Between a Rock and a Hard Place: Employer Sponsored Health Care Benefits

1
Between a Rock and a Hard PlaceEmployer
Sponsored Health Care Benefits

• Gerald M Shea, Asst to the President, AFL-CIO
• National Academy for State Health Policy
• August 2, 2004

2
Premiums Rose Six Times Faster than Inflation,
and Four Times Faster than Wages in 2002
Chart 1
13.9
3.1
2.2
Source KFF/HRET Survey of Employer-Sponsored
Health Benefits 1999, 2000, 2001, 2002, 2003
KPMG Survey of Employer-Sponsored Health
Benefits1993, 1996 The Health Insurance
Association of America (HIAA) 1988, 1989, 1990
Bureau of Labor Statistics, Consumer Price Index
(U.S. City Average of Annual Inflation (April to
April), 1988-2003 Bureau of Labor Statistics,
Seasonally Adjusted Data from the Current
Employment Statistics Survey, 1988-2003.
Estimate is statistically different from the
previous year shown at p1999-2000, 2000-2001, 2001-2002.
Estimate is statistically different from the
previous year shown at pNote Data on premium increases reflect the cost
of health insurance premiums for a family of four.
2
3
Almost Half of Bargaining Conflicts in 2003 were
over Health Care

• 46 of the more than 6,000 cases handled by the
  FMCS in 2003 involved health insurance disputes,
  surpassing wages and job security as the top
  concern
• Peter J. Hurtgen, FMCS

4
2003 2004 Bargaining Over Health Care

• 2003 In large contracts covering 1.5 million
  workers, health costs were center stage. Coverage
  was largely preserved, but contracts included
  cost-shifting and wage trade-offs. One large
  strike (So Cal grocery stores)
• 2004 Less bargaining 800,000 workers in large
  contracts. Disputes in retail food continue.
  Conflict over costs-shifting fueling political
  debate.

5
Health Benefits Competitive Disadvantage

• In the global economy, US companies are at a
  disadvantage compared to other industrialized
  nations with social insurance systems, and
  developing countries without insurance systems

• Domestically, companies that provide health
  benefits are at a disadvantage compared to
  companies that do not or ones that offer
  catastrophic-only coverage

6
Real Health Expenditures Per CapitaCanada,
United States and OECD Countries, 2001in U.S.
Dollars, PPP
Notes Health expenditure per capita expressed in
economy-wide purchasing power parity, United
States dollars. Source Source Health DataTab
le 9 Total Expenditure on Health, Per capita US
PPP, Organization for Economic Cooperation and
Development (OECD), http//www.oecd.org/document/1
6/0,2340,en_2649_34631_2085200_1_1_1_1,00.html.
7
Health Care Insecurity at Worlds Largest
Corporation
Low Wal-Mart wages high health premiums no
coverage for 60 of company workers And pressur
e on competitors to cut existing health benefits
.
8
Wal-Mart Workers Pay Greater Share of Premiums
than Other Private Sector Employees
Source UFCW analysis Kaiser Family
Foundation, Employer Benefits Survey 2003.
9
Fewer Wal-Mart Workers Are Insured UnderTheir
Employer Plan Than Other Workers in Large Firms
(2001)
Source Commonwealth Fund, October 2003 Wall
Street Journal, September 30, 2003.
10
Cost-Shifting is Predominant Trend in Health Care
Financing

• Percentage of premiums paid by workers relatively
  steady since mid-nineties at about 15 for
  individuals and 27 for families
  
• Dollars contributed for family coverage up 400
  in same period
  
• PPO deductibles doubled for workers in firms of
  less than 200 since 2000
  
• One-third of firms predict offering high
  deductible plans in next two years. Almost as
  many predict offering health reimbursement
  accounts (Kaiser Family Foundation/Health
  Research and Educational Trust 2003 Health
  Benefits Survey)

11
Nearly Half of Adults with Private
HealthInsurance Report Erosions in Their
Benefits
Percent of adults 1964 with continuous coverage
throughout past year
Increased a lot or a moderate amount.
Among those who pay any premium.
Source The Commonwealth Fund Biennial Health
Insurance Survey (2003).
12
Cost Related Access ProblemsHave Increased,
20012003
Percent of adults ages 1964 who had any of four
accessproblems in past year because of cost
Did not fill a prescription did not see a
specialist when needed skipped recommended
medical test, treatment, or follow-up had a
medical problem but did not visit doctor or
clinic.
Source The Commonwealth Fund Health Insurance
Surveys (2001 and 2003).
13
Two of Five Adults Have Medical Bill Problemsor
Accrued Medical Debt Uninsured andLow Income
Most at Risk
Percent of adults ages 1964 with any medical
bill problem or outstanding debt
Problems paying/not able to pay medical bills,
contacted by a collection agency for medical
bills, had to change way of life to pay bills, or
has medical debt being paid off over time.
Note Income groups based on 2002 household
income.
Source The Commonwealth Fund Biennial Health
Insurance Survey (2003).
14
More than Two of Five Adultswith Medical Bill
Burdens Used All or Mostof Their Savings on
Medical Bills
Percent of adults ages 1964 with medical bill
problems or accrued medical debt
Source The Commonwealth Fund Biennial Health
Insurance Survey (2003).
15
Is Wal-Mart an Aberration or a Trend-Setter?
16
Wal-Mart Spends Less Than ½of What the Average
US Employer Spends on Health Benefits
2002
Source Mercer, Wal-Mart, Kaiser Family
Foundation, (Wall Street Journal, 9/30/03).
17
What you get for that (worker premium payments,
deductibles and co-pays) is an outstanding
catastrophic medical plan.Wal-Mart V-P Mona
Williams (Mn. Star-Tribune)
18
Pressure from Stock Analysts

