Cost

HEALTH REFORM: A Reporter's Guide to Covering Health Issues

Paul Testa — Tue, 17 Feb 2009 20:43:00 -0500

The Alliance for Health Reform has released the first chapter in the new edition of Covering Health Issues—an online guide to the major topics in health policy. From national health reform to local health disparities, each chapter provides readers with the basic facts, background on the issue, and overview of the likely policy debates.

The first chapter, written by our colleague Joanne Kenen, tackles the issue of health reform in its entirety. Kenen lays out likely policy debates, noting that "this time around, politicians and policymakers are talking about the intertwined issues of coverage, cost and quality." She provides an overview of the ongoing debates in each, while also addressing related reform issues such as public health and health information technology.

Designed with reporters specifically in mind (although it's useful for other people working in health policy or just wanting to learn more), each chapter also features helpful tips and story ideas for covering health issues. Kenen, formerly an award-winning reporter for Reuters, offers up her own thoughts on some of the common mistakes in health reporting, such as equating more health care with better health care.

The Alliance for Health Reform will post new chapters shortly, and will also add an updated list of sources and resources —-some familiar voices, and some new ones.

HEALTH POLITICS: Skip the Flowers and Chocolate, Show Economy You Care With Health Reform

Paul Testa — Fri, 13 Feb 2009 18:35:00 -0500

Congress is set to pass a $787 billion economic stimulus package—with more than a $130 billion in health-related funding. The House is expected to vote this afternoon, with the Senate scheduled to follow suit this evening.

Congressional leaders worked late into the night Thursday, to reconcile he House and Senate versions of HR 1. The conference report detailing the compromises in the final legislation is available from the House Committee on Rules. Just how late were lawmakers up hammering out the details? The 496-page pdf is filled with handwritten notes and last-minute edits.

Here are the press releases from Appropriations, Energy and Commerce, Ways and Means and Senate Finance detailing their committee provisions in the final bill.

Below is a brief highlight of legislation's health related spending:

$87 billion in additional federal Medicaid funds for states, including an across the board increase in FMAP of 6.2 percent, with further reductions in state share based on unemployment rates.
$24.7 billion for federal subsidies to COBRA covering 65 percent of the cost of health insurance premiums for a maximum of nine months
$19 billion for health IT, with $17 billion for investments and incentives through Medicare and Medicaid
$10 billion in funding for NIH,
$1.1 billion for comparative effectiveness research
$1 billion for prevention and wellness programs

For Congressional leaders looking to tell the economy they care this Valentine's Day, nothing says I love you like health reform. While no bill's perfect, the health spending provided in this legislation will not only help stimulate the economy but also lay the foundation for broader comprehensive health reform. Considering the price of roses these days, we'd say it's a bargain. But health reform isn't just for special occasions. So we hope Congress and the administration will continue to show the economy and the American people, just how much they care, by addressing broader health reform efforts early and often in the coming weeks and months.

QUALITY: A State of the Health Care Union

Paul Testa — Thu, 12 Feb 2009 16:21:00 -0500

In less than two weeks, on February 24, President Obama will address the Congress in what amounts to his first State of the Union. Health care, The Atlantic decided, couldn't wait that long.

Hosting a State of the Union for Health Care on Wednesday, the magazine brought together experts from across the health care spectrum to lay out where we are and where we need to go in the coming year.

In terms of where we are, much should sound familiar to our readers. Health care costs too much. It covers too few, and the care it does provide is too often mediocre.

As David Walker, President & CEO, Peterson Foundation, told the audience, health care is our nation's single largest fiscal challenge, with the potential to bankrupt our government and cripple our competitiveness. The fact that some 46 million are left without health insurance, Walker said, was shinola.

In terms of quality, Mark Chassin, M.D., President, The Joint Commission, noted that each day there are about six wrong-site surgeries in the U.S. "Twenty five years ago, health care was cheap, safe and totally ineffective," Chassin said. "Today, health care is effective, expensive and totally unsafe." It's not surprising then, as Mary Woolley of Research! America told the audience, that more than 70 percent of Americans no longer believe we have the best health care system in the world.

