numbers of people over age 65 and over age 85. Even if increased efficiency were able to reduce health care expenditures for each age group by 25 percent, health care spending would continue to increase as a result of changing demographics. Therefore, achieving health care reform that aims to reduce spending will be extremely difficult. I am pleased to appear before you today to discuss long term strategies for health care. My name is Dallas Salisbury. I am employersmight have have reported had success available with for specific non-health initiative consumpti Statement s, others on. Summar remain Regardless y dissati ofsfied, who bears and most the burden continue of to increasing search for health ways However, most uninsured Chart children 5 were in families whose family head was a full-time, full-year Chart 6worker (56 percent). Chart 1 Chart 2 Table2 Chart7 the to l_r_i control elent their of the inere_gi limployee ng eogtg. BenefitResearchInstitute (IiBRI),_nonlsrofit,n_l_arti_m_,l_ubliel_liev r_eh 8r_ani- expenditureg, in the aggregate, employer gpending on health _re repregentg leggthan 6 l_ereent of total labor eo_t_. The Thege go Non Nonel vchildren ernment, elderly clerly Population were Population labor much lead wi w ers, legg tihout thout likdv and Health Health employers to b_ In Insurance surance, uninmr_d have,Da been l than h_trying L. thoge galto khu_y whoge make Iq I_on lonelderly _' the 6 amily 1d health 6rly he_ Popul Population elcare worked ation system wi without only thout more paH6_ rt Health cost time ltk effective In, In or su urine6 exper'mnced rance, as , EmployerSpendingon HealthInsurance, a WagesandSalaries,andTotalCompensation b in Billionsof Dollars Percentage Uninsured among Children under Age 18, by Work Status of Family Head zation based in Washington, DC. EBRI has long been committed to the accurate statistical analysis of public policy byby Own Family WorkIncom Status e by Work Status by Family of theTyp Family e Head changes in employer health expenditures have less impact on the growth rate of total compensation than do some unemployment (chart 7). Almost 77 Employee percent of Ben uninsured efit Resea children rch Institut were e living in a family whose head of household well as increase access and and a quality. s A Percentage Although of EBRI Corporate their Analysis efforts After ofmay theTax March produce Profits 1990 results, CPS ,Selected they Years cannot 1948 provide -1989 universal access to % EBRI Analysis of the March 1990 CPS EBRI Analysis of the March 1990 CPS EBRI Analysis of the March 1990 CPS EBRI Analysis of the March 1990 CPS was also uninsured. benefits issues. Through our research, we strive to contribute to the formulation of effective and responsible health, Employer efforts employer to control expenditures their health on wages care and expenditures salaries (which through represent mandator 84ypercent contributions of wagesto and monthly salaries) premiums, (table 3). 9 health services at a lower overall cost. The pursuit of greater access and better quality for better value can be successful, 35.0 T-77 Employer Spending on Employer Spendingon EmployerSpendingon welfare, and retirement policies. In keeping with EBRI's mission of providing objective No and impartial analysis, our work copayments, • Healtsince h in increased slabor uranceproductivity deductibles, is a top pgenerally rio and ritythe for implementation measures American output s. Aof in recent choicemaking terms EBRI of tota/ /Gallup labor benefit costs, poll plans found total may compensation that have 61begun percent to seems sensiti of working toze be but not without paying $40,000 for it. Health Insurancea Wages andSalaries TotalCompensationb does not contain recommendations. 30.0- - - patients Other Arelevant mericans Dem to the ograp measure magnitude rega hicrd Chealth hara forof issues cthealth einsu ristof ics rance competitiveness care costs. as theirInmo 1989, stand important 48 profitability. percent employee of employees benefitin . Ninety-two medium- and percent large-si of zed American establish s - who or More NotMarried, Percentageof corporate Percentageof corporate Percentageof corporate • Endnotes mentssaid with they group havehealth familycoverage physicians were rate inthe plans quality Under that of required care they a contribution receive asChildl excellent to e premium ss or good; for individual among respondent coverage s ($25 who had per 25.0- Children FamilyHead Year $ billions after-taxprofits $ billions after-taxprofits $ billions after-taxprofits • Introduction Governbeen mentsho --Health spitalized care during spending the past hasyear grown , 82 as percent a proportion rate theofcare revenues they received at both the as excellent federal level or good. and the Yet,state largely anddue to month, on average), up from 26 percent in 1980 Worker ($9 per month, on average). Part-Year However, even if patients are aware of the Sex and Age--Men were more likely to be uninsured than women in all age groups except between ages 55-64. Women $10,000 Marriedwith 1950 $ 0.7 3% $ 147.2 589% $ 155.4 622% Children government uncertainty 20.0" of level. cove Federal rage and government cost, 56 percent health rate care the spending overall represented health care s15.1 ystem percent as fair of or federal poor. When revenues asked inwhat 1989,they costs of health care, they can lack much of the information necessary to evaluate and make rational purchase decisions tThese were gene data ralare ly le taken ss likprimaril ely than y m freom n to anbe EBRI coveSpecial red direc Report tly by entitled an emplo 'Uninsured yer health in insu the rance United planStates: but weThe re mo Nonelderly re likely to 1960 3,4 13 272.8 1003 296.7 1091 • ....._.:_.:.:.:.:.:......:............-_:-_. The American public values the financial protection provided by health insurance. The health care delivery system in the 1970 4 times as much 14.6 as in 1965,35 before the implementation 551.5 of Medicare 1323 and Medicaid. 