Testimony of Dr. Henry E. Simmons, M.D, M.P.H, F.A.C.P.
President, National Coalition on Health Care
June 18, 2002
Mr. Chairman and members of the Subcommittee, thank you for the opportunity
to testify before the Subcommittee on rising health care costs and how
employers and employees are responding to those increases. I am Dr. Henry
Simmons, President of the National Coalition on Health Care. The Coalition
is the nation’s largest and most broadly representative alliance
working to improve America’s health care. The Coalition was founded
in 1990 and is non-profit and rigorously non-partisan. Former Presidents
Bush, Carter, and Ford are our honorary Co-chairs and our working Co-chairs
are former Iowa Republican Governor Robert D. Ray and former Democratic
Congressman Paul G. Rogers of Florida. Our members include major corporations
and unions, the nation’s largest consumer, religious and labor groups,
as well as health care provider groups and large health and pension funds.
Collectively, our 80 members employ or represent more than 100 million
Americans. Our membership list is attached to my written statement.
The Rising Costs of Health Insurance
National health care spending is rising rapidly and this year will exceed
$1.54 trillion – more than $5,400 per capita. That is four times
what we spent on health care in 1980, and the total bill is expected to
almost double to $2.8 trillion by 2011. Our per capita health care costs
are far higher than any other industrialized nation and our health outcomes
are no better.
The premiums that employers, employees, and individuals pay for health
insurance are rising at the fastest rate in history. On average, premiums
jumped 12 percent last year and – depending on plan type –
are projected to increase 12 to 16 percent this year. Hewitt Associates
recently reported that preliminary HMO increases for 2003 are averaging
22 percent – nearly 7 percent higher than the increases Hewitt found
for this year. Out-of-pocket costs are also rising rapidly.
These huge increases are occurring at a time of low general inflation.
Why? And why should Congress, employers and the public be concerned?
Causes of Rapidly Rising Health Insurance Premiums
The recent and ongoing surges in health insurance premiums are being
driven by a confluence of two sets of forces, old and new – which
have come together to create the equivalent of "A perfect storm"
in health care.
The first set – traditional cost drivers – includes a mix
of:
- Poor quality, waste and inefficiency due to inadequate quality control,
inadequate science and a structurally flawed health care system
- Advances in medical technology
- Increasing service intensity
- The high costs of end-of-life care
- High administrative costs
- Cost-shifting to cover the costs of emergency care for the uninsured
and underinsured
- Fraud and abuse
- General inflation, and
- State mandates
To these have now been added a new set of forces – emerging cost
drivers, which include:
- A longer and deeper insurance underwriting cycle, designed to help
insurers and health plans make up for premium shortfalls in recent years
- Increased use of medical technology
- Pressures from Wall Street on for-profit health plans to raise premiums
in order to increase profits
- Escalating prescription drug costs and utilization
- Diminished competition due to provider consolidations and tougher
negotiations with health plans for higher reimbursements
- The medical needs and demands of 77 million baby boomers
- Soaring medical malpractice insurance premiums and, with them, an
increased tendency for physicians to order extra tests and make treatment
decisions that limit their risks
- Consumer demands for easier and broader access to care, and
- International terrorism.
How Are Employers and Employees Responding?
In answer to the subcommittee’s question as to how employers and
employees are responding to rapidly rising costs, the answer is very poorly.
In fact, in the absence of major national policy changes and system restructuring,
they will be unable to deal with the problem.
Why Should Congress Employers And The Public Be Concerned?
First, we have not one, but three systematic problems – rising
costs, decreasing coverage, and pervasive, destructive, and expensive
quality problems. These problems are interrelated and growing worse. To
successfully deal with one you must deal with them all. Whatever employers
and other private sector payers have been doing to contain costs isn’t
working.
Second, what is especially worrisome is that we are seeing startling
premium increases at a time of low general inflation and even though employers,
especially big companies, have become more serious and sophisticated about
health care purchasing. Health care premiums for even the largest and
smartest employers are out of control. Costs for small businesses and
individuals are rising even more rapidly.
Third, increasing health care costs for employees – and sharply
rising premiums in the non-group market – will produce dramatic
increases in the number of Americans without health insurance. The Coalition
estimated in its recent report, "A Perfect Storm: The Confluence
of Forces Affecting Health Care Coverage," that due to cost increases
the number of uninsured Americans may have increased, just in 2001 and
2002, by 6 million. A summary of our report is included in my written
testimony.
Fourth, many of the new wave of ostensible cost containment tactics that
employers are edging towards – increased cost-sharing, defined contributions
– are in fact ways to shift costs, not contain them. If and as more
companies move in this direction, we will see the employee share of health
care spending continue to rise. The effect would be the equivalent of
a wage decrease – with some added disadvantages.
With increased cost sharing through higher deductibles and co-payments,
more and more employees would put off needed health care for financial
reasons – the very scenario that health insurance is meant to protect
against. And with defined contributions, many would drop coverage altogether
because of sharp increases in the costs of maintaining it.
Fifth, we have created a perpetual motion machine in health care, which
is headed in the wrong direction. All our problems are growing worse and
present policies and procedures will not be powerful enough to enable
employers and employees to address these problems.
Summary
The Coalition believes that we will need a major new public policy initiative
to respond to surging health insurance premiums. Our members are working
to encourage a renewed national debate about the large-scale issues facing
American health care – and about the options for system-wide reforms
that will be necessary to contain costs, achieve universal coverage, improve
the quality of care, assure equitable and sustainable financing, and simplify
administration.
|