As for fixing that system, Senator Bob Bennettt (R-UT)—in a welcome reminder that there are some who still want to solve the health care crisis on a bipartisan basis—laid things out clearly describing what he called the "big Aha moment" in health reform. "If you have health reform that focuses on quality health care for everyone you save bundles of money," he said. "The secret to cost control in health care is quality. The best health care is the cheapest."

So how do we get to a high-quality, high-value health care system? The event's discussion focused around the concepts: transparency, public reporting, and realigning incentives to drive better outcomes.

As we've said before, you can't manage what you don't measure. Much has been made about the need for more public reporting in health care. The real consumers of this information about outcomes and quality are not patients but providers, argued University of Virginia's Elizabeth Teisberg, Ph.D. As Toby Cosgrove, CEO of the Cleveland Clinic said, "There's no group that's more competitive than doctors. These are people used to being at the head of their class... You put the numbers up, the quality will improve."

In constructing these measures, Teisberg asserted that it was important to distinguish between process measures (did a patient receive this recommended treatment or test) and outcome measures (not just mortality, but readmission rates, length of stay, etc.).

Furthermore, Chassin argued that more attention and effort had to be paid to getting what we know works adopted as a standard of practice. It takes close to 17 years for the introduction of medical innovations to achieve general acceptance in our health care system. Publicly reporting process and outcome measurements can help speed up that process. It can serve as the foundation for the kind of comparative effectiveness research our colleague Joanne Kenen talks about in a post early today. It can help realign incentives so that we're paying for better outcomes and higher value care. And it can happen soon.

Representative Frank Pallone, Jr. (D-NJ) spoke at lunch about trying to move comprehensive health reform legislation this year. Congress, Pallone said, had already laid a strong foundation with SCHIP and the Stimulus bill. He said that leaders in Congress and the administration were committed to moving forward as quickly as possible, and that his committee planned to begin holding health reform hearings after the President's Day break. We hope we here a similar message two weeks from now in the president's address to Congress.

HEALTH REFORM: Prospects Remain High for 2009

Len Nichols — Wed, 11 Feb 2009 13:12:00 -0500

This post appears on the National Journal's Health Care Experts Blog where you can also see what other health policy analysts have to say on Health Information Technology.

The prospects for health reform in 2009 are still high, despite Senator Daschle’s withdrawal and the worsening economy. In fact, the economic crisis has made the case for reform even more compelling. Indeed, it is useful to remember that the health reform debate is far larger than any one man or woman and the underlying reasons for reform are unchanged.

Our health system is on a trajectory that cannot be sustained. The costs of inaction are high and they will only rise over time. Families, employers, and governments are all threatened by rising health care costs. These trends will not change on their own. In fact, they will worsen. This issue is not going away and neither are the "strange bedfellow" coalitions of business, labor and consumer groups that helped make health care a decisive issue in the 2008 campaign.
Our struggling economy has revealed and worsened the flaws in our health system and the call for reform will grow more urgent as a result. More and more families are losing insurance along with their jobs and are finding themselves unable to afford essential health care services. Countless interviews and media reports have documented jobless families who view affording health care as one of their most immediate economic concerns. The economic crisis only further demonstrates the need for reform and will only heighten the public's awareness of our system's gaps. It also raises the ante for Congress. While partisan posturing will not end tomorrow, most members will not be able to do nothing and declare victory to the people this time. Doing nothing on health care will be seen as a failure, much as failure to pass a stimulus package will be seen as irresponsible.
Health reform remains a priority for the Obama Administration and for Congress. David Axelrod captured this best when reminding reporters last week that "this issue has great power of its own." President Obama has stated consistently that making insurance affordable for all Americans is a primary goal of his administration. This goal is shared by key Congressional leaders, including Senate Finance Chair Max Baucus, HELP Chair Ted Kennedy, Energy and Commerce Chair Henry Waxman, and Ways and Means Health Subcommittee Chair Pete Stark. Now that SCHIP is signed with the economic stimulus package soon to follow, the full attention of these key leaders will shift to comprehensive health reform.
The American people, throughout the 2008 campaign and beyond, have called for a better, more affordable health system. The people who sent Barack Obama to the White House will not change their views on our health system because of Tom Daschle's withdrawal. They elected Obama to do a job, and what particular individual holds what particular job matters little in the grand scheme of the overwhelming desire for "real change."