618.3 As a proportion 1483 of total aboutliked health mocare st about treatment. their care, Most howeve purchase r, the decisions, public cited in fact, facto are rs made that are by s the ynonymous providers with of health highercare, costswho . themselves rPopulation eceive empwithout loyer covHealth erage as Insurance' dependents published of other in wo April rkers 1990. and publicly To order, finan please ced heal call th Deb cov bie erage. MossW atome (202) n aged 775-6 55-6 3154, . 15.0- $2o,oo0- 1980 71.6 48 1372.0 916 1638.2 1094 United Statesexpenditures, has performed the a number change of is not miracles nearly that as were significant. not possible Federal 30,government or even 10, years expenditures ago. People on health are surviving care heart are largely unable to make fully informed decisions because medicine is an imprecise science. Therefore it is not certain 2al Lth ouis oug Harris h morand e lik A es___o ly to c recei .iates, v Inc. e indi Trade rect Oefmp fs and loyeC r-s hpo oicns eso :red Healheal th Pto h/icin yO su pra tince, ons for wetrhe e le 199 ss 0 lik s.el (New y thanYork, menNY: in thi L souis age group $39,999 Full-Year, 1985 124.3 97 1975.2 1546 2367.5 1853 attacks and 10.0 cancers " that once were fatal; vital organs are being transplanted Some into individuals who then lead normal lives; for 9 percent of total expenditures on health services and supplies in 1965, 15 percent in 1967 (after the • whether Harris Given and cost A public ssociates sharing policy can 1990). option effectivel s of"f y r control ee" mandated the quantity employer of health coverage careand services "free"delivered. national health insurance, both proposals to be co1989 vered by priv1 a7 te 8.1or publicly 1 financed 03 health in2573 surance. .2 This 14 may 91 occur partly b3 eca 079.0 use men recei 1784 ve coverage more Unemployment Full-Year, premature babies are growing up healthy; diseases have been eradicated. At the same time, national health expenditures have implementation of Medicare and Medicaid), and 16 percent in 1989. State and local health spending represented Full-T 14.4 ime oftenreceived than women majority through support thei (56 r ppercent revious and emplo 54 ye percent r or thr , ough respectiv theely). MediIntere care di stingly, sability8p 4rpercent ogram. said employers should be 3Northwestern National Life Insurance Company. Americans Speak Out on Hea/th Care Rm_ning. (Minneapolis, MN: 5.0" Not Married, Nonworkers Source: EBRI tabulations of data from the U.S. Department of Commerce, National Income and Product Accounts. been increasing at twice the rate of general price inflation for over a decade. withChild Thirty-four ren million Americans lack health state and local revenues in 1989, nearly twice as much as a proportion of revenues as in 1965. In terms of total HMOs Northwestern required give providers toLi provide fe Insurance financial coverage Company, incentives if employees 1990). to provide paid part cost ofeffective the cost, care but support and are for therefore government-provided generally identified health with insurance cost alncludes employer contributions for group health insurance, Medicare Hospital Insurance, and military medical insurance. 0.0 Full-Year, Married, insurance, which limits their ability to pay for health care services. containment. spending declined on to A survey health 27 percent by services A. ifFoster it meant and supplies, Higgins higherfound however, taxes.that state annual andHMO local premiums spending has werechanged lower, on little, average, representing than fee-for- 12 4The PersoMarch nsblncludes aged CPS 55-6 wages questions 4 we an re d salaries, lea individuals st lik health ely to benefits, about be unins and their ur aed llhealth other (cha non-c rt insurance 8), ashwhile benefits. coverage those aged throughout 21-24 we the re mo preceding st likelycalendar to lack co year. verage. Other $10,000- Part-Time Childless Average Full-Year, Full-Year, Full-Year, Some Part-Year Nonworker Workers $19,999 service premiums total U.S. in expenditures 1989 ($2,319 in versus 1965$2,600, and 14 respectivel percent iny). 1989. These figures represent a 16.5 percent increase from 1988 The Respondents se young p to erso the ns1ma 990ysurvey no longe Full were r -'1b 3m einstructed cov e eredPa by to rt-Time a provide family po information Unemp licy and loyment mabout ay nottheir havehealth become insurance permanen coverage t membduring ers of the The rapid increase in health care costs has challenged the health care delivery system and increased the costs of private and for •1989. HMOs, Eighty-four Assuming compared pe accurate rcent with ofnonelderly respon 20.4 percent ses were Ame growth given, ricansfor the had fee-for-service uninsured health insurance should plans. in include 1989, However, only leaving man those more y in emplo dividuals thanyers 16 percent, feel whothat were or HMOs 3without 4.4 million have work force. Many young workers may not currently participate in their employer-sponsored insurance plan because of a 34.4 Million Uninsured under Age 65 34.4 Million Uninsured under Age 65 34.4 Million Uninsured under Age 65 34.4 Million Uninsured under Age 65 increase. The elderly population accounts for a disproportionately high share of health care expenditures because the public health insurance coverage to the consumer. The results have been a reduction in health insurance coverage and been wai health ting people unsuccessful insurance pe proportion riod without prio for in r t of reducing the health o e the lentire igib total ili incosts. s ty. urance 1health 2 months. Their coverage. care reasons However, bill paid Mo include sby t a comparison of governments a the 17 unin percent sof ured has the annual remained results (54.4 increase percent) of the essentially March inwere premiums, 1 constant working 990 survey coupled since adult with s,the with while the the the incidence of sickness increases with age. In 1989, for example, elderly individuals (age 65 and over) averaged 9.1 annual introduction of cost management techniques that have reduced the providers' ability to subsidize uncompensated care. implementation increased Survey remainder ofcosts Income associated of were Medicare and nonworking Program with andoffering Participation Medicaid, adultsHMO (16.7 the