afford not to have health insurance coverage. So you're going to have to dig really deep into your pockets to try to figure out a way to do that. You know, some implications for the hospitals, the physicians, the drug companies, everybody else in the healthcare system if people can't afford their health insurance. First of all, if you're a hospital, you want to get paid. And if you don't have health insurance, you're not likely to get paid. If you're a physician and you want people to pay you, and if the person doesn't have health insurance, they're not likely to pay you either. So it has implications just beyond what the person is facing. So what is your crystal ball telling you? How do we come out of this? Well, you know, I think that people will lose their coverage. People will be outraged by the fact that they have lost their coverage. The hospitals and the physicians will be upset that they've lost significant money. And I don't know if it's next year, three years from now or ten years from now, but we will go back to making sure that people have health insurance coverage. Probably not single pair, you know, those kinds of options. But more of a piecemeal approach where we'll get more people to have coverage because we can't afford as the society for them not to have coverage. How do you see this ending? This particular standoff, do you think the ACA subsidies are gone? I think that they will probably stay in some way. The Republicans are very concerned about them. Of the subsidies go to red states in the South, predominantly. Many of these places, 42% of the people have some kind of coverage through the Affordable Care Act and they will lose their coverage. And so there's a strong need for everyone, but for the red states, especially to make sure that these people have some kind of coverage. Otherwise, the rural hospitals and some of the other hospitals will just go out of business. The doctors will not be able to provide care because they won't have enough money. And so there will be a whole set of things that will occur. Now whether that occurs tomorrow, three years from now, five years from now, I can't tell you, but the numbers are pretty compelling. This feels like the same conversation you've probably been having your whole career. Before we go into get a healthy health insurance system. We're probably not going to ever have a very robust and healthy system. It all comes back to a decision we made in 1942 that the IRS did where it said, we are going to provide tax subsidies to private health insurance and especially employer sponsored insurance. Most of us in America get our health insurance coverage through our employer and generally a large self-insured company. Those companies are not likely to give up the idea of providing health insurance to their workers. It's a very attractive option for them in recruitment of employees. And they are the ones that are paying huge amounts for health insurance. They're also paying providers very high premiums compared to what Medicare pays for the same services and things like that. They so far talk about having to be very concerned about rising health care costs but have not been very active in trying to actually control costs. And so until they are so upset that with the status quo, I don't think we're going to get fundamental change. As always, Jerry Anderson, thank you so much for joining me. I'm glad to be there any call anytime. Public Health on Call is a podcast from the Johns Hopkins Bloomberg School of Public Health produced by Joshua Sharfstein, Lindsey Smith Rogers, and Stephanie Desmond. Audio production by J.B. Arbagast, Michael Bond-Phils, Spencer Greer, Matthew Martin, and Philip Porter with support from Chip Hickey, Distribution by Nick Moran, Production Coordination by Catherine Ricardo, Analytics by Alisa Rosen. If you have questions or ideas for us, please send an email to public [email protected]. That's public health [email protected] for future podcast episodes. Thank you for listening. [Music]