A survey of public opinion
Over 51% of the adults in Wisconsin with health insurance have their primary health insurance provided by the public sector either through various subsidy programs or through public employers. Furthermore, those with publicly provided insurance tend to have more complete coverage and less expensive coverage than those with privately provided insurance. These are important facts to know because these conditions contribute to the high health care costs in Wisconsin.
This study reports on a unique, new survey, conducted by Harris Interactive, of a random sample of 1,000 adults in Wisconsin undertaken to learn the sources and characteristics of their health insurance. What was learned for the first time was that the concentration of publicly provided insurance creates several reasons why health costs are high- er in Wisconsin. These reasons include a heightened demand for health care services, a low incentive to curtail health care use, and easier access and lower costs to health care for those with publicly provided health insurance.
This groundbreaking survey sheds new light on the role of publicly provided health insurance in Wisconsin.
Some of the highlights appear below.
- Wisconsin (88.3%) has greater health insurance coverage than the nation (84.5%), on average.
- About 28% of Wisconsin adults receive health insurance from one or more of the federally subsidized health insurance programs, such as Medicare, Medicaid, BadgerCare, and CHAMPUS (VA).
- Another 11% of Wisconsin adults receive health insurance only from a public employer or a related union, as a public employee, former employee, or family member. None of the 11% receives any federally subsidized insurance or private insurance concurrently.
- The remaining 6% of those publicly insured receive insurance from a public employer but also from a private employer or through private purchase insurance programs.
- Altogether 45% of Wisconsin adults receives some kind of publicly provided health insurance. These adults constitute more than 51% of the adults with insurance.
- Almost half (49%) of Wisconsin adults with health insurance are covered by more than one health insurance program.
These percentages have several implications for health care costs in Wisconsin.
- The high percentage insured means that more health care services will be demanded, raising their price.
- The 28% of adults with federal subsidies means that more than one-quarter of the persons using health care services will yield their health care providers less than market rate reimbursement for services. The federal government pays less than $.80 for every $1 of medical expense billed under Medicaid and Medicare in Wisconsin. The large shortfall in payments to health care providers (well over $1 billion annually) is recaptured in part by higher charges to other users of the health care system.
- With just over 70% of the population not receiving these subsidies, the 70% not subsidized must share the burden of the unreimbursed costs. Therefore, the burden is greater for each and results in higher health care costs and higher health care insurance rates for all who must pay.
- Publicly provided insurance tends to be more generous in its coverage, and it contains fewer cost-sharing elements for users than the privately provided counterpart. To the degree to which this is true, it results in greater use of health care services and fewer incentives to live healthy lifestyles.
This last point on more generous coverage and lower cost was examined in detail. Respondents were asked numerous questions as to exactly how much they had to pay for insurance overall, how many ways they had to cost share to access health care services, and how expensive that cost-sharing was for them. To undertake this analysis, the population was divided into two groups, those who only had some form of privately provided insurance (49%) and those who had any form of publicly provided insurance (51%).
- In terms of what the individuals had to pay in annual premiums for their insurance, the differences were not great. For example, 71% of those with privately provided insurance and 71% of those with publicly pro- vided insurance reported paying $3,000 or less for health insurance premiums. However, among a smaller sub-group consisting of those with only public employer-provided insurance, 79% claimed to be paying
$3,000 or less. (The small difference between public and private has likely changed in the few months since the survey, as private employers have increasingly passed on more health insurance costs to employees.)
- What did differ was that fewer individuals with publicly provided coverage were subject to common methods designed to control utilization. These include out-of-pocket payments for co-pays and deductibles for drugs and doctor visits. Overall, those with publicly provided insurance tended to pay less. For example, 58% of those with any publicly provided insurance paid $500 or less out-of-pocket annually compared to just 41% of those with privately provided insurance. Furthermore, 81% of those with only public employer-provided insurance paid $1,000 or less annually compared to 75% of all with publicly provided insurance and 63% of those with just private insurance.
- Additional costs were charged through annual deductibles for prescriptions, cost-sharing payments for each prescription, co-payments for visits to doctors, and the like. Those with publicly provided insurance paid these fees less often, and when they did pay, the fees were lower. Visits to doctors, for example, were fully covered for 52% of those with publicly provided insurance and by only 24% of those with privately pro- vided insurance. Prescription costs were completely covered for 22% of those with publicly provided insurance but only 12% of those with privately provided insurance.
- Another aspect of coverage is ease of access to health care. Again, on average, 26% more respondents with privately provided than publicly provided insurance experienced any of five restrictions on access to health care. Thus, for example, 63% of those with private insurance versus 45% of those with public must use a doctor from a preset list.
The implications of these findings for health care costs are the following:
- Those with publicly provided insurance are less likely to modify their health-related behavior because they have fewer health care cost disincentives. Thus, those with publicly provided insurance are more likely to use health care services, since access is less costly and easier to arrange for them than it is for those with private insurance.
- Since those (51%) with publicly provided insurance are more likely to make demands on health care services, the costs of those services are likely to be driven up by the increased demand.
- This higher demand for health care services is further enlarged in Wisconsin because of the characteristics of the population here. It is both older and more obese than the rest of the U.S. These two conditions are strongly related to higher health care expenditures.
Respondents were asked to assess a commonly mentioned alternative means of providing health care, the Canadian approach. Under this plan, the government pays for all of the costs of health care out of taxes and negotiates directly with doctors and hospitals to set fees and the type of care they offer.
- This approach had appeal to 57% of those with privately provided insurance and 61% of those with publicly provided insurance.
- But when those who favored the plan were asked whether they would still support its use if they have to pay for the new program with their state taxes, many fewer favored its implementation: 41% of all adults with privately provided insurance and 44% with publicly provided insurance favored the Canadian plan.
Wisconsin health care cost increases are driven by four factors related to the high level of public provision of health insurance: 1) a substantial portion of the adult population with publicly provided insurance that provides limited incentives for policy holders to be wise consumers of health services or to live healthy lifestyles; 2) very low federal reimbursement rates to health care providers; 3) sizeable absolute underpayments from the federal government because of the over 28% of the adults with subsidized health care; and 4) a need to spread these underpayment costs among a reduced percentage of the adult population. This combination leads to increased health care costs in Wisconsin.
If Wisconsin is to begin to address these causes of higher health care costs, the state should make a concerted effort to gain a larger reimbursement from the federal government on Medicare and Medicaid services. Employers should be encouraged to choose health care insurance that includes proper incentives for individuals to live healthi- er lifestyles and use health care services more judiciously. Public employers should strive to bring publicly provided health insurance into better balance with that provided by private employers. And the state and its citizens should address the issue of obesity, an epidemic that is said will consume at least 20% of health care dollars for those per- sons 50 to 69 years of age by 2020 unless the extent of obesity is reduced (Rand 2004).