percent) options, has share ledof some including or public children researchers budgets the(28.7 added consumed topercent). believe administrative by that More health many than costs care respondents 85continues ofpercent multiple actually of to plans the grow unin answer and sured publicly increased financed taxes.2insurance. In a recentAt public the same opinion time, survey, these people 94 percent are also of respondents less likely than agreed those thatwith health higher careincomes should be to available receive physician contacts, almost twice as many as individuals between the ages of 25 and 44. Likewise, patients age 75 and other insurance. However, 47 percent of workers not covered were either ineligible for or could not afford their employ- • Health Care Costs s were either workers or dependents of workers. possible the health public increases insurance budgets in indemnit questions have remained y rates with associated reference relatively to fixed with either adverse as a a proportion particular selection. point of10 GNP in Emplo time while yers orhealth to are some cutting care period expenditures back of on time the less have number than the of employer-sponsoredhealth insurance. to everyone, even if they cannot afford it.3Although the uninsured represent an important public policy concern, no older averaged 4,098 days of hospital care per 1,000 persons per year, more than seven times as many days as patients ers' plans. 6Although some of the uninsured were in families whose head of household experienced unemployment during u Public Attitudes on Health Care full year.The increase in the proportion of public budgets consumed by health care expenses suggests that increases in HMO options they offer and negotiating harder for rate cuts by pressing for increased experience rating (group rates agreement has been reached on a national strategy to guarantee access to health care or assure reasonable payment for between the ages of 35 and 44. Table one demonstrates the age rated individual and family premiums for group health the year, more than 60 percent were in families in which the family head was employed either full or part time through- 5Le_:irglCF. health The spending Healthare Canow re Financi coming ng System at the expense and the Unins of other uredpublic (Washington, expenditures DC: such U.S.as Department infrastructure of Health and education and based •U.S.The expenditures on actual majorithistorical y of onthe hea uninsured lth claims careexperience exceeded (54.4 per 1 from cent) 2 percent the were group of eithe Gross itself). r full National -time, According full Product -year to the workers (GNP) U.S. in Department or 1 dependents 990--more of o Labor, than f suchtwice HMO workers the. Statement that care. Workers with low earnings are more likely to be uninsured than those with high earnings. Among all workers, 28.3 coverage out the year. for anThe employer majority whose (54 percent) firm size of is 28 thein uninsured Washington, wereD.C. either between employed 1987 full and time 1991. yearIt round clearly or shows dependents the implica- of such The Human public capital). Servi willc be esThis ,the 1990 arbiter may ). represent of whether a more or not likely health threat reform to American initiatives competitiveness are focused properly. than emp To assess loyer the contributions shifting tides to of enrollment The remaining among emplo unins yu ees red with wereemployer-sponsored in families headed health by full-year plans , grew part-tim steadil e wo y rfrom kers 2 (8percent .2 percent) in ,1980 worker to 17 s with percent some proportion of GNP than in 1960 and more than that in any other industrialized country. In the last 25 years, the U.S. percent of those with annual earnings below $10,000 were uninsured, compared with about 4 percent of those with tions of population aging. workers. in 1989. However, of all steadily Be employed fore the full-time Comm workers ittee and on their Ways depen and dents Means only 12 percent were uninsured during public opinion expenditures. , EBRI and The Gallup Organization, Inc. have conducted a monthly series of national public opinion polls 6These unemplo finding ysme are nt from (9 pe the rcen May t), 1 or 988 nonwo Current rkersPopulation (14.5 perSurvey. cent). health care sector has outgrown other sectors in the economy by an average of 3 percent annually. The aging population annual The March earnings Current of $50 Population ,000 or more. Survey This(CPS) is primarily provides because an important low-income source workers of information tend to beabout employed the economic in industries and that 1989. Fifty-eight percent of all uninsured workers usually worked at least 35 hours per week. Generally, part-time workers on public attitudes toward economic security issuessuch as health insurance, health care satisfaction, and the value of benefits 7Medicaid eligibility levels are linked to AFDC eligibility levels, which are set by individual states. These levels vary and advances in medical technology mean U.S.that Ho this usetrend of is Re likely presentatives to continue. Current discussions of health care expen- health insurance status of the U.S. population. 4 This information can be useful in the analysis of legislative proposals are less likely to offer health insurance and/or have a weaker or temporary attachment to the work force. These workers In addition to increasing the quantity of health care services provided, the increasing ratio of elderly to working individu- and their dependents were more likely to be uninsured than their full-time counterparts. Among part-time workers, since June 1989. As elected officials well know, the tide of opinion can shift rapidly and a move from "what do you want?" In PPOs •from dividuals Heal are 14 t --Despite percent a h relativel insurof ance ythe the new prov ffact ederal ty is pe that ion o poverty fmore ihealth s a funct employers rate care ionindeliver o Alabama f etoday mployer y network require to s 79 izepercent . premium in Twenty-six which in an California. contributions percent organization, ofAbout self-employed forgenerall group two-thirds plans y an workers of than insurer, thean