As many of you know, I was a senior adviser at the Office of Management and Budget (OMB) during the Clinton-era reform efforts. Throughout the past week, I was compelled to recall what we were all doing in February 1993. At this moment (and many other moments) 16 years ago, we were going through an Ira Magaziner "toll gate" exercise with 500 of our closest friends. In large working groups, we were trying to write down a detailed blueprint of a new health care system that did not exist in nature.

Look where we are now. This time, the chairs of Finance and HELP have pledged to work together to build upon our existing system, while making it work better for all. We also have a president who understands that the lessons of 1993-4 require (among other things) an unshakable commitment to bipartisan conversation. (And yes, health reform must and can still be bipartisan).

Further, many more stakeholders, like our own group Health CEOs for Health Reform, and countless other employers and labor leaders are willing to say, "The status quo is unsustainable and we CAN work collectively to align interests and reform our system to serve everyone."

We should not lose sight of how much further along the health reform debate is today compared to the winter of 1993. Congressional leaders have emerged; bipartisan conversations have been initiated; and, industry leaders have shown some signs that they are willing to engage, rather than obstruct. The moral and economic motivations for this issue are too strong, the costs of failure too high, and the progress towards our goal too great for our optimism to wane. Now remains the time to act.

VOICES OF REFORM: Collaboration Key to Affordable, Safe Health Care for All

Health Policy — Tue, 10 Feb 2009 14:00:00 -0500

Gary S. Kaplan, MD is the Chairman and CEO of the Virginia Mason Medical Center in Seattle, Washington. In recent years, Dr. Kaplan has worked with local employers to control health care costs, while improving value. Dr. Kaplan is a founding member of Health CEOs for Health Reform and a leader in payment reform policy. Today, Dr. Kaplan shares Virginia Mason's story and why he believes every American can have access to high-value care at lower prices.

Collaboration Key to Affordable, Safe Health Care for All

By Gary S. Kaplan, MD

The numbers are staggering. Nearly half the $2.6 trillion in the U.S. health-care system is waste. Take a moment to let that sink in. More than a trillion dollars—that's 12 zeroes behind the 1—adds no value for patients and sometimes even causes harm.

At Virginia Mason Medical Center, we don't claim to have all the answers to this dilemma. But we have seen what's possible and are anxious to share our experience in improving care and reducing cost. It isn't going to be easy, but the result we think is achievable makes it all worthwhile: quality, affordable health care for all Americans.

Virginia Mason's focus on quality, access and affordability of health care began in earnest more than seven years ago when our board and executive team began to realize how much of all health-care expenditures did not add value for patients. A big part of the problem, our leadership determined, was that health-care processes were not, in reality, designed around patients receiving care but rather built for physicians, nurses and the care-delivery team.

With this shift in thinking, VM leaders traveled to Japan to study the legendary Toyota Production System. We returned committed to creating waste-free, patient-centered care. Since then, we have successfully adapted Toyota's methods to patient care. Along the way, we have become an international leader in creating systems that enable health-care providers to achieve previously unattainable levels of safety, effectiveness and efficiency.