• From the perspective of investors, Costcos
  benefits (10/hour starting wage, 90 paid health
  benefits after 3 months for full-timers, after 6
  months for part-time) are overly generous. Public
  companies need to care for shareholders first.
  Costco runs its business like it is a private
  company. Bill Dreher, Deutsche Bank
  Securities
• (Wall Street Journal, 3.26.04)

19
Share of Uninsured Working at Large Firms Jumped
from 1987-2003
Source The Commonwealth Fund.
20
Most Large Firms Expected to Boost Worker
Premiums in 2003
Chart 28
Source Kaiser/HRET Survey of Employer-Sponsored
Health Benefits 2003.
32
21
A Renewed National Debate over Health Care

• The pressure of high health costs
• Strain on workers, employers, retirees, govt,
  and the economy overall
  
• Reform current health care coverage ...or replace
  it?
  

• Medicare Rxdrug benefit
• Health Issues in 2004 a repeat of 1992?
• State rebellion over Washington inaction
• Can improved quality also lead to lower costs?

22
Majority of Americans Believe Paying forHealth
Insurance Should Be a Shared Responsibility
Who do you think should pay for health insurance?

Other combination of sharing 5
Dont know/refused 4
Mostly government 14
Shared by individuals, employers, and government
59
Mostly employers 11
Mostly individuals 5
Note Percentages may not sum to 100 because of
rounding. Source The Commonwealth Fund Biennial
Health Insurance Survey (2003).
23
Majorities of Americans Across Political
Affiliations Say that Candidates Views on Health
Care ReformWill Be Important Factor in Election
Decisions
Percent
93
88
87
86
Responses include very, somewhat, not too, not
at all important, or dont plan to vote.
Source The Commonwealth Fund Biennial Health
Insurance Survey (2003).
24
Support for a Full or Partial Repeal ofTax Cut
Is Strong Across Income Groups
Percent
Note Income groups based on 2002 household
income.
Source The Commonwealth Fund Biennial Health
Insurance Survey (2003).
25
Support for Repealing Tax Cut Varies byPolitical
Affiliation, Republican Support RisesUnder a
Limited Repeal
Percent
Source The Commonwealth Fund Biennial Health
Insurance Survey (2003).
26
With Cost-Shifting Now the Dominant Trend in
Health Care Financing, Quality Purchasing May Be
the Only Alternative
27
Forces Behind Quality Initiatives

• Data on Quality Safety Problems Rand,
  Harvard, IOM, AHRQ, CMS, JCAHO
  
• Growing understanding among purchasers and
  consumers that quality in health care can be
  
• Accurately measured
• Routinely assessed
• Systematically improved
• Belief that quality purchasing has potential to
  lower the rate of increase in health costs

28
Ten Percent of the US Population Accounts for 70
of Health Costs

• In addition to maintaining health and preventing
  illness, care management focuses on high-leverage
  intervention opportunities.

29
Quality Purchasing and Care Management Involves
Industrial Change Cultural Change

• Standardized performance measures
• Real time public reporting of quality
  performance
  
• Computerized information systems and decision
  tools
  
• Patient-centered health care organizations
• New partnership between clinicians and patients
• Personal responsibility from consumers

30
Building Blocks for Quality Purchasing

• Robust set of uniform national measures
• IT that collects data as a by-product of care
• Public reporting of quality information using
  standardized national measures
  
• Patient/consumer education
• Purchaser payment based on quality

31
Worst Health Care Inflation EverAnnual Change in
Private Health Spending Per Capita (Adjusted for
Inflation (1961-2002)
Voluntary Effort
Managed Healthcare and Threat of Health Reform
Wage price controls
Medicare Medicaid
Source Drew Altman and Larry Levitt, Health
Affairs, January 23, 2002
32
Difference in 1990 Per-Capita Health Spending,
(U.S. vs. Germany)

• U.S. spending 2,439
• German spending 1,473
• U.S. spends less on
• Care
• But more on
• Prices
• Administration
• Other

Source Uwe E. Reinhardt, The Cost of American
Health Care What Drives it? Can We Afford it?,
January 13, 2004.
33
Worst Health Care Inflation EverAnnual Change in
Private Health Spending Per Capita (Adjusted for
Inflation (1961-2002)
Voluntary Effort
Managed Healthcare and Threat of Health Reform
Wage price controls
Medicare Medicaid
Source Drew Altman and Larry Levitt, Health
Affairs, January 23, 2002
34
U.S. Health Costs Are 67 Higher Than
Industrial Competitor Nations
Note OECD percentile represents average GDP
share among all OECD nations
excluding the US.
35
Hourly Labor Costs in ConstructionUnion vs.
Non-Union Workers, September 2002
Total 40.69
Total 22.00
Source Bureau of Labor Statistics. UNPUBLISHED
DATA, 2003