they states dcontracts 31 did percent have 10 ditures focus on perceived problems in the system, such as quality and access to health care, but they also encompass the designed to expand access to health care services. may als will also contribute be employed to an only increase part time in the or unemployed proportion ofat GNP times. that is accounted for by health expenditures. Medicare families of those employed fewer than 17 hours per week were more likely to be insured (77 percent) than families of to "what are you willing to pay?" can produce very different results. with higher of a network workers income and deductibles of in eligibility doctors, firms with are thresholds hospitals, fewer higherthan and for and_medically 25 copayments other employees health needy" more were care common, persons. providers covered by All to individual their provide states own are health services employers' required spending at to a plan discounted provide as compared a share Medicaid price of with adjusted schedule. coverage nearly 72 notion that the United States is spending "too much" on health care--that health care consumption and expenditures expenditures alone, which are estimated to have represented 1.9 percent of GNP in 1990, are projected to increase to 3.0 Hearing on those working 17 to 34 hours per week (69 percent). The reason for this difference may be that publicly financed health Providers to pre percent gnant income enter w ofom employees these has enincreased and agreements chil in dr firms by enonly hoping with up to 0.9 1a,g 0to e 00 percentage 6generate or if their moreincome employees. a points higher issince le volume ssSelf-employe than 1965. 133 ofMoreover, business. perd cent workers ffPPOs the individual fand edera may workers l be phouseholds ovoffered erty inleve firms on l.pay with a stand a fewer consider- -alone than are inherently too high. These perceptions have led employers and government policymakers (who together account for Most of the uninsured were working adults (54.6 percent), while the remainder were nonworking adults (16.7 percent) or Family percent Type of GNP in the year 2000 and 6.8 percent of GNP in 2060. These figures suggest that health care financing for coverage is less available to the latter group. Nonworkers were more likely to be uninsured than all other working Our surveys indicate that obtaining health insurance is a top priority for most Americans. A 1990 EBRI/Gallup poll found basis smaller 25 or as employees an proportion optionmade within ofup total 49.9 a traditional U.S. percent health of indemnity all spending uninsured plan. thanworkers they In thedid latter in in 1989. 1965, case, Anand insurers additional virtually usuall 15 the ypercent encourage same of proportion all participants uninsured as they workers to use SThe following section draws from EBRI Issue Brief #114, "Health Care: What Role in the U.S. Economy._' 63 percent of total U.S. expenditures on health services and supplies) to make assorted proposals for reforming the children (28.7 percent) (chart 1). Between 1988 and 1989, the proportion of the population that was uninsured in- the elderly will continue to be a difficult issue for both public policymakers and private employers. Given the magnitude groups--nearly 21 percent did not have any health insurance in 1989. that 61 percent of working Americans regard health insurance as their most important employee benefit; 59 percent said they financing were in and firms delivery with of 25-99 health employees. care. Health insurance provision is a function of income. the fort preferred hcomi1980. ng.providers However, To orde by r,waiving if plone easeaccepts deductibles caU (30 the 1) premise 33 or 8-6946. offering that more employer attractive increases coinsurance are passed provisions. on to employees PPOs appear in the to form be of Long.Term Strategies for Health Care creased slightly from 15.7 percent to 16.1 percent. Some of this increase can be attributed to sampling error and slight MaritalStatus_The majority of the uninsured are in families of married couples either with or without children of such projections, it is not surprising that many employers with relatively large retiree populations have been at the would 9Whilnot e thi accept s is true a job in the thataggr didegate not ,provide individua health l emp benefits. loyer exper Respondents ience may said vary.that Retiree theirhea employer lth carewould costs an have d age to o pay f act them ive gaining wages popularity: and salaries, the U.S. individuals Department may be of bearing Labor found more that of the in burden 1989, 10 ofpercent growingofhealth participants care expenditures. in medium-sized and changes in Employee Benefit Research Institute (EBRI) methodology. Therefore, this report does not conclude that (chart 6). These families represent the majority of the nonelderly population. Compared to their unmarried counterparts, forefront of proposals to reform the U.S. health care delivery system. Unemployment--Workers who experienced some unemployment were much more likely to be uninsured than those who workforce as well as size of firm all affect this outcome. an average of $4,219 in additional income to forgo their current employer-provided health benefits. Individuals prefer the large •WhyThirty-six emplo are Health yer health percent Careplans of Expenditures wage were and enrolled salary Growing workers in PPOs, ? earning compared less than with$onl 10,000 y 1 percent annuallyinwere 1986. covered Employ through ers are divided their employer's in their there has been a significant increase in the number of uninsured persons in the United States. However, even without an these people are more likely to have private insurance partly becausemany have income from two sources.Among poor were consistently employed. Among individuals working more By than 35 weeks during the year, with no unemployment, l°Various studiesindicate that when there is a choice between an HMO and a traditional indemnity plan, younger, healthier hidden costs of lower wages over direct payments like premium co-payments. responses plan initiatives to compared PPOhave effectiveness with employer 90 percent satand controlling of ins those urers earning costs. undertaken A.more Foster to than Higgins redu $50, ce 0health & 00 Cannually. o., care Inc. expenditures found Sixtythat percent ? 