Where Is Health Care Heading? A National Look
Paul Fronstein runs the Health Research and Education Program at the Employee Benefits and Research Institute (EBRI) and has been a thoughtful commentator on national health care directions from a nonpartisan perspective for many years. He did a Q&A for Managed Care magazine recently that contains lots of provocative and important insights -- click here for the whole interview.
The erosion in employer sponsored coverage is tied to rising health premiums and also to the overall economic environment. Low unemployment kept businesses in the health insurance game in the late 90s and early 00s and will have the same effect as before:
FRONSTIN: Rising premiums drive people to decline coverage. One reason fewer people are covered by employer-sponsored plans is that more people are opting out, mainly because of affordability. More small businesses are not offering coverage than in the past. Considering what's happened with premiums over the last five to seven years, I'm impressed that we haven't had greater erosion in coverage.
MC: Do you foresee that this erosion of coverage will continue?
FRONSTIN: In the short term, I don't see a tremendous erosion of coverage. One thing that people outside of health care tend to forget is the impact of the overall economy on health care. In the late '90s, the strong economy enabled the managed care backlash. The lower unemployment rate drove employers to enhance benefits and drove small employers to offer benefits. Once unemployment drops below a certain threshold, the economy starts to have an impact on what employers do and don't do. The likelihood that a small business offered health benefits increased 20 percent between 1998 and 2000, even though small businesses saw almost a 20 percent increase in premiums over those two years. That tells me that employers will do what they have to do to recruit and retain workers if they think it will affect the success of their business. Even if health care costs are increasing rapidly, if employers think cutting back on those benefits will affect their business, they'll make other tradeoffs but they'll maintain health benefits.
MC: You see indications that we're heading for another period like the late '90s?
FRONSTIN: Right now, we're at 4.8 percent unemployment. The economy is certainly moving in the right direction as far as unemployment is concerned. We're not that far away from that threshold. I don't know if the threshold is 4.6 percent, 4.4 percent, 4.2 percent or 4 percent, but we're within a percentage point of it as opposed to being within 3 percentage points. If unemployment continues down that path, employers will postpone abandoning health insurance.
And despite national hype, the verdict is still out on the success of "consumer directed" health plans:
MC: Are consumer-directed health plans really a way to give people more control over their benefits or just window dressing for cost shifting?
FRONSTIN: We used to talk about different types of plans as managed care heavy and managed care lite. Right now we have consumer-driven lite. People are being given some decision making, but not a whole lot, and certainly not what's possible. It's very hard to give people a lot of responsibility when they don't have the information needed to make good decisions. I'm not convinced that account-based health plans and high-deductible plans are the best way of changing the way people use the health care system.
MC: How much of the growth of consumer-directed plans is consumer directed? In other words, are people actually embracing this concept or are they getting pushed into it by their employers?
FRONSTIN: It's the latter at this point. Our research shows that about half of the people in these plans had no choice of plans, compared to about only a third of people with traditional insurance that didn't have choice.
And the future of cost control?
MC: What changes in Medicare do you foresee in the nearer term?
FRONSTIN: I expect that any changes to the program will be driven by cost. So if the cost of the prescription drug benefit comes in way out of line from what was expected, I could see the government going to price controls. Think back to 1965 when we got Medicare. The promise was a fee-for-service program with no price controls. In 1983 we got price controls for hospitals with DRGs, and in 1989 we got price controls for doctors with RBRVS. Right now, we have no price controls on drugs, but I think it's inevitable that we'll have them.
Lots of interesting insights. Check it out. Tip of the hat to the Health Care Blog for pointing out this useful interview.