Facts on Health Care Costs - 2007 Report

FACTS ON HEALTH CARE COSTS - National Coalition on Health Care

Introduction

By several measures, health care spending continues to rise at the fastest rate in our history.

In 2005 (the latest year data are available), total national health expenditures rose 6.9 percent -- two times the rate of inflation (1). Total spending was $2 TRILLION in 2005, or $6,700 per person (1). Total health care spending represented 16 percent of the gross domestic product (GDP).

U.S. health care spending is expected to increase at similar levels for the next decade reaching $4 TRILLION in 2015, or 20 percent of GDP (2).

In 2006, employer health insurance premiums increased by 7.7 percent – two times the rate of inflation. The annual premium for an employer health plan covering a family of four averaged nearly $11,500. The annual premium for single coverage averaged over $4,200 (3).

Experts agree that our health care system is riddled with inefficiencies, excessive administrative expenses, inflated prices, poor management, and inappropriate care, waste and fraud. These problems significantly increase the cost of medical care and health insurance for employers and workers and affect the security of families.

National Health Care Spending

● In 2005, health care spending in the United States reached $2 trillion, and was projected to reach $2.9 trillion in 2009 (2). Health care spending is projected to reach $4 trillion by 2015 (2).

● Health care spending is 4.3 times the amount spent on national defense (4).

● In 2005, the United States spent 16 percent of its gross domestic product (GDP) on health care. It is projected that the percentage will reach 20 percent in the next decade (2).

● Although nearly 47 million Americans are uninsured, the United States spends more on health care than other industrialized nations, and those countries provide health insurance to all their citizens (4).

● Health care spending accounted for 10.9 percent of the GDP in Switzerland, 10.7 percent in Germany, 9.7 percent in Canada and 9.5 percent in France, according to the Organization for Economic Cooperation and Development (5).

Employer and Employee Health Insurance Costs

● Premiums for employer-based health insurance rose by 7.7 percent in 2006. Small employers saw their premiums, on average, increase 8.8 percent. Firms with less than 24 workers, experienced an increase of 10.5 percent (3)

● The annual premium that a health insurer charges an employer for a health plan covering a family of four averaged $11,500 in 2006. Workers contributed nearly $3,000, or 10 percent more than they did in 2005 (3).The annual premiums for family coverage significantly eclipsed the gross earnings for a full-time, minimum wage worker ($10,712).

● Workers are now paying $1,094 more in premiums annually for family coverage than they did in 2000 (3).

● Since 2000, employment-based health insurance premiums have increased 87 percent, compared to cumulative inflation of 18 percent and cumulative wage growth of 20 percent during the same period (3).

● Health insurance expenses are the fastest growing cost component for employers. Unless something changes dramatically, health insurance costs will overtake profits by 2008 (6).

● According to the Kaiser Family Foundation and the Health Research and Educational Trust, premiums for employer-sponsored health insurance in the United States have been rising four times faster on average than workers’ earnings since 2000 (3).

● The average employee contribution to company-provided health insurance has increased more than 143 percent since 2000. Average out-of-pocket costs for deductibles, co-payments for medications, and co-insurance for physician and hospital visits rose 115 percent during the same period (7).

● The percentage of Americans under age 65 whose family-level, out-of-pocket spending for health care, including health insurance, that exceeds $2,000 a year, rose from 37.3 percent in 1996 to 43.1 percent in 2003 – a 16 percent increase(8).

The Impact of Rising Health Care Costs

● National surveys show that the primary reason people are uninsured is the high cost of health insurance coverage (9).

● Economists have found that rising health care costs correlate to drops in health insurance coverage (10).

● Nearly one-quarter (23 percent) of the uninsured reported changing their way of life significantly in order to pay medical bills (10).

● Almost 50 percent of the American public say they are very worried about having to pay more for their health care or health insurance, while 42 percent report they are very worried about not being able to afford health care services (11).

● In a poll conducted by the Harvard School of Public Health, 43 percent of respondents named high costs as one of the two most important health care issues for government to address (12).