Employers' Challenge Marks Turning Point

An important point in our journey came in 2004 when employers issued VM a straightforward challenge to reduce the cost of health care. We responded by inviting several employers and their health plan, Aetna, to work with us to redesign health-care delivery systems—based on methods we learned from Toyota—and restructure dysfunctional reimbursement methods. This marked the beginning of our marketplace collaboratives, which have turned out to be an invaluable tool during the past five years.

The hallmark of marketplace collaboratives is working with groups of stakeholders to deconstruct—then reconstruct—the delivery of health care, again using processes gleaned from Toyota's methods and content derived from evidence-based medicine. Cost-accounting methods also are used to compare reimbursement with the true cost to deliver care.

Bringing employers, providers and health plans together in a transparent, innovative environment of mutual accountability isn't easy at first—but it is well worth the effort. We are able to tackle medical conditions of high cost to employers with a sharp focus on reducing variation in quality and access that drives much of medicine's expense. Costs to purchasers begin to decrease within months after each collaborative's first meeting, while quality and patient satisfaction improve significantly.

Our first marketplace collaboratives centered on back pain and migraine. They introduced a number of breakthrough innovations to ensure reliability in quality and cost, provide real-time performance information for employers, and align reimbursement and value. Among the innovations were:

Mistake-proofing to ensure imaging for back pain and migraine is value-added
Real-time measurement of patient satisfaction and appointment access
A method for measuring absenteeism and presenteeism
A gain-sharing model based on better outcomes and reduced cost for back pain
Introduction of product specifications as performance standards for providers

Encouraged by these initial successes, we formalized the marketplace-collaborative model with the launching of our Center for Health Care Solutions at Virginia Mason in 2007.

Paying for Value

Designing a product that facilitates payment for value is one of the important goals of any collaborative. Typically, doctors are paid for the quantity of care they provide, not the quality of care they deliver. They are paid well for tests and procedures regardless of value. When doctors substitute low-margin, high-value care for high-margin, low-value care, they incur an immediate financial penalty. Ironically, doctors often receive much less reimbursement or no payment at all when they provide simple, value-added care.

However, direct cost of care represents a fraction of the burden of overall medical expenses. Our marketplace collaboratives seek to reduce the indirect costs of health care that do not show up on a medical bill. For many conditions, the cost of employees missing work due to illness or showing up for work when they shouldn't is much greater than the direct cost of care. For employees who are ill, delayed access to care is also a driver of indirect cost.

Focusing only on direct care ignores what often is the greatest opportunity to lower health-care costs for employers. Our model is geared toward patients' rapid return to best possible function, and includes paying attention to both direct and indirect costs.

As a result, cost to purchasers has decreased dramatically, while outcomes and patient satisfaction have improved significantly. Reducing the cost of providing health care and partnering with employers and health plans in this effort can mean better financial performance for doctors, even as unnecessary care is eliminated.

Based on our experience, we believe easy access to a system of reliable, evidence-based care produces much better outcomes at a fraction of the cost of conventional high-variation care. We are beginning to experiment with payment systems that align reimbursement with value and believe this is possible on a much larger scale.

In our view, applying reliable systems to health-care delivery and aligning health-care financing with value would permit all Americans to benefit from high-quality care at an affordable price. It starts with changing our mindset and committing to a shared agenda that requires reform in both care delivery and payment systems.

It won't be easy, but to quote Robert F. Kennedy, "All of us might wish at times that we lived in a more tranquil world, but we don't. And if our times are difficult and perplexing, so are they challenging and filled with opportunity."

Gary S. Kaplan, MD, is Chairman and CEO of Virginia Mason Health System in Seattle.

IN THE STATES: Yearly Check-up for State Reform Efforts

Meredith Hughes — Fri, 06 Feb 2009 15:35:00 -0500

It's been a tough year but many states have shown determination to make progress on health reform, even amid their economic challenges. State Coverage Initiatives, created by a partnership between the Robert Wood Johnson Foundation and AcademyHealth, recently released its "State of the States" 2009 report. Here's a brief overview of the findings:

Coverage Initiatives. Massachusetts is easily the most well-known. The only State to have implemented an individual mandate, it now reports that 97.4 percent of its residents are insured. Vermont has also made significant progress. Between 2005 and 2008, Vermont's uninsured rate dropped from 9.8 to 7.6 percent, and the goal is near-universal coverage by 2010. Even before yesterday's reauthorization and expansion of SCHIP, 10 States, particularly Iowa and New Jersey, were able to push forward on expanding children's enrollment in health care programs in 2008.

