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Wednesday, April 11, 2007
(2:14 PM) | Stephen:
Americans Pay Enough For Healthcare Already

I'm continually distressed at the way rightwing talking points are able to infect our discourse. The latest willing victim is Jason Furman, the director of the Hamilton Project, "a think tank organized to come up with ideas for centrist Democrats." Well, of course he is.

Furman's basic idea is
that the U.S. could reduce health-care spending big time if people shared a larger slice of the cost of care. After all, when consumers know how much something costs, and when they have to pick up a hefty chunk of the bill, they are more careful about what sort of tests and procedures get ordered up on their behalf.
I'll address the easy part first. People go to the doctor because they feel the need for an expert opinion. Doctors spend three years in graduate work, then several years in various internships and residencies. When I was uninsured, I still didn't question my doctors any more than I do now, even though I knew that whatever pill or procedure the doctor proposed was going to come completely from my bank account. I'm tired of the idea that Americans know what treatment they need and just let clueless doctors prescribe expensive nonsense because we don't know how much things cost.

But that's not the only reason Furman's proposal is laughable. He suggests that Americans pay half of all their medical costs until they reach 7.5% of their income. This, he says, will bring Americans face-to-face with the real costs of healthcare and will make them more cautious. I suppose that this could be effective, if Americans currently paid less than 7.5% of their gross incomes for their healthcare. The reality, though, is quite different.

First, the average insurance premium paid by employees in 2006 for family coverage was approximately $3000/year. This is not the cost to employers, which was closer to $11,000.

Second, average out of pocket spending per person in 2005 was $840 a year. For a family of four, that turns into $3360. Therefore, a family of four paid an average of $6,360 a year in out-of-pocket expenses for the last couple of years.

Third, the average household income in US in 2004 was $60,528. This means that the average American household has been paying almost 11% of their gross income for healthcare over the last few years.

It gets worse if anyone from that family is admitted to a hospital for any reason. One of the cheapest hospital admissions is childbirth without complications. According to BlueCross/BlueShield, the average cost for that is $8,505. That's the retail cost, which insurers never pay. This is where it gets dicey and I have to rely upon estimates and personal experience, but the numbers are still instructive. Insurance companies can pay as little as 25% of the retail price, and most insureds pay 80% of that, which makes the patient responsibility about $425 - similar to my experience.

However, that's just for the hospital stay. The doctors' office global fee is usually $500 from the patient. Labs, this last time around for my family, were about $350, and various pregnancy-related prescriptions cost us a little over $300.

Add all these together and a normal, "easy" pregnancy with no complications will cost the patient $1575. If that amount is added to the average premium/out-of-pocket costs, our American family is paying 13% of their gross income for healthcare. Other inpatient admissions are usually more expensive. If you are unlucky enough to have a heart condition put you in the hospital it could cost you 5-10 times more than a childbirth.

The thing is, I like Furman's proposal - at least the surface of it. But I like it for far different reasons than the ones that motivated him to propose it in the first place. Furman wants Americans to reduce their consumption of healthcare services, thereby saving all of us billions and billions of dollars.

I, on the other hand, wouldn't mind seeing my out-of-pocket expenses decrease to a mere 7.5% of my family's gross income. There's a lot of things we could accomplish with an extra 4% - usually more - of our income finding its way into our bank accounts.

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