As the new year begins, a trio of health statistics cast a bright and unflattering light on a nation in crisis.
These figures, all unimaginable just a generation ago, have set the stage for a financial reckoning in 2023 and beyond.
Shocking statistic no. 1: The number of Americans on Medicaid
Without looking: What percentage of Americans receive some or all of their health insurance coverage from the government?
You might assume a low percentage. After all, publicly funded healthcare is commonly associated with Canada and countries in Europe, but you wouldn’t put the US in that group, right?
The shocking truth is that most of the US population will soon have some form of government sponsored health insurance. Right now, 158 million Americans (nearly half of the nation’s 330 million population) are covered by a combination of Medicare, Medicaid, and subsidized enrollment in state and federal exchanges. Experts predict that the percentage will increase.
Within that population is an even more shocking statistic: According to the Centers for Medicare & Medicaid Services (CMS), Medicaid enrollments exceeded 90 million in 2022.
This program, traditionally tied to a small population of impoverished Americans, will serve more than 100 million people in FY 2023 (that’s 1 in 3 insured Americans). Since 2020, Medicaid enrollments have increased by 30% thanks to expansion programs in several more states under the Affordable Care Act and funding for the Covid-19 public health emergency.
The implications for states are daunting. While the federal government may spend hundreds of billions more than it receives in taxes each year, states must balance their budgets each year. To achieve this amid rising Medicaid costs, state leaders will need to (a) raise taxes, (b) reduce spending on things like education, road maintenance, and law enforcement, or (c) limit access to medical services.
Medicaid recipients are already having a hard time finding primary care physicians. They also face long delays for specialist care. Both findings stem from low Medicaid reimbursement rates for doctors and hospitals.
As a result, millions of Americans have turned to emergency rooms as their go-to places for routine care, which has created two life-threatening problems:
1. Fewer people receive preventative screenings or ongoing help managing their chronic conditions, which lead to often avoidable problems like heart attacks, strokes and cancer.
2. As emergency rooms fill up with non-urgent patients, those with urgent and life-threatening problems have to wait longer for evaluation and treatment.
This combination – more emergency room patients with preventable problems and unnecessary emergency room use – will invariably drive up our nation’s medical bills.
As economic pressures are mounting for states, the federal government is also feeling the pinch.
The Medicare trust fund, which funds the cost of care for people over the age of 65, is set to become insolvent by 2028. Last month, Congress approved lower payments to doctors and hospitals to lower costs, which kicked off a frightening new possibility: Health care providers could start turning down Medicare patients in the future like Medicaid enrollees do today.
Shocking statistic no. 2: the annual percentage increase in deductibles for employees
Healthcare inflation has not only taken a huge chunk out of government funds, it’s also hitting the wallets of people with private insurance.
Since 2000, medical expenses have increased by 4.85% each year, significantly outpacing the annual increase in GDP of 2.85%.
With health care premiums rising at a faster rate than revenues, companies have offset the difference by shifting the financial burden to employees in the form of high-deductible health plans.
In 2022, despite below-average healthcare inflation, US employees paid a shocking 10.6% more in out-of-pocket healthcare expenses than a year earlier.
Medical bills are already the number one cause of bankruptcy in the United States. If a recession were to occur, as predicted by many economists, millions of other workers and families will suffer economic hardship.
Shocking statistic no. 3: The percentage of seniors who choose Medicare Advantage
“Traditional” healthcare, enacted by Congress in 1965, continues to use a fee-based reimbursement model, which pays doctors and hospitals based on the quantity (rather than the quality) of the medical services they provide.
In 1997, Congress created an alternative program called Medicare Advantage (MA). Unlike traditional Medicare, this option is “happened.” This means that the federal government pays health care providers an upfront annual fee based on the age and health status of the enrollees.
Proponents of Alzheimer’s disease say that capitation incentivizes doctors to keep patients healthy without over-treating and over-testing them.
However, there are some downsides. Although older adults enrolled in Alzheimer’s enjoy more predictable annual costs and added benefits such as eyewear coverage, they have fewer choices when selecting doctors and hospitals.
Despite this limitation, the program continues to grow in popularity and was chosen by 48% of all Medicare enrollees in 2022. The Kaiser Family Foundation projects that MA will soon be the dominant choice of Medicare members.
This fact would shock the politicians who passed the original Medicare legislation as well as those who introduced AM three decades later. They could never have guessed that most Americans would be willing to give up the choice, even for the added benefits and reduced financial risk.
Again, the implications are profound.
In recent years, companies like Amazon, CVS, and Walmart have invested billions in acquiring pharmacy, medical group, and insurance capabilities in hopes of disrupting traditional healthcare. All of these reprocessing giants are testing capitate coverage models as a way to reduce costs and improve care.
As Americans become more receptive to capitalization and the limits on choice, the door is being opened for these companies to step in and dominate US healthcare in the future.
Connect the dots
Healthcare inflation has outpaced GDP growth for half a century. As a result, American employers, elected officials and families are finding that the cost of care is progressively out of reach.
These three statistics demonstrate how precarious our healthcare system has become. And they indicate that something will have to give, soon.