Why health insurance can cost more than housing
Special to Colorado Mountain News Media
ABOUT THE SERIES
APRIL 2: Despite — or perhaps because of — Colorado mountain dwellers’ love of hiking, skiing, bicycling and all things physical, health care costs are stubbornly stuck far above average.
TODAY: How did western Colorado reach a point where for some people, health-care costs more than a large mortgage?
APRIL 4: People in the mountains use MRIs and other imaging services, as well as pathology and lab work, at three times the rate of the rest of Colorado, part of why costs are higher.
APRIL 5: Health experts in the mountain resorts and metro Denver warn critics to be careful what they wish for — tossing out all or part of the Affordable Care Act can make things a lot worse.
APRIL 6: Facing much higher costs, many high-country residents wonder whether their hospital bills are justified — or whether the amenities have to be so nice.
APRIL 7: Innovation, generosity and cooperation are showing some promise for tamping down high-county health-care costs.
Second of six parts.
Garfield County resident Heather McGregor simply can’t afford health insurance anymore, although she had it most of her life.
Working part-time at a nonprofit, her cost this year would be a bit more than $1,000 a month for a plan that requires her to meet a $6,500 deductible before she gets any benefits. “You add it all up and that’s almost $20,000 a year,” she said. “Health insurance for someone in my situation — I’m in good health, I have some savings — is just not a smart economic choice.”
McGregor said health care in the mountain resort communities “is very good. I could go right here in Glenwood and get an MRI or an EKG or any of those fancy tests. The convenience factor is very good. But the prices …”
She looks forward to the day she turns 65 and qualifies for Medicare like her husband. “I’m hoping it’s still there. It’s amazing to see what coverage he can get for a real reasonable cost.”
How did we get here? How did western Colorado reach a point where for some people, health care costs more than a large mortgage?
It has to do with the idiosyncrasies of Obamacare, but it also has to do with the American health care system and various attempts to make it either uniquely our own or more like the rest of the world’s, say health policy experts.
The United States spends 18 percent of its gross domestic product on health care — way more than any other nation, according to the Commonwealth Fund. Other developed nations spend an average of about 10 percent.
And by many measures, the United States has worse outcomes, despite spending much more. The United States is worst among the countries in infant mortality, has the highest obesity rate and ranks in the bottom half in life expectancy, according to the Commonwealth Fund study.
Fifty-five years ago, the United States was already first in spending as a percentage of GDP, but that percentage was a relatively modest 5 percent. That was before the proliferation of surgeries and lifestyle drugs and the expectation that people should live actively and well into their 80s.
Why is the United States so much more costly for health care than other nations? Studies point to the better salaries for health professionals here, the greater use of tests, the higher costs for hospital stays and the higher cost of drugs. While the United States is the world leader in developing new drugs — both lifesaving and lifestyle — its citizens pay more for those drugs than do people elsewhere, and also consume more per capita.
But there may be an even more critical factor.
Other countries are able to keep per-capita health care costs at about half what we pay here because “everyone has health insurance, no one is outside the system,” said Colorado Lt. Gov. Donna Lynne, whose career has been in public health. The young and healthy can’t opt out in the European countries; they have to pay more than they probably will recoup during their 20s and 30s, eyeing the days in their 50s and 60s when they likely will get more in services than they pay in premiums.
Here, with a maximum $695 yearly fine for not carrying insurance under Obamacare, young people can pick and choose when they want to enter the system. Single women who are 26 and plan to wait until they are, say, in their early 30s to start a family, can opt out of the system and the maternity benefits they won’t need for a few more years. And they can opt out again after their child-bearing years.
The European nations also have more aggressive government intervention in setting rates, which at least indirectly set limits on how much a physician can earn. And they’re more willing than the United States to say “no” to certain procedures for people of a certain advanced age.
All of that smacks as un-American to some, a pretty good idea to others.
The United States health care system still largely operates on fee for service, rather than paying doctors a set salary for helping keep a slice of the population healthy, Lynne said. The fee-for-service model can be like the old canard — “If you have a hammer, everything looks like a nail.” If you have a license for orthopedics, everybody can look like they have bad knees or joints; or if you have an MRI machine, everyone with lower back pain might look like they could benefit from a scan.
As in other nations, the healthy subsidize the sick here. The difference is that instead of coming primarily from taxes, health coverage dollars come right out of Americans’ paychecks or pocketbooks.
And that can be startling or aggravating, and can spark complaints that the poor, the obese, the illegal immigrants, everyone but us is getting a good deal.
That certainly happens in Garfield, Eagle, Summit and Pitkin counties, especially among the self-employed who are classified as upper-middle class, but certainly don’t feel that way in the face of $400,000 to $1 million median home prices and $4 a gallon milk.
IT ALL ADDS UP
Tamara Drangstveit, executive director of the Family and Intercultural Resource Center in Silverthorne, said it’s not just milk and housing. Everything costs more in the mountain valleys: gasoline transportation and, of course, health care.
“The problem in the high country is just to live here and raise a family, you have to make more than 300 percent of the poverty level. And at that level the tax credits aren’t enough to make health care affordable,” she said.
