We continue our discussion about the health care consumer in this diary. In the last diary we began to look at where consumers purchase health care; i.e., doctor's office, emergency room, in-patient, etc. Today we are going to talk about the different ways that consumers actually pay for the health care that they purchase.
There are actually three very different ways to pay. Let's look at them now.
In 2012 American consumers will pay somewhere around $2 trillion for health care services and products. These payments may come directly from the consumer, aka out-of-pocket expenditures. They may come from private insurance plans that cover 165 million Americans, or it may come from government programs. But no matter how the supplier of health care is paid, the decision to acquire some kind of health care, and therefore set in motion the transfer of some amount of the $2 trillion, is a decision made by the consumer, aka the patient.
Right now, per capita health care expenditures are about $8,000 in the U.S., the average per capita cost for other industrialized countries is around $4,500. By source of expenditures this breaks down as follows:
Government $3.795
Private $3.189
Cash $ 976
In other words, on a per capita basis, private sector expenditures both by individuals and insurance companies is about the same as government expenditures. But the problem with the way this data is presented is that it takes the amount spent by government, private insurers and individuals and divides it by the total population of the United States. All well and good except for one glaring fact: these are three very distinct consumer (or patient) populations.
The Medicare and Medicaid populations number roughly 90 million; There's some overlap because both plans pay for medical services delivered to people other than the seniors and the poor. Government medical payments go to the disabled, to veterans and other specific groups. But the figure of 90 million for the size of the government patient pool is probably quite accurate.
Out-of-pocket expenditures also overlap somewhat with the other groups. Because this includes co-pays for people who carry private insurance (purchased individually or provided by their employer) or who purchase supplemental health insurance while their basic coverage comes through Medicare. There are also roughly 50 million people without any insurance coverage whatsoever, in some cases the result of circumstance (loss of job, lack of income,) in other cases because they choose not to purchase a private plan.
But the largest number of Americans shopping for health care are individuals enrolled in private insurance plans either directly or through group plans sponsored by their employers. Together this population numbers some 160 million. I am not sure how much money this population spends on co-pays both for premiums and health care, although some of these payments are recovered through deductions against their income tax bills.
Given the above, presenting data that breaks down per capita health care costs by dividing the total population by expenditures from public (government) and private (premiums, co-pays and out-of-pocket) sources actually obscures more about the functioning and performance of the US health care market than it explains. Because if the number of people covered by private insurance or not covered by any insurance is 60% higher than the number covered by government plans, and the total public and private expenditures are roughly the same, then we are spending a lot more per capita on public health coverage than we are spending on private coverage.
If we take the total number of people not covered by government plans and divide this number by the amount spent on private health insurance coverage, we end up with a per capita health care expenditure for this population of not $8,000, but somewhere around $5,000. It should be added, incidentally, that 210 million people constitutes the fourth-largest country in the world, behind only China, India and Indonesia, and with the exception of Japan, twice as large as the largest of all those OECD countries (Germany) whose health care outcomes are so much better than ours. And by the way, the per capita figure of $5,000 for annual health care expenditures is just about the average per capita cost for every industrialized country that has universal health coverage for its population.
Why is the per capita cost of our health care so out of whack between the public and private health care consumers? For the simple reason that we have these two systems offering health care to two very different groups of consumers. Government plans cover health care costs for the most medically vulnerable whose costs are higher and whose outcomes are generally worse. Private plans, on the other hand, with all due respect to the Affordable Care Act, still have mechanisms in place which allow them to fill their customer pools with the healthier part of the population. This is particularly true, according to Kaiser, with employer-sponsored group plans, which still enroll the overwhelming bulk of privately-insured Americans. By definition, employed individuals have better health than the old, the disabled, the unemployed and the poor, who make up virtually all the consumers covered by government plans.
Once again I want to make it clear that I'm not shilling for the insurance industry. I simply want to make sure that when we talk about a health care "crisis" in America, we base our discussion on facts and not assumptions. If anyone lacks affordable health insurance it is a crisis for them and some way has to be found to respond to their needs. Let's just make sure that we understand the problems we are trying to fix.