March 15, 2007                                                         Contact:Lucas Hamilton


      Guest Editorial
      By Montana State Auditor John Morrison
      Whether you have health coverage or are one of Montana’s 170,000 uninsured, you are probably asking the same question: Why is health insurance so dad-gummed expensive? The answer is complex, but the short of it is that a lot of people are making money off the current system, which is also why politicians have such a hard time trying to fix it.
      If you have an average American family, your health insurance costs about $12,000 per year and the cost rises faster than your pay. Average premiums have risen 87 percent since 2000 while wages since then have increased only 20 percent. Most people get their health coverage through their jobs and share the cost with their employers. The rising cost of health insurance has led to a crisis for individuals and their families as well as the businesses that employ them. Starbucks now spends more for health coverage than it does for coffee and General Motors spends more per car for health than it does for steel.
      Nationally, we’ll spend $2.2 trillion this year for health care. That’s about 16 percent of our gross domestic product. In other words, one out of every six dollars spent in our country goes for health care products and services. Other industrialized countries spend 8-11 percent of their GDP in this category. In rough numbers, we will spend about $7000 per person this year on health care and other major countries will spend less than half that.
      Does it translate to longer lives and healthier citizens? Hardly. The World Health Organization ranks us worse than most other modern countries in infant and child mortality, maternal deaths, low birth weight, life expectancy, and years spent in poor health. Further proof is in the Medicare system where average expenditures per enrollee vary widely from state to state; the states that spend more have more specialists providing more services, but boast no better outcomes.
      So where is all the money we spend on premiums going?
      First, health care goods and services cost more in our country. Although we have fewer doctors than other countries, we rely more on specialists and pay higher fees. Hospital stays in the U.S. are also more expensive than in other developed countries. And prescription drugs cost more in the U.S., their prices rise faster than overall medical inflation, and demand for them—driven by advertising--is growing.
      Second, much of the treatment rendered in the U.S. is unnecessary. There are various explanations for this: 1) We pay doctors by the service, instead of by the result; 2) Poor information systems lead to duplicative care and medical mistakes; 3) Doctors practice “defensive medicine;” 4) Patients want the newest--and often unproven--diagnostic technology and prescription drugs; 5) Some billing is fraudulent.
      Third, the 46 million uninsured Americans impose huge costs on the system. The uninsured are more likely to delay treatment, aggravating injuries and illnesses, and to seek expensive emergency room care. Montana hospitals provide over $100 million in charity and bad debt care every year. Nationally, the figure is around $40 billion. Those costs get shifted right onto the backs of folks covered by private health insurance.
      Fourth, our own behaviors drive up health care costs. Smoking, obesity and alcohol abuse cause heart disease, cancer, diabetes and other costly chronic illnesses. Seventy percent of health costs are incurred by 10 percent of the population, adding to everyone’s premiums.
      Finally, insurance company overhead adds about 15 percent to the cost of paying claims and is rising fast. Between 2000 and 2005, net administrative costs, including profits, increased 12 percent per year, while health expenditure growth averaged 8.6 percent. When you add what doctors and hospitals spend to bill the insurers and wrestle with them, it comes to about one in every four health care dollars.
      We can take steps now to cut these major costs. They include: building an integrated health care IT system, wellness programs that lead to healthier lifestyles, paying providers for prevention and other good results, focusing on treatments and drugs that work, improving access to primary care doctors, cutting insurance overhead, bargaining with drug companies, and covering the uninsured. We’ll take a closer look at these strategies in the weeks ahead. Some of them are addressed in bills pending before the legislature.
      It has been said that politicians don’t solve problems, they respond to crises. Well, poll after poll shows that Americans believe the health care system is in crisis and needs urgently to be reformed. Change requires a will and a way. We have both, and history will judge us by what we do with them.
      John Morrison is the elected Montana State Auditor and Commissioner of Insurance and Securities.