After lengthy debates from 2008 to 2011, a presidential election and a Supreme Court decision, you would think we were getting a little further down the road to having a handle on health care in America. You would likely be wrong. The Robert Wood Johnson Foundation has just produced a report on insurance and small businesses from 2000 to 2011 and it isn’t pretty. Specifically, it looks as though fewer companies are offering health insurance to their employees and fewer employees are taking it even when offered. This is true for all businesses but particularly so for small business.The percentage of all companies offering insurance declined from 59% in the year 2000 to 52% by 2011. For small businesses, the numbers went from 47% in 2000 to 38% in 2011. The reason seems pretty clear. Annual premiums more than doubled for individuals over that period of time and rose even higher for family coverage to an astonishing $14,447 a year.
Premiums for small businesses may actually be higher because these businesses with fewer employees have very little leverage with insurance companies. When spreading the risk, size matters, and organizations with large numbers to bring into the risk pool do much better in the premium department. Part of the idea of state operated health insurance exchanges under Obamacare is actually to be able to do a better job of creating larger risk pools for insurers to deal with. It may work, but the jury is still out. Between individual mandates and the requirement for even small businesses to offer health insurance to their employees, there should be nearly universal coverage. Theoretically, spreading the risk over the entire population should cause premiums to drop but we will have to wait and see if that actually happens.
The Robert Wood Johnson report and the general trend in healthcare costs would seem to suggest that even if widespread coverage fosters a reduced premium, increasing health care costs may eat up those reductions. While annual premiums were doubling between 2000 and 2010, the cost of the average American hospital stay was doing precisely the same thing. This was true even though the average length of a hospital stay was declining. The average hospital stay jumped from an average $17,390 to $33,079 between 2000 and 2010 and this was actually a period of low inflation in the remaining parts the economy.
There are differences in medical care costs by states. Washington State has relatively higher costs per inpatient day than many other states and the US in general. Across the US, nonprofit hospitals average about $2025 per inpatient day while for-profit hospitals come in a little under that at about $1629. The corresponding numbers for Washington State are $2,972 for nonprofit hospitals and $2,588 for profit hospitals.
It would be nice if there were some simple explanation for this, but it appears there is not. Even the reasons why U.S. health care costs in general are higher than other developed countries are a little obscure. There are differences in physician compensation and particularly in the use of specialists and specialist compensation which may account for as much as 37% of the health care cost differences between the U.S. and other developed countries. Our higher per capita income is also thought to contribute – 30% or more and regional differences in care costs contribute some more. The basic, and large, problem is that we pay more for health care and get no better results than many who spend less.
In 2012, the cost per day for hospital charges averaged $3,949 in the U.S., the next highest cost country on the high cost list was Chile at $1,552. Looking at common procedures, the total facility and physician costs for appendectomies, averaged $13,003 in the U.S., followed by Switzerland at $5,840. A physician fee for a routine office visit averaged $89 in the U.S., also followed by Switzerland, at $64. The bottom line in the U.S. is that we spend almost three times as much on a hospital stay as other industrialized countries, even though average stays in other industrialized countries tend to be longer.
Stay tuned. We’ll try to keep tabs on development in Obamacare and health care costs in general; it doesn’t look like the book on health care and health insurance costs is anywhere near its last chapter.