● In a USA Today/ABC News survey, 80 percent of Americans said that they were dissatisfied (60 percent were very dissatisfied) with high national health care spending (13).

● One in four Americans say their family has had a problem paying for medical care during the past year, up 7 percentage points over the past nine years. Nearly 30 percent say someone in their family has delayed medical care in the past year, a new high based on recent polling. Most say the medical condition was at least somewhat serious (13).

● A recent study by Harvard University researchers found that the average out-of-pocket medical debt for those who filed for bankruptcy was $12,000. The study noted that 68 percent of those who filed for bankruptcy had health insurance. In addition, the study found that 50 percent of all bankruptcy filings were partly the result of medical expenses (14). Every 30 seconds in the United States someone files for bankruptcy in the aftermath of a serious health problem.

● One half of workers in the lowest-compensation jobs and one-half of workers in mid-range-compensation jobs either had problems with medical bills in a 12-month period or were paying off accrued debt. One-quarter of workers in higher compensated positions also reported problems with medical bills or were paying off accrued debt (15).

● If one member of a family is uninsured and has an accident, a hospital stay, or a costly medical treatment, the resulting medical bills can affect the economic stability of the whole family (16).

● A new survey shows that more than 25 percent said that housing problems resulted from medical debt, including the inability to make rent or mortgage payments and the development of bad credit ratings (17).

● A survey of Iowa consumers found that in order to cope with rising health insurance costs, 86 percent said they had cut back on how much they could save, and 44 percent said that they have cut back on food and heating expenses (18).

● Retiring elderly couples will need $200,000 in savings just to pay for the most basic medical coverage (19). Many experts believe that this figure is conservative and that $300,000 may be a more realistic number.

Time for Action on Reining in Health Care Costs

Policymakers and government officials agree that health care costs must be controlled. But they disagree on the best ways to address rapidly escalating health spending and health insurance premiums. Some favor price controls and imposing strict budgets on health care spending. Others believe free market competition is the best way to solve the problems. Public health advocates believe that if all Americans adopted healthy lifestyles, health care costs would decrease as people required less medical care. There appears to be no agreement on a single solution to health care’s high price tag. Many approaches may be used to control costs. What we do know is if the rate of escalation in health care spending and health insurance premiums continues at current trends, the cost of inaction will severely affect employer’s bottom lines and consumer’s pocketbooks.

Citations on request

EMRs, KP HealthConnect and Research - George Halvorson Letter

Dear KP colleagues,

More than 2,500 media outlets –- newspapers, magazines, and radio and TV stations -- ran stories last week about the Kaiser Permanente research done about miscarriages and caffeine consumption.

The story ran on the front pages of over thirty major newspapers –- including the New York Times, Boston Globe, San Francisco Chronicle, Sacramento Bee, Cleveland Plain Dealer, and Dallas Morning News.

That piece of Kaiser Permanente research will have an impact all over the world. It’s impossible to estimate how many miscarriages will be avoided as a result of that research -- but there is no doubt that the number will be large –- and the effect will last a very long time.

This weekly celebration letter is not about that very solid piece of research. It is about the specific role we play in world health care –- and that story illustrates a piece of that role.

We have a very special status in the world of health care. We are almost alone in our role as both the provider of health care coverage and the hands-on provider of actual care. Our new data base uniquely has all of the data about the provision of care and about the cost of care.

Everyone else has a splintered and incomplete data base. Even the very best of the other large multi-specialty caregivers -- like the Mayo Clinic or the Geisinger Clinic or the Cleveland Clinic –- who also have implemented electronic medical record systems –- can’t match our data base. Why is that? Because even Geisinger, as a leader in electronic medical record support, only has the portion of the data that relates to the pieces of care delivered directly by Geisinger doctors and the Geisinger hospitals. So if a patient goes to Geisinger for some care and to other caregivers for the rest of their care -- which many Geisinger patients do -- the Geisinger data base is incomplete for that patient.

Geisinger is a great and talented care system. But they don’t have their patients “enrolled.” So they only have part of the data about the care of each patient.