Cost Control. Rising unemployment and increasing Medicaid enrollment are big issues for States, as they add to the strain on their already overburdened budgets. States, such as Pennsylvania, Ohio, West Virginia, Maryland, and North Carolina, have taken steps toward aiding small businesses who are struggling to afford health care coverage to their employees, through subsidies, reinsurance programs, benefit plans, and tax cuts or credits. Minnesota enacted broad legislation that emphasized payment reform, price and quality transparency, chronic care management, administrative efficiency, and public health.

Quality Improvement. The report found that States are increasingly likely to consider both cost and quality along with access in their health reform initiatives. Many States, most notably Vermont and Massachusetts, have included quality as a significant part of their agenda in health care reform, believing that a focus on quality of care will also lead to efficiency and cost reduction. Iowa established the Iowa Electronic Health Information Commission to develop a statewide plan to expand the use of electronic health records, which can help control costs and enhance quality. The trend toward linking cost, coverage and quality is particularly heartening to us at New America's health policy program as it's a big theme of our work.

Arkansas, Connecticut, Ohio, Oregon, and Utah were among the States that worked during 2008 to build consensus for future action. State governments, however, are limited in the tools they have to address the many complexities and challenges of health care reform. But innovations at the State level should inspire leadership on a national level.

COST: Cancer Costs Can Be A Killer Too...

Joanne Kenen — Thu, 05 Feb 2009 20:38:00 -0500

Michael Courtney was 41 years old when he was diagnosed with a rare form of lymphoma. It started on his tongue, but spread quickly. He has had radiation and chemotherapy. Treatment will continue indefinitely. So will his bills.

An auto mechanic, Courtney was hesitant about changing jobs because he didn't want to lose his health insurance. But a new employer promised immediate benefits so he took the job. He was even able to stay with the same insurance company that he had at his old job. But a month into the new job, he found that the new policy wouldn't cover his cancer for three months. His disease was a pre-existing condition. Already strapped with medical bills, he postponed treatment.

Courtney's story is one of 20 real-life experiences of patients that gives the human dimension to a new report by the American Cancer Society and the Kaiser Family Foundation released Thursday. Based on calls to the Cancer Society's insurance help line, the study called "Spending to Survive" concluded that after a cancer diagnosis, the financial implications may not be the first concern "but for many, it soon becomes one." Even people with health insurance face enormous financial obstacles to care.

"This should set off alarm bells," said Kaiser president Drew Altman. People tend to think their insurance covers them when they become seriously ill. That is not always the case.

Cancer patients too often find out that their insurance doesn't protect them when they need care the most," said John Seffrin, CEO of the Cancer Society. "High out-of-pocket costs coupled with the high cost of insurance premiums can force cancer patients to incur huge debt, and to delay or forgo life-saving treatments."

Here are some of the common problems cancer patients face:

High cost-sharing. Deductibles and co-pays can add up fast, and it doesn't take much to send a struggling family into bankruptcy.
With treatments costing tens of thousands of dollars, cancer patients can breeze through insurers' annual or lifetime caps on benefits.
People who become too sick to work may lose their employer-sponsored coverage, and COBRA is expensive.
Individual policies generally have less comprehensive benefits than job-linked plans—if the patient can even get coverage in the individual market. Both patients and long-time survivors often find it impossible to get coverage.
State high-risk pools are not open to all cancer patients. Some have waiting lists to get in, waiting periods for certain treatments, and very high costs. Waiting can mean the difference between life and death for some cancers.