55 percent of the uninsure of emplo dyers were in increase, the size of this population continues to be significant. and Whynear-poor are We C families oncerned (with Abo incomes ut the Grow of uping to 124 Heapercent lth CareofSector the poverty ? level), both married (44 percent) and not 13.8 emplo percent yeesmwere aybe mo uninsured. re likely to Inopt contrast, forthe HMO, 19.2 percent leavingof a hi those gher-risk persons group working in the in35 dem weeks nity plan or more and the and rebreporting y causing in some dem- families with income under 200 percent of the poverty level. surveyed said they were unable to measure the effect Dallas of PPOs L. Salisbury on medical costs, while 24 percent said they reduced costs, Between 1947 and 1987, the U.S. health care sector outgrew the combined other sectors of the economy by an average of married individuals (47 percent) without children were uninsured more often than other familytypes. Families with nity premiums to increase. unemployment were uninsured. Among all persons aged 18-64 with some unemployment, those who reported being and insurers continue to implement various measures in an effort to manage health care costs. Cost contain- Not 17 only percent do Americans said there was value nothe effect, provision and 4of percent insurance, saidthe PPOs majority increased are satisfied medical with costs. the health care they receive. However, President 2.5 percent annually. Health care prices rose 1.6 percent faster annually than non-health care prices, and the quantity of Some uninsured individuals have limited access to basic health care services partly because they lack private health In many cases, when observers discuss a sector of the economy that is flourishing, it is considered to be a favorable children were less likely to be uninsured, partly because they are more likely to be eligible for publicly financed health unemployed because they could not find work were the most likely to be uninsured (44 percent). Least likely to be they • are initiatives Individuals not satisfied include between withcost the thesharing U.S. ageshealth of through 18 and care29 copayments, system are more as alikely whole. deductibles, toA be19 uninsured 91and EBRI premium /Gallup than those sharing; poll in found all alternative other that age while groups. delivery more Almost than systems half 10 health care delivered grew 0.9 percent faster than other quantities. More recently, from 1977 to 1987, the health care insurance and are ineligible for (or do not otherwise receive) publicly financed health care. Uninsured individuals may be situation. After all, growing businesses often create desirable by-products such as jobs, revenues (both of which generate Employee Benefit Research Institute programs.Low-income single-parent families are more likely than two parent families to receive public assistance.Nearly uninsured were those who reported they were unemployed because they were in school, taking care of their homes or of Americans million health (56 children--or maintenance percent) rate nearly organizations the 1 U.S. 6 percent health (HMOs) ofsystem all children--were and aspreferred fair or poor, provider not most covered of organizations those by who private stated (PPOs); health they utilization insuance have family and review physicians were either From the participant's perspective, the relative attractiveness of the various types of plans often depends on the value the sector outgrew other sectors of the economy by an annual average of 3.0 percent, with medical services prices outgrowing forced to seek medical care for preventable ailments that could have been treated less expensively if they had received tax revenues), capital investment, investment in research and development, and foreign exports. Health care delivery 60 percent of those in single-parent families were covered by Medicaid in 1989, compared with only 27 percent of those families, or retired. rate the quality expanded of care coverages they receive for services as excellent or settings or good believed (92 percent). to be more Incost addition, effective; among and respondents health promotion who had pro- been individual ineligible assigns or did to not freedom receive of publicly choice in financed the selection medical ofassistance providers. in Since 1989.Americans More than one-half have long(56.1 beenpercent) accustomed of uninsured to fee- prices in non-health industries by an average of 3.0 percent, and the quantity of medical services delivered averaging the access to preventive health services. The cost of inefficient, uncompensated care is borne by all payers in the health care industries supplied 16 percent of net new jobs between 1980 and 1990. Further, industries such as pharmaceuticals and in two-parent families. Therefore, even though members of two-parent families were more likely to be covered by private hospitalized during the last year (26 percent of all respondents), a large majority (82 percent) rate the care they received as for-service children medicine, management were living manprograms yinplace a family amay high headed be value voluntary by on a full-year, freedom 17orApril there of full-time choice. may 1991 beworker. For a financial this reason, incentive some for insurers participation. have found While that some plans same growth as quantities of other goods and services delivered. The relatively rapid growth of prices may be explained by delivery system. It is estimated that uninsured patients accounted for 11 percent of personal health care expenditures in medical equipment have higher than average levels of investment on research and development in addition to a positive health insurance (38 percent) than members of single-parent families (18 percent), they were also more likely to be Industry--The majority of uninsured workers reported their industry of primary employment was retail trade, services, or excellent or good. that preserve the ultimate right to