Most other care systems and independent, solo-practice caregivers have a lot less data than Mayo or Geisinger or the Cleveland Clinic.

Why is that important? Because medical care delivery is sadly very incomplete in its data base.

Real research on patient care in most settings today involves tiny patient samples –- with each data element laboriously hand-collected. Those research projects are very small, very time limited, and very un-computerized.

We have the wonderful opportunity to computerize our care data and then use it to do some of the best medical research in the world.

We are building that overall data base through KP HealthConnect.

Our new system will not only give us excellent research data, the total system will also give our caregivers special support in the care of individual patients. I will write about that support in another weekly letter fairly soon.

For now, let's celebrate the fact that we have an opportunity that almost no one else in the world has –- the chance to use the computer to study populations of patients and to do research projects electronically that advance the science of caregiving and track the progression of the new science over time.

Because we have this great opportunity, we have a great obligation –- the obligation to truly use this new tool kit to both improve care and teach the rest of the world how to improve care.

The 2,500 news articles and stories that were printed about Kaiser Permanente research just this week were an indication of ways the world needs us to perform. The researchers for that study used our old data base -- and did excellent work. The follow-up studies that we will be able to do with the new data base will be exceptional.

Have a great week and be well.

George

KP HealthConnet and Care Improvement - George Halvorson Letter

Dear KP colleague:

We all know that KP HealthConnect is a computer system dedicated to care improvement -- to building electronic data bases about patients and populations of patients that can be used to support care, enhance care, and do important research about care. Just about everyone who works and delivers care here understands that process and that strategic direction.

What quite a few people do not know, however, is that the whole KP HealthConnect idea is not a new concept or goal. It isn’t even a fairly recent concept or goal. Even though we truly are pioneers today at Kaiser Permanente in finally actually doing this work, some of our founders very clearly had the idea of using the computer to support care delivery several decades ago -- before anyone else in the world was thinking in those directions. Dr. Sidney Garfield, our founding physician, said that computers would become a major tool for caregivers -- maybe the most important tool. He said that over four decades ago.

Even before Dr. Garfield made those comments, one of his peers and colleagues -- Dr. Morris Collen -- shared that idea and was actually working to build an electronic medical record. Dr. Collen could see how incredibly useful computerized data could be to caregivers -- so he actually started building an EMR for Kaiser Permanente in 1961 using IBM punch cards.

We still have data from those original efforts. Dr. Collen believed that the diagnostic process and the care delivery process would both be improved if physicians had instant access to automated data about patients.

Dr. Collen was right. He was also four decades ahead of the ability of computers to do that work in an efficient way.

Dr. Collen is one of our medical giants. He also invented multiphasic testing, and is well known in world medical circles for his work in that area. He invented the first machine that could run multiple blood tests simultaneously -- and Kaiser Permanente pioneered what later became a whole new testing industry.

Today, the highest honor in medical informatics is the Morris F. Collen Medal. Some call it the Nobel Prize of medical informatics.

He also was a founder of our various medical research programs -- and started us down the path we are on today. The recent study that ran in more than 300 newspapers and magazines across multiple countries about the impact of sleep deprivation on the body weight and depression levels of new mothers is a direct extension of that whole data-based research agenda.

So why am I celebrating Dr. Collen in this weekly letter -- and why am I changing from my practice of not naming specific individuals in my weekly letters? Because Dr. Collen recently celebrated a birthday. He is in his early nineties, and he is still writing books and advising our research teams. I spoke to a group meeting of our research leaders not long ago in Oakland and Dr. Collen was in the front row. After my talk, he asked the toughest question of anyone in the room -- a serious, well thought out, well phrased question about the economics of aging that made me want to salute before answering.

We are making a lot of progress in a lot of areas because of directions that he has led us. So my letter this week is to celebrate Dr. Collen as a physician, thinker, strategist, visionary, and leader. Please join with me in thanking him for his many contributions. I feel honored to have met him and to have had the opportunity to benefit from his insights, his pioneering leadership, and his wisdom.

Be well.

George