Of course for the uninsured, it's even worse. There's long been data that uninsured people with cancer fare worse than the insured. But the discrepancies can be truly shocking. Seffrin said that an insured person diagnosed with stage two colon cancer has a better prognosis than an uninsured person with stage one. Stage one is the earliest and most treatable stage which, he said, "one could argue no one should die of."

So as we as a nation get to work at fixing our health care system, we have to remember the underinsured, as well as the uninsured. We need to address the cost of care and develop ways of learning more about what works and what doesn't work for cancer patients. And we need to remember, as Georgetown University health policy expert and 13-year cancer survivor Karen Pollitz said at the panel discussion at Kaiser, that "pretty good" insurance isn't good enough if it leaves people broke. "We need to look at health insurance first through the lens of people who get really sick," she said, recalling how stressed she was during her treatment even though she had excellent coverage. People need insurance that "won't leave them in a lurch, that won't leave them bankrupt, that won't leave them stressed out and crying on their kitchen floor." Or as Seffrin put it, "We need a rational health care system that gives people what they need, when they need it."

HEALTH REFORM: A Presidential Call to Action

Paul Testa — Thu, 05 Feb 2009 17:32:00 -0500

Yesterday, President Barack Obama made a down payment on health reform signing the SCHIP law that extends and expands coverage for low-income children. Today, he makes a pitch for the next installment.

In a call to action in an op-ed in today's Washington Post, Obama outlines how the proposed economic recovery package is a not just a burst of short-term spending but a "strategy for America's long-term growth." Health care figures prominently. He writes:

In recent days, there have been misguided criticisms of this plan that echo the failed theories that helped lead us into this crisis—the notion that tax cuts alone will solve all our problems; that we can meet our enormous tests with half-steps and piecemeal measures; that we can ignore fundamental challenges such as energy independence and the high cost of health care and still expect our economy and our country to thrive. [...]

Every day, our economy gets sicker—and the time for a remedy that puts Americans back to work, jump-starts our economy and invests in lasting growth is now.

Now is the time to protect health insurance for the more than 8 million Americans at risk of losing their coverage and to computerize the health-care records of every American within five years, saving billions of dollars and countless lives in the process.

Fix the economy or fix health care? President Obama's op-ed shows he rejects the false choices of such a dichotomy. The problems of health care and the economy are closely related. So are their solutions. We cannot put off health reform until we "fix" the economy, because we cannot fix the economy without reforming health care.

Yesterday's reauthorization of SCHIP is an important first step. Dedicating part of the stimulus package to health care can not only spur job-creation and economic activity in the short term, it can lay the foundation for health reform. Incorporating these intitial investments into broader reform is necessary for realizing their long-term potential to lower unsustainable costs, improve care and save lives.

The President writes: "What Americans expect from Washington is action that matches the urgency they feel in their daily lives..." With medical costs contributing to half of all bankruptcies and many home foreclosures, millions of Americans feel that sense of urgency manifested in health care. As the economy worsens, the number of concerned Americans grows. They've made the call for health reform loud and clear—it started with the election and it continues today. It's time to answer.

HEALTH POLITICS: Daschle Out, But Health Reform Still In

Len Nichols — Wed, 04 Feb 2009 21:14:00 -0500

The progress towards national health reform hit a bump in the road when Senator Daschle felt compelled to withdraw as nominee for Secretary of Health and Human Services. Still, it is useful to remember that the health reform debate is far larger than any one man or woman and the underlying reasons for reform are unchanged and compelling.

Our health system is on a trajectory that cannot be sustained. The costs of inaction are high and they will only rise over time. Families, employers, and governments are all threatened by rising health care costs. These trends will not change on their own. In fact, they will worsen. This issue is not going away and neither are the "strange bedfellow" coalitions of business, labor and consumer groups that helped make health care a decisive issue in the 2008 campaign.