choose while giving powerful incentives to use an identifiable group of providers are factors such as the growth in the price of medical labor and capital and the slower growth in medical productivity than in 1988, $32 billion, even though they had 37 percent fewer physician contacts and 69 percent fewer inpatient days.s The balance of trade. Given these facts, why are so many parties upset over the current boom of the health care sector? uninsured than single-parent families (38 percent compared to 26 percent). manufacturing (chart 3)--industries that employ a majority of the work force. Workers most likely to be uninsured were more • The successful uninsured in thedo market. generally These have plans access allow to the health emplo care--they yee to choose do not a fee readily -for-service have access delivery to mode financing. or anThe HMO result or is non-health sectors of the economy. Reasons for the relatively rapid growth in the quantity of health care services deliv- money spent annually on inappropriate care for uninsured patients may be more effectively spent by expanding access to either self-employed or working in agriculture, construction, retail sales, or services. Agricultural workers may be migra- Table3 When PPO significant option asked what within cost they ashifting single liked most plan to pay about atfor theuncompensate the point overall of service. quality d care In ofby these the those care plans, who theyparticipants do received pay forfrom health incur their care fewer physicians, services. out-of-pocket The respondents greatest expenses bcited urden ered between 1957 and 1977 (1.2 percent between 1957 and 1967 and 2.4 percent between 1967 and 1977) include the basic health care services. Concerns over the current level and growth of health spending may be driven in part by employers' perception that Children--Almost 10 million children---or nearly 16 percent of all children--were not covered by private health insur- tory and/or be paid low hourly wages. Construction industry workers may be employed on a contractual basis for a AnnualGrowthRates: factors when hits using that small are designated employers synonymous HMO thatwith provide or PPO higher health providers cost insurance. such than as when Community attention they choose and rating care feeand -for (12 - composite service percent) delivery. , group friendliness rating Alliedcould -Signal (11 help percent) and lower ,South- and costs development and utilization of new technologies and the spread of health insurance. Ongoing increases in health health care expenditures represent an increasingly large component of employee compensation (5.8 percent in 1989 ance particular and were project. either Because ineligible workers or didin not these receive industries publicly may financed not work medical consistently assistance for the in 1 same 989.employer, More thanthey 70 percent are lessof EmployerSpendingon TotalCompensationWages , andSalaries,andHealthInsurance,1960-1989 availability western for small Bell (10 are employers percent). notable, When among but cost asked companies shifting whatdue they that to liked uncompensated have least implemented about care their such would care, plans. no only single AT&T be solved factor plans by received to universal implement special access a emphasis, point to financing. -of- but services wages and the aging baby boom generation may cause the price and quantity of health care services, respectively, Employment Status compared with 1.5 percent in 1965), federal and state governments' perception that Medicare and Medicaid represent a these children were in families with incomesbelow 200 percent of the federal poverty level. Children were more likely to likely to have employer-sponsored health insurance. Workers in the retail sales and service industries, which employ service For managed small businesses care network , the "problem" that will have might thebe nation's that they largest would enrollment pay more fand or the will "re be form" unique than in that they the nowcompan pay foryheal 's th they to continue were factors to outgrow that generally those of reduce other cost goods including and services. waiting time (8 percent), insufficient time spent by physician with Year Health Insurance Wages and Salaries TotalCompensation growing proportion of public budgets (29.5 percent in 1989 compared with 1! percent in 1965), and individuals' percep- be uninsured iftheir family head was either self-employed(22 percent) or working in a firm with fewer than 25 employ- many part-time workers and experience rapid turnover, are often subject to waiting periods before becoming eligible for insurance. unions have agreed to help write the standards and select the bidders. While they are a relatively new phenomenon, patient In 1989, (6more percent) than , and 85 percent limited of availability the uninsured (4 percent). were working In addition or living to in giving a family highheaded ratings by toatheir worker personal (chart health 2). Thecare, 1961 9.7% 2.8% 3.0% tion that a greater proportion of their disposable income is going toward the purchase of health insurance and health care benefits. ees (30 percent). Nineteen percent of children in families whose head of household wasunemployed were uninsured. 