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U.S. healthcare dilemma not one thing

As the national debate over healthcare reaches a decisive moment, it is useful to examine the most important threads contributing to the crisis in the system.

September 09, 2009|James Oliphant and Kim Geiger

WASHINGTON — As President Obama and his critics prepare for a climactic battle over healthcare, they face a seeming paradox: Millions of Americans say the system they depend on for everything from routine flu shots to life-saving heart surgery is broken and needs fixing. Yet most Americans also say they're pretty satisfied with their healthcare.

The explanation for the apparent contradiction -- and a big reason healthcare has turned into such an incendiary fight -- is that it's not one crisis, it's a bundle of crises. And since most people are fairly healthy most of the time, problems can go largely unnoticed until calamity strikes.

Medical costs are spiraling up much faster than inflation or personal income, for instance, but the impact is cushioned for a majority of Americans because they still have job-related insurance. While employers are shifting more and more of the premiums' cost onto workers, the increases are gradual and lumped in with other payroll deductions.

For many, it's only after a medical problem occurs that they discover the coverage gaps and other limitations in their insurance can turn sickness into financial calamity.

There are problems with quality as well. Americans like to think they have the best healthcare in the world, and at its best, American medicine may still be a world leader.

But overall, the evidence suggests that almost every other developed nation delivers better healthcare at substantially less cost.

It is against this background that Obama addresses Congress tonight on the healthcare overhaul.

Here, in brief form, are major elements of the problem:

The "cost curve": Costs are expected to rise 71% in the next decade, according to the Centers for Medicare & Medicaid Services. Insurance premiums are rising with them.

Even with higher premiums, large companies are narrowing the scope of what's covered. And among smaller companies in some states, one major cancer case can push premiums so high that the employer is forced to drop health benefits altogether.

What's driving up costs? Partly it's the abundance of new technologies, which are both effective and expensive. Inefficiencies -- "defensive medicine" designed to protect against lawsuits, failure to use best practices, and a rise in for-profit healthcare entities -- also contribute.

Some experts, such as Harvard University economist David Cutler, argue that modernizing the healthcare system could save hundreds of billions of dollars annually. Even a 1% drop in costs would make it possible to cover the uninsured, he calculates.

Employers want out: Costs for employer-based insurance premiums have risen 119% over the last decade, more than three times faster than wage increases.

At that pace, the average family premium could reach $23,842 by 2020, according to a study by the Commonwealth Fund, a nonpartisan healthcare policy think tank.

Rising costs have drained resources employers might otherwise have devoted to wage increases; some companies have cut benefits and shifted premium costs to employees.

In the last eight years, deductibles have tripled for employees in large firms and quadrupled for those in companies with fewer than 200 employees. Average worker contributions for family premiums have more than doubled since 1999.

And according to a Harvard study, half of employers will cancel coverage within a year after an employee suffers a disabling illness.

Growing ranks of uninsured: Obama says 46 million Americans lack health insurance. The Center for American Progress, a liberal think tank, says that number has jumped 13% in the last two years.

California now has an estimated 7.7 million people who lack health insurance -- and the majority of them have jobs.

Conservative analysts contend that the overall figure would be reduced dramatically by subtracting illegal immigrants, people between jobs, and those who are eligible for government programs but haven't enrolled.

When people without insurance get sick or injured, they defer treatment, turn to family or visit clinics or emergency rooms, which try to recover the costs by charging insured patients more or seeking government aid.

By one estimate, 8% of premiums -- an average of $1,100 annually for a family -- goes to treating the uninsured.

Also, unless coverage is extended to all or most of the uninsured, insurance companies say they can't afford to eliminate preexisting condition rules or benefits caps and make other changes that would benefit those who have insurance.

Medical bankruptcy: About 25 million Americans are underinsured -- in addition to paying a policy premium, they spend more than 10% of their income on out-of-pocket medical costs.

"If you get really sick, you may be bankrupt," said Jon Gabel, a senior fellow at the National Opinion Research Center, a nonpartisan think tank based in Chicago.

In 2007, an American family filed for medical bankruptcy every 90 seconds, and three-quarters of those families were insured, according to a Harvard study.

Medicare: Americans assume that taxes paid over a working lifetime will underwrite their medical expenses as retirees.

But as costs rise and baby boomers begin to swell the ranks of the retired, that bargain may not hold.

Stephen Zuckerman, a health economist at the nonpartisan Urban Institute, says portions of the Medicare trust fund could be exhausted as early as 2017, meaning that the government would have to raise taxes or significantly cut spending -- or both.

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joliphant@latimes.com

kim.geiger@latimes.com

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