In Summit County, 24 percent of people are at or below 139 percent of the federal poverty level (FPL) — an individual earning less than $16,394, a family of four earning less than $33,534. At those income levels, households qualify for Medicaid or Expanded Medicaid, and pay very little for health care coverage.
Thirty-eight percent in Summit County are in what is sometimes called the middle class, meaning their earnings fall between 139 percent and 400 percent of the FPL. This is the group that qualifies for tax credits that subsidize their health premium costs. The goal — not always reachable — is to limit total premium and deductible spending to less than 10 percent of income.
To squeeze under that 400 percent of FPL level, a single person can earn no more than $33,534 a year; a family of four can earn no more than $97,200.
A family of four bringing in $57,700 will pay $599 a month for health insurance because it qualifies for a $721 per month tax credit.
A family making $86,300 gets just a $430 tax credit per month, so its health care costs are $887. A family making $104,000 gets no subsidy, so its health care costs are $1,320 per month, with a deductible of some $6,000.
Whether the household income is $57,000 a year or $120,000 a year, if they’re all paying high mortgages, and paying for food, day care, transportation and other necessities, all of those families of four are living close to the edge.
Monthly premiums have gotten so high that both employers and those on the individual market have flocked to higher deductibles to dampen the monthly costs. The percentage of Coloradans who have deductibles in their health plans rose from 60 percent in 2005 to 90 percent in 2015.
Insurers in the individual market, which covers about 12 percent of Coloradans, offer gold and platinum plans if the household wants to pay more in monthly premiums, but less in deductible and out-of-pocket costs. They offer silver and bronze plans under the Affordable Care Act if the family wants to go vice versa, lower monthly premiums but big costs in the form of deductibles and co-pays if someone gets very sick.
OTHER COSTS EAT INCOME
And those who have to pay the full freight are opting for cheaper plans. Bronze is the top choice for those above 400 percent of FPL, while silver is the top choice for those who are getting help on premiums via the tax credit.
Department of Health and Human Services officials in Washington, D.C., are quick to note that the majority of people on the individual market can find a plan for less than $100 a month per person.
But most residents of the Colorado high country cannot.
The discounted plans are available only to those whose household incomes are below 400 percent of poverty, and in Vail and Aspen particularly, that doesn’t apply to most people. The cost of housing is such that self-employed people might earn $70,000 a year and find most of their income swallowed by $2,500 house payments and the bare essentials. Do you spend another $2,000 a month for health insurance or do you run the risk that the family will stay healthy — and that you can cover the occasional doctor visits out of pocket?
Health care is simply not affordable for people in the high country, Drangstveit said. She supports the idea of extending tax credits — and thus lowering monthly premiums — for singles and families whose incomes are pushing 400 percent and 500 percent of the FPL. That would give a break to individuals earning up to $59,400 a year, and families of four earning up to $121,500 a year.
State Rep. Diane Mitsch Bush, a Democrat whose district encompasses Eagle and Routt counties, is introducing such a bill. It would provide a financial subsidy for those who are spending more than 15 percent of their income on health care and who are between 400 percent and 500 percent of the federal poverty level. She thinks it could help several thousand individuals and families throughout the state, including a disproportionate share in western Colorado.
“We have a perfect storm — a higher cost of living, lower than average wages and such high premiums that people simply can’t afford them.”
Drangstveit also likes the Maryland All-Payer Model that gives more incentives to doctors and hospitals to keep their patients healthy. It produced a $116 million Medicare savings its first full year.
“I believe that health care is a right, not a privilege,” Drangstveit said. “The bottom line is we have to find a way to bring down prices so everyone can afford to access insurance.”
COSTLY ER VISITS
There are other reasons health premiums are so high here, and some of them are maddening.
After a quarter century of public-service campaigns, too many people in Colorado and elsewhere still go to emergency rooms for nonemergencies, jacking up the prices for everyone. Among those surveyed by the Colorado Health Institute, 40 percent acknowledged that their last visit to the ER was for a nonemergency. And now there is a new phenomenon — the free-standing emergency room, affiliated with hospitals, geographically separate, but every bit as expensive.
Pain in the abdomen? A free-standing emergency room charges an average of $5,634.58. An urgent care center charges about 2 percent of that — $151.49, according to the Colorado All Payer Claims Database. Even if the patient foots only a small co-pay, the insurance company is paying a whole lot more than it otherwise would have to, and next year recoups the money via premium bumps for everyone.
When people go out of their provider network for services, the prices skyrocket. It may be worth it to the person who wants, say, the very best surgeon for his prostate cancer, but the bills tend to push up the costs for all.
Universal coverage would promote better health by staying on top of health risks via partnerships between patients, primary care physicians and physicians assistants, many health professionals say. Switzerland and Taiwan had systems similar to the United States, but significantly reduced costs when they moved to systems of universal coverage.
Meantime, President Donald Trump and the Republican Congress still want to repeal and replace the ACA.
“I wish I had a crystal ball,” Drangstveit said. “Obamacare certainly has things that need to be improved. But you can’t ignore the fact that 20 million more people are insured because of Obamacare, and they’re more able to access health care when they need it.
“I hope cooler heads prevail, recognize the good things about the act and make it better. Let’s not move ourselves back 10 years.”