The following testimony was provided on January 22, 2018 to the Task Force on Health Care Coverage for All of Maine, a legislative study group created by SP 592 in the 128th Maine Legislature. CAHC was invited to provide comments related to health care, health coverage, and economics.
Statement of Steve Butterfield, Policy Director
Consumers for Affordable Health Care
To the Task Force on Health Care Coverage for All of Maine
Monday, January 22, 2018
Senator Whittemore, Representative Sanborn, and members of the Task Force, I’d like to thank you all for this opportunity to present to you today.
My name is Steve Butterfield, and I am the policy director at Consumers for Affordable Health Care – or “CAHC” – a nonpartisan nonprofit organization based here in Augusta. Since 1988, CAHC has advocated the right to quality, affordable health care for every person in Maine.
I was asked to be here today to speak about the “economics” of health care. I’d like to focus my remarks on the ways in which the cost of health care and health coverage can impact individual consumers and their families, and the decisions people make about when and how they access the care they need.
To begin, let me lay out a simple truth: costs are a barrier to care. People cannot get the care they need if they cannot afford that care. That is true if they cannot afford insurance premiums or deductibles, or cannot afford to see a doctor or go to the hospital, or cannot afford to fill a prescription. I have provided links and citations in my statement today that will lead you to high-quality, comprehensive, unbiased research that shows the following:
- cost is a barrier that impacts consumer behavior;
- costs are rising faster than consumers can keep up with;
- consumers cannot “shop” their way to saving the overall trend in our health system, nor should they be expected to;
- and that is because Americans do not “use” or even try to use more health care than consumers in other, comparable countries.
In other words, while it is undeniable that health care costs are rising and that American families are feeling the strain, this is not a situation that they have caused, or even heavily contributed to. America’s health care system already has a tendency to overburden consumers with excessive demands: to serve as their own diagnosticians, care coordinators, social workers, attorneys, medical coders, and billing experts. Asking them to also fix a cost problem that they are in no position to influence is as cruel as it will be unproductive.
Cost is a barrier
According to survey data published last week by the Kaiser Family Foundation, approximately 1 in 10 Americans reports avoiding or forgoing necessary medical care because of the cost of receiving that care. Another survey of 2016 data shows that 33% of Americans avoided care because of cost. The cost barrier is particularly burdensome for uninsured individuals, individuals who report worse overall health, and those with higher deductibles.
This situation is, in some ways, improving. The Affordable Care Act (ACA) is responsible not only for significant coverage gains, but also has been credited with being responsible for cutting personal bankruptcy filings in half by driving down the number of individuals facing bankruptcy as a result of medical costs. The implementation of the ACA consequently correlates with a decline in the number of Americans who reported difficulty accessing care due to costs, as this chart shows:
One point of concern I’d raise is that, even as coverage rates are increasing – and, with the recent expansion of Medicaid in Maine, I’d expect our state-level data to improve dramatically over the next year or two – many consumers with insurance are facing new cost barriers through increases in their out-of-pocket cost sharing amounts, such as deductibles.
While the ACA limits deductibles and annual out-of-pocket maximums for many plans, the cost share amounts are still significantly higher than most Americans can afford. One estimate by the Federal Reserve showed that 44% of Americans would not be able to cover a $400 emergency from their savings. With the maximum deductible for a bronze plan set at over $7,000, deductibles rising in the employer sector as well, and with insurance plan designs increasingly relying on consumers meeting significant amounts of their deductibles or out-of-pocket maximums before the plan assists in paying for many services, it is clear that even insured consumers are going to be put in positions where the cost of care will once again become a major burden.
And in fact, we are already seeing some evidence of this. Hospitals have reported increases in the number of insured consumers who are unable to pay their bills.
“It’s the prices, stupid.”
The trajectory of increase in health care spending has been driven far more by increases in the cost of health care than by utilization of health care. In other words, even when they avoid or delay care, avoid treatments, and avoid filling prescriptions – which they do, in response to cost concerns – Americans are getting slammed by the unstoppable march of health care costs.
The title of this section refers to a landmark 2003 study by four health economists which compared the U.S. health sector to other Organization for Economic Cooperation and Development (OECD) countries – nations comparable to the U.S. in terms of overall development and economic status – and found that “the difference in spending [on health care between the U.S. and other countries] is caused mostly by higher prices for health care goods and services in the United States.”
While that study is from 2003, newer research shows the same problem. In fact, in an article published in November in the Journal of the American Medical Association, researchers investigated how five factors – population growth, population aging, disease prevalence or incidence, service utilization, and service price and intensity – impacted health care spending increases in the U.S. between 1996 and 2013. They found that more than 50% of the increase was due to service price alone. In other words, our problem is not that we buy too much: rather, it is that we pay too much.
Rising health care costs have continued to dramatically outpace overall economic growth, or inflation, or wages. While there has been some slowing in recent years, it’s important to note that we’re talking about a decrease from, say, 9% in 2011 to “only” 6% in 2016 (according to data from PriceWaterhouseCooper). That’s particularly alarming when compared against overall wage growth, which is statistically more or less stagnant – rising only 10% in inflation-adjusted terms since 1973.
Consumers can’t shop us to safety
In a well-functioning market, it would be reasonable to expect competition to lead to market-driven control of price growth. However, there are limitations to the applicability of that approach in the health care market.
Research has shown that the percentage of health care services that are both “shoppable” and in which consumers bear a significant enough percentage of out-of-pocket costs to have an incentive to comparison-price accounts for only 7% of overall health spending. While that’s not insignificant, and while we certainly advocate that transparent and valid price data must be available to consumers to help inform their decision-making, it is also not enough for interventions in this component alone to significantly impact the overall cost curve.
In other words, increasing price transparency is an important piece of the puzzle, but we need more focus on the actual drivers of health care spending growth – prices – and less on blaming consumers for a problem they aren’t causing.
American consumers are not over-utilizers
To synthesize all of the data I’ve presented above, I’ll close with this.
If I could permanently eliminate one pernicious, persistent, and fallacious idea from the conversation around America’s health care costs, it would be the idea that American consumers are unhealthy profligate spendthrifts who go to the doctor so much that the system cannot bear the strain.
Let me be absolutely clear: this is wrong, wrong, wrong, wrong, wrong.
Not only is there no actual evidence that this is systemically true, the opposite is actually the case. We are not over-utilizers. Study after study after study shows that the problem is prices, not service delivery or utilization.