Dollars and sense of rising health insurance costs

If you watched Tuesday night's Presidential debate and were able to look past the highlights (or lowlights) of Governor Romney's "binders full of women" comment and President Obama's indignant denial that his administration politicized its various explanations of the Sept. 11 terrorist attack in Libya, you may have noticed the President say of his opponent, "he's the one who wants to turn Medicare into a voucher." Obama's tone of voice clearly indicated to the audience that he felt this would be a bad thing. But what's so bad about a voucher? To many people, receiving a "voucher" means getting something for free, and having a choice about what that something is. In the District of Columbia, for example, low-income students have taken advantage of tuition vouchers to attend private schools that they otherwise would not have been able to afford.

Many policymakers, including Romney, support transitioning Medicare from a "defined benefit" program (meaning that recipients are guaranteed benefits regardless of how much they cost) to a premium support program - essentially, a voucher for a specific dollar amount that could be used to pay for health insurance - by the year 2023. President Obama and others oppose the plan because they worry that the voucher wouldn't be enough to cover Medicare's premium costs, forcing seniors who want to keep their current benefits to pay more out of pocket or switch to a lower-cost plan with fewer benefits. Why? Health care costs vary widely across states, and even if premium support growth is indexed to general inflation (as Romney and running mate Paul Ryan have proposed), Medicare costs have grown faster than inflation for years.

A recent study by researchers at the Kaiser Family Foundation seems to confirm these fears. Modeling from available Medicare cost data, and making a few assumptions about how premium support would work, the authors concluded that if a Medicare voucher system had been in place in 2010, about 4 in 10 seniors nationally would have felt no difference. 59 percent of U.S. seniors would have had to pay higher premiums, assuming they did not change their plans. There was huge state-by-state variation, however. In DC, for example, 99 percent of seniors would have been fine. But in states with especially high health care costs (e.g., Florida), the average difference between the voucher and the premium cost would have been more than $100 per month. The authors did not model how insurance companies would have responded to these hypothetical shortfalls; one could argue that if enough customers can't afford to buy the plan you're selling, you would need to make the plan more affordable somehow. They also didn't predict if premium support would keep pace with actual insurance costs over time; given the track record of the past few decades, however, it is likely that the value of the vouchers would shrink relative to premiums with every passing year. Alternatively, keeping Medicare viable in its current form would require some combination of tax hikes (not just on "millionaires and billionaires") or deep spending cuts elsewhere in the federal budget.

It isn't only health care costs for seniors that are skyrocketing, of course - all health care costs are. So who pays the difference when employer-based health insurance premiums regularly outpace wage increases? Employees do, in the form of lower salaries. In a recent study in Family Medicine, my colleagues Richard Young and Jennifer DeVoe estimated just how much cash the average employed American family has lost due to health costs rising faster than inflation over the past 15 years. The answer: a whopping $8,410 per family, or nearly 14% of actual earnings. If this trend continues, the Affordable Care Act's laudable extension of insurance coverage to most Americans will be rapidly undone by unaffordable insurance costs for practically everyone.

Both Presidential candidates have failed to confront this issue squarely. Both deserve blame for not leveling with voters and admitting that taming health care costs is the only escape from the rock of "ending Medicare as we know it" and the hard place of shifting more insurance premium costs on to seniors. Since "the most expensive technology in health care is a physician's pen," argue Young and DeVoe, physicians - including primary care physicians - have a large role to play in this effort:

Family medicine has always thought of its physicians as being patient centered. Perhaps our patients would rather have more income and fewer marginally effective medical tests and treatments. Perhaps their health would improve less from having more screenings and scans but improve more from having more disposable income, less worry about losing their job, and less stress from living paycheck to paycheck. We should ask them. If they want to take advantage of this tradeoff, we should advocate for our patients to achieve this goal.