People expect a lower cost of living in the middle of the country. It’s one of the perks of picking, say, Wichita over Washington, D.C.
But when it comes to health care, not even choosing a cheaper part of the country can shield you from the pain of American medical prices.
Kansas and Missouri count among the five states where people with work-based insurance face average premiums and deductibles topping $9,000 a year.
In Missouri, deductibles are so high that economists at the Commonwealth Fund consider the average middle-income earner there underinsured.
Why underinsured? Because when deductibles add up to 5% or more of a person’s income, they start skipping out on health care.
“And when people do get care, they often accumulate a lot of medical debt,” economist Sara Collins said. “That has financial ramifications for families.”
Collins is vice president at the Commonwealth Fund, where she directs its program on insurance coverage and access to health care.
In a new report, the organization dug into a federal survey of more than 40,000 employers.
Families in Kansas who get their insurance through work pay 36% of the premiums themselves. In Missouri, 33%. The average American family pays 29%.
“It’s really hard to imagine how we continue to allow this to happen,” Wichita physician Justin Moore said after reading the new research. “Every incentive in health care … is aligned to increase the amount of money that we take out of people’s pockets.”
Moore is medical director of the Kansas Business Group on Health – an insurance-buying coalition that brings together 35 very different businesses.
Some have just a few hundred employees. Others have tens of thousands. Yet all wrestle with how to curb what seems like the unstoppable rise of medical and insurance prices so that they can provide affordable prescriptions and quality health care to employees.
It’s one of the country’s most pressing puzzles. More than half of Americans not old enough for Medicare get health insurance through work.
A recent study by the Health Care Cost Institute found spending per person with employer health insurance grew more than 20% over five years.
That’s nearly three times the pace of broader economic inflation. And most of this increase isn’t attributable to people getting more care and medications.
Instead, two-thirds of the problem comes simply from price hikes.
The disconnect between prices and costs
Imagine walking into a grocery store. You fill your cart with what feels like about $50 worth of groceries.
Only, you’re scared to walk to the front of the store and pay, because you know the total might actually come to $100 or $200. If you’re unlucky, maybe $500.
Even worse, you won’t get to return that gallon of milk to the shelves once you see on the bill that they priced it at $20.
That’s American health care. It’s hard to know what to expect.
“Health care costs are so random across the country,” Collins said. “There’s not a lot of relationship between prices and what it actually costs to deliver a service.”
A study by the RAND Corporation think tank suggests some Kansas City hospitals rank among the most expensive in the country. RAND looked at prices paid by employer health plans that volunteered the information.
When the Kansas Health Institute analyzed the same data, it found something else interesting: Prices vary widely within Kansas. A visit to the emergency room that costs $150 in south-central Kansas can cost $700 in the Kansas City area.
Yes, the cost of labor varies across the state, a partial explanation.
But the institute says Medicare, for example, would only pay 10% more for those services in Kansas City compared to what it would pay in south-central Kansas. (Medicare factors in regional cost differences.)
How businesses cope
The health care industry takes home more each year at a rate much faster than growth in the national per-capita gross domestic product, the Health Care Cost Institute found.
Insurance companies, brokers/consultants, pharmacy benefit managers and other insurance administrators hired to help employers navigate the health industry and strike good deals struggle to beat back the increases.
Investigative journalists have uncovered evidence that they sometimes contribute to the problem. Just one reason: Higher bills can mean higher profits.
And so as medical prices and insurance premiums go up, employers pass more of the cost to workers, and simultaneously suppress worker wages.
Premiums and deductibles in Kansas and Missouri now typically add up to around 12% of median income.
The situation is bad for the middle class, but low-income earners have it worse. The Commonwealth study found they shell out far more for their premiums than higher earners.
Some companies raise deductibles in an effort to slow the growing premiums. In its own surveys, the Kansas Business Group on Health sometimes sees family deductibles as high as $12,000 to $17,000 per year.
“We’re seeing this steady trend toward higher deductibles,” Moore said. And “companies are contributing fairly little to things like flexible spending accounts or health care spending accounts.”
Collins has more bad news for the typical worker.
“They’re not only spending more on their premiums and their deductible,” she said, “their wages are being held down.”
That is, employers don’t necessarily pass their entire annual increase in health care spending directly to employees. They foot part of the increase themselves, too. But this cuts into the same pot of money that might otherwise have gone toward pay raises.
This tradeoff hasn’t panned out well for Americans.
Researchers from Harvard and Stanford universities who dug into more than a decade’s worth of credit reports from across the U.S. found medical debt has become the top source of work for collections agencies.
It accounted for more than all other kinds of debt in collections combined.
In a 2020 survey, Commonwealth found more than 40% of underinsured people skipped or delayed medical care or medications for fear of the bills.
Proposals on the table
Policymakers and politicians debate a wide range of solutions, but party politics, ideological disagreements and lobbyists with deep pockets make passing any reform more than tricky.
It took Congress years to legislate against the health industry phenomenon known as “surprise bills” – and that was a bipartisan issue with a significant public outcry for action.
The Biden administration packed a raft of health care measures into its now-stalled Build Back Better Act.
This includes continuing the temporary pandemic-related expansion of insurance marketplace subsidies that passed Congress last year and that led to record-high enrollment in marketplace plans. It also includes temporarily offering private health coverage to certain low-income earners who would qualify for Medicaid if they didn’t live in states like Kansas that don’t allow them to.
But some of the ideas on the table don’t tackle the underlying and longer-term problem, Collins said: Prices.
“You’re still left paying for these prices that don’t really coincide with the cost of delivery,” she said. “That’s a much bigger issue in terms of the country being able to afford health care generally.”
Some policymakers propose rolling out state or federal public health insurance options available to people beyond those who already qualify for Medicare or Medicaid. A few states have just recently passed laws to that end.
Meanwhile, a small number of Kansas companies have begun trekking down other paths in search of savings.
Some have joined coalitions that negotiate prescription drug prices directly to cut pharmacy middlemen out of the cost equation. Others have hired middlemen that import drugs from abroad for much less than Americans normally pay.
Still others turned their backs on brokers who receive undisclosed perks — ranging from fancy vacations to cold cash — from insurance companies for hawking their wares. Some employers opted instead for brokers who shun conflicts of interest.
A third bucket of strategies involves cutting insurance companies out of the equation by contracting directly with primary care doctors to see employees (often for a monthly fee), or setting rates directly with hospitals.
Absent solutions at the state and federal level, Moore says businesses need to rock the boat on their own.
“In the short term, I think that’s where it is,” he said. “Employers looking past their traditional relationship with an insurance company, a broker, a pharmacy benefit manager. And just looking for solutions.”
Celia Llopis-Jepsen reports on consumer health for the Kansas News Service. You can follow her on Twitter @celia_LJ or email her at celia (at) kcur (dot) org.
The Kansas News Service is a collaboration of KCUR, Kansas Public Radio, KMUW and High Plains Public Radio focused on health, the social determinants of health and their connection to public policy.
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