Our struggling economy has revealed and worsened the flaws in our health system and the call for reform will grow more urgent as a result. More and more families are losing insurance along with their jobs and are finding themselves unable to afford essential health care services. Countless interviews and media reports have documented jobless families who view affording health care as one of their most immediate economic concerns. The economic crisis only further demonstrates the need for reform and will only heighten the public's awareness of our system's gaps.

Health reform remains a priority for the Obama Administration and for Congress. David Axelrod captured this best when reminding reporters that "this issue has great power of its own." President Obama has stated consistently that making insurance affordable for all Americans is a primary goal of his administration. This goal is shared by key Congressional leaders, including Senate Finance Chair Max Baucus, HELP Chair Ted Kennedy, Energy and Commerce Chair Henry Waxman, and Ways and Means Health Subcommittee Chair Pete Stark. Now that SCHIP is being signed with the economic stimulus package soon to follow, the full attention of these key leaders will shift to comprehensive health reform.

The American people, throughout the 2008 campaign and beyond, have called for a better, more affordable health system. The people who sent Barack Obama to the White House will not change their views on our health system because of Tom Daschle's withdrawal. They elected Obama to do a job, and what particular individual holds what particular job matters little in the grand scheme of the overwhelming desire for "real change."

As many of you know, I was a senior adviser at the Office of Management and Budget (OMB) during the Clinton-era reform efforts. For some perspective on the Daschle road bump, recall what we were all doing on February 4, 1993. At this moment 16 years ago, we were going through an Ira Magaziner "toll gate" exercise with 500 of our closest friends. In large working groups, we were trying to write down a detailed blueprint of a new health care system that did not exist in nature.

Thanks to leaders like Senators Ron Wyden (D-OR) and Bob Bennett (R-UT), and Representatives Deborah Wasserman-Schulz (D-FL) and Jo Ann Emerson (R-MO), we have two years of bipartisan commitment to comprehensive reform to build upon. In addition many more stakeholders, like our own group Health CEOs for Health Reform, and countless other employers and labor leaders are willing to say, "The status quo is unsustainable and we CAN work collectively to align interests and reform our system to serve everyone."

So while we will miss former Senator Daschle, we should not lose sight of how much further along the health reform debate is today compared to the winter of 1993. Congressional leaders have emerged; bipartisan conversations have been initiated; and, industry leaders have shown some signs that they are willing to engage, rather than obstruct. The moral and economic motivations for this issue are too strong, the costs of failure too high, and the progress towards our goal too great for our optimism to wane. Now remains the time to act.

COST: Small Businesses, Big Health Care Problems

Meredith Hughes — Tue, 03 Feb 2009 18:33:00 -0500

For small businesses the economic hits just keep coming, and as the New York Times reminds us, the hardest hits are often from health care.

The Times' Kevin Sack profiles several small business owners faced with a difficult choice: cut health care benefits or close their doors. Amberly Allen, who runs her own direct-mail firm, spends 17 percent of her firm's payroll on employee health benefits. Thomas L. Fritts, who owns a sporting goods store in Illinois, saw his company's health care costs rise 30 percent last year while his business's sales plummeted 60 percent.

Small business owners are shifting a greater share of health care costs onto their employees. In the past two years, for businesses with fewer than 200 workers, the percentage of employees enrolled in a plan with an annual deductible of $1,000 or more jumped from 16 percent in 2006 to 35 percent in 2008. See the chart below from the 2008 Kaiser HRET survey:

Previously, we've looked at the Business Case for Health Reform in conjunction with the Committee for Economic Development and Better Health Care Together. According to Lois Quam of the consulting firm Piper Jaffray, problems with health care cost in the U.S. hurt small businesses the most, to the point that "health care has become an barrier to entrepreneurship and job creation." Removing that barrier through comprehensive health reform makes sense for small businesses and our economy as whole. Tomorrow the House Small Business Committee will hear testimony on "Health Care Reform in a Struggling Economy: What is on the Horizon for Small Business."