1962 13.5 6.7 7.1 respondents point-of-service also expressed plans are gaining satisfaction in popularity. with their Interstudy health insurance found that benefits. enrollment in open-ended HMOs, which allow M As aythe CPS baby shows boom that generation workers not ages, covered the elderly directly population by their employers' will grow from plans 31were .7 million often people coveredinby 1990 their(1spouses' 3 percent plans of the or services (5.1 percent in 1989 compared with 4.2 percent in 1965). Indeed, health expenditures do represent a growing 1963 9.5 5.2 5.5 enrollees • U.S.to health opt for care care expenditures from nonnetwork exceeded providers $675 billion , rose and 11812 percent percent(from of GNP 476,in788 1990. enrollees Providin to g 1individuals ,041,214 enrollees) with benefit population) to 70.1 million people (23 percent of the population in 2060), and the demand for health care services will 1964 13.0 7.3 7.4 proportion of compensation, disposable income, and public budgets. Firm Size--Almost one-half of all uninsured workers were either self-employed or working in firms with fewer than 25 Chart 8 promises 1965in the future that are as comprehensive 13.5 as those today will 7.7result in continued rapid growth 7.8 of expenditures. These from July findings 1988suggest to Julythat 199the 0, compared satisfaction with that 7 percent insured growth Americans in "pure" feel for HMO their health enrollment care over may reduce the same their period. willingness to employees in 1989 (chart 4). More than 21 percent of self-employed persons were uninsured, compared with 15 percent 1966 Chart 3 25.4 10.1 Chart 4 10.8 accept reform proposals Percentage that of Men may and alterWomen or ration Aged the18 care --64they with Sel receive. ected Sources of Health Insurance Coverage The aging of the population affects costs. For example, Medicare expenditures accounted for 1.97 percent ofGN P in 1990 Employers_The employer share of total health expenditures has remained between 28 and 30 percent since 1980. 1967 14.9 7.1 7.3 of all workers. Almost 28 percent of workers in firms with fewer than 25 employees were uninsured, compared with only EBRIAnalysisof the March1990CPS Workers Aged 18-64 without Health Insurance, Workers without Health Insurance Aged 18-64, In addition and areto projected offering to plans reach with 3.01 cost percent management in 2000 features, and 6.8 percent some employers in 2060. Washington have begun to DC sponsor small emplo corporate yers programs are charged 1968 24.7 10.0 10.3 Table1 Nonetheless, health care expenditures are the fastest-rising component of employee compensation. Because employers' % about 8 percent by Industry of thoseofin Primary firms with Employment 1,000 or more employees. Small employers often by areFirm unable Sizeto obtain reasonably 1969 16.0 9.8 10.2 Athat 199may 0 EBRI help /Gallup to manage survey health explored care public costs (and attitudes possibly toward boost policy productivity) options for byhealth promoting care reform. wellness.These Such surveys programs indicate over $1,000 per month for family coverage for a 55 year-old compared to $370 per month for a 29 year-old. Cost growth EBRIAg Analysis eRelated of the Health MarchPremiums 1990 CPS for a Washington, DC Employer EBRI withAnalysis 28 Employees of the March 1987-1991 , 1990 CPS health care expenditures represent a growing cost of production, many argue that such spending puts them at a competi- 80.0 priced health insurance for their employees because insurers generally charge them higher premiums due to the greater 1970 18.7 6.4 6.9 ainclude preference smoking for employment cessation, weight based insurance control, fitness versus, government stress management, provision. hypertension, Fifty-four percent health of risk respondents appraisal, said and the back federal care. and underwriting practices have caused many small employers to drop insurance, and population aging combined with tive disadvantage and is hampering their individual competitiveness and U.S. competitiveness overall. These observers 1971 11.7 6.0 ..................... 6.7 risk posed by a small group. In 1989, although only 22 percent Total Premium of the nonelderly Cost (Employer population and Employee) lived in families whose head government While programs should to provide promote health wellness coverage are generally for all Americans. voluntary, several Twenty-seven companies---U-Haul percent continued International to support andgovernment- Baker agerating will cause more erosion in coverage among employees of small firms in the future. Age rating also has the effect 1 Age 972 The and Type views expressed in this statement 17.2 are solely those of the author 9.3 and should not be attributed 10.1 to the are apt to measure employer health care expenditures as a percentage of corporate profits or to divide such expenditures Industries Self-Employed of household worked for a firm with fewer than 25 employees, this group accounted for nearly 40 percent of the 70.0 i::::i{::iii::iiiiiiiiiii::i::!_ 1,000 or More 19 of 7 Coverage 3 March 25.11987 March1988 10. March 9 1989 March 1990 11.9 March 1991 provided Hughes, health Inc., among insurance themeven --have if it established meant higher programs taxes, •:':':':':':':':':':':':': but thatwould require .................................... be willing employees to pay who only smoke an additional or who are$337.10 significantly in taxes per of making the tax exemption for employer-provided health insurance relative to income most valuable for older, low- Employee Benefit Research Institute, its officers, trustees, sponsors, or other staff. The Employee Benefit Other _m ployed by uninsured. unit output thereby yielding the amount of health care in the price of a unit product (a car, for example). Health care 60.0 i::;::i::iiiiiiiiiii::iii::;::i:: 1974 12.1 9.0 9.7 income workers with health insurance. Single Coverage overweight or Research underweight Institute to pay is amore nonprofit, than nonpartisan, other employees public toward policy research the costorganization. of health insurance. year, on average. More than one-half of respondents (56 percent) said that employers should be required to provide health 1975 17.2 5.5 6.4 costs, however, are only one component of total compensation, the measurement that is generally used to determine Less than 29 $ 71.36 $ 89.90 $140.16 $148.44 $159.74 benefits at no cost to employees. More than four respondents in five (84 percent) said employers should be required to provide 1976 22.6 10.4 11.5 Income Aged 30-34 89.20 112.40 175.20 185.54 199.68 productivity and competitiveness. Table 2 illustrates that employer spending for total compensation as a proportion of 5o,o. iii 1977 19.5 10.5 11.2 • Concern over the current level and growth ovemment of health spending ma Employ_ y be driven in part by the fact that health care coverage • Conclusions ifemployees Aged 35-3 paid 9 part of the cost; these 107.04respondents13said 2.40 they would2be 10.2 willing 6 to pay22 an 2.64 average of $52 93 .50 9.60per month 40.0........ g::_i_i;:_i_i_i(-i::;:: ......................... corporate after-tax 1978 profits has actually decline 15.2 d since 1985 and that employer 12.6 spending on wages and13.0 salaries is a much Aged 40-44 130.82 164.82 500-999 268.96 _iii_ 272.12 292.86 (or $714 expenditures per year). represent an increasingly large component of employee compensation and public budgets. Health care 1979 17.2 iiiiiiiiiiiiiiiiiiiiii!i!iii 11{iiiiiiii!iii!iiiii .8 12.2 Aged 45-49 154.60 194.80 303.70 321.60 346.10 The uninsured are concentrated disproportionately in low-income families. In 1989, nearly 60 percent of the uninsured more significant determinant of total labor expenditures than is employer spending on health care. 1980 15.2 9.6 9.8 costs, however Aged 50-54 , are only one component 168.50 of total compensation. 209.78 Total 327.04compensation 346.34 as a proportion 372.70 of corporate The majority of Americans consider health care to be a right. Although most prefer care with no cost, they are willing to were in families with annual incomes under $20,000 (chart 5). While more than 37 percent of families with incomes of Manufacturing Employees _il 198 Ag 1 ed 55-59 168 18.9 .50 209.78 10.1327.04 346.34 10.3 372.70 • Access to Health Insurance _ after-tax profits has actually declined since 1985. Employers could explictly trade off health expenditure growth for 100-499 \ I __I°-_ ___::}_ share some costs explicitly and more costs on a hidden basis. Americans want "reform", but only reform that means more The less notion than $5that ,0Over 00 benefits were Age 60 uninsured, are only one onlyelement 9.5168.50 percent of a of total families compensation 209.78 with incomes package 327 above .04 that $20,000 an employee 346 were .34 uninsured. and employer 372.70 Families negotiate with 1982 14.7 5.0 5.5 a slight reduction in wages if employees were willing. Such a solution is not available for governments in controlling the 1983 11.0 5.7 6.0 caring-providers, more accessibility, no risk of forfeiture, and lower costs. Under 25 is not new. Outside of collectively bargained contracts, however, some employers claim that they do not (and could not) incomes below Family the Coverage federal poverty level were more likely to be covered by publicly financed health programs or be 1984 9.0 9.7 9.6 Almostcosts 180of million social persons programs. under age 65--representing 84 percent of that population--were covered by either Employees private or Lessthan 29 $177.16 na $324.66 $343.60 $ 369.82 make uninsured explicit 2 3o. O than trade-offs .... .o Olto o.be o.- covered between by benefits private and insurance. cash compensation. As _._._._.:_e_._ income....... increases -.... iiiiNNi_#._._._._<_:_ ,;_i_i_ the _ percentage ;i_i_i_i_i_!_i_i_!_{_{!_i_....._.._._._._._._._._._. of the population ;_i_i_i_i_``````````..._!_!_!_!_!_!_!_!_!_!_!_!_! without health 1985 Retail Trade 5.2 7.4 6.9 0.0 "_" _ Aged 30-34 212.68 $251.72 389.68 412.30 443.78 publicly financed health insurance in 1989. However, about 16 percent of the nonelderly population---or 34.4 million Business, labor, and government also view health care as a right. Each is searching for a reform that will provide greater 1986 9.3 EBRI 6.1 6.1 insurance andAged the 35-39 percentage covered by248.00 publicly financed 293. programs 68 decrease, 454.52while the percentage 481.04 covered 517.by 72 private Services Employees TotalPrivate DirectEmployer Indirect Employer TotalPublic Medicaid NoHealth people--received neither private health insurance nor publicly financed health coverage. Leaders representing business, • Some 1emplo 987 yers have made aggressive 9.6 efforts to control the growth7.4 of health expenditures by making 7.1 employees more 18.8 Ag Million ed 40-44 Uninsured Workers Aged 336 18-64 .58 na 616.84 25-99 652.82 702.62 access at a lower cost. Yet, because they must find the money, they are in a tough position. Demographics and technology Many economists, however, argue that such trade-offs are made in the long run--whether implicitly or explicitly--and health insurance increases. Because eligibility levels for Medicaid, the primary publicly financed health program for the Coverage Coverage Insurance Coverage 198 Aged 8 45-49 425. 10.0 16 na 8.0779.16 Employees 824.62 8.1 887.52 careful buyers of health care services through 2121 plan K Stree features t, NW,such Suitas e mandatory 600 contributions to monthly premiums, co- both play against those who want to spend less. The data in this testimony as well as other available data show that per that it is therefore employees--not employers--who bear the burden of increasing health care costs in the form of lower nonelderly, Note:Otherare industries discontinued includeagricul at certain ture,mining, income construction, levels (rather than being phased out), _ the percentage uninsured among Aged 50-54 478.32 na 876.56 927.70 998.48 1989 8.8 5.9 5.9 payments, and deductibles. However, research indicates that these initiatives have produced a temporary reduction transportation, Ag communications, ed 55-59 utilities,wholesale 499.56 trade, Washington, finance, nDC a 20037-1896945.52 968.94 1,042.84 capita health care costs rise dramatically with age. The average age of the population is increasing and there are growing non-health families with compensation. incomes below If that the poverty argument level is true, was slightly it is unlikely less than that that increasing among business families spending with incomes on health just above care costs this [] Source: EBRItabulationsof U.S. Departmentof Commerce,1990. insurance,and realestate. 18.8 Million Uninsured Workers Aged 18-64 Over Age 60 499.56 na 915.52 968.94 1,042.84 in health expenditure growth but have not Jim reduce Med n actualWome health n care costs. (202) 659-0670 numbers of people over age 65 and over age 85. Even if increased efficiency were able to reduce health care expenditures level. This situation occurs because families with incomes just above the poverty level are less likely to be eligible for per se is eroding global competitiveness. Rather, it is employees who are experiencing a decline in the income they 6 7 2 3 8 4 5