Healthcare 'crisis' grows for middle class

Rising jobless rate leads to more uninsured, prompting Congress and White House to seek ways to widen coverage.

More than 2 million Americans lost their health insurance when they lost their jobs during the past year.

That's more than at any time since 1992 and brings the total number of people without coverage to more than 41 million. That number exceeds the aggregate populations of 23 states plus the District of Columbia.

True, the number of uninsured tends to spike during economic hard times. But the problem has been exacerbated by healthcare costs, which are now rising at five times the rate of inflation. As a result, experts predict that even more employers – who provide most Americans with their insurance – will continue to cut back coverage, if not eliminate it altogether.

"This is the top health problem in the United States, and it's the issue of conscience in the American healthcare system," says Ron Pollack, the executive director of Families USA, a nonpartisan healthcare advocacy group in Washington.

But as the problem grows to what many perceive as crisis proportions in America's middle class – the vast majority of the uninsured are working people – so, too, does hope that after a more than a decade of failed proposals and fierce turf battles, Congress may find a workable compromise.

In their budget proposals, both the White House and the Senate have earmarked more than $90 billion over 10 years to expand health-insurance coverage. While there's no consensus on how to spend it, there is broad agreement, particularly among the major stakeholders in the healthcare system – from doctors to hospitals to health-insurance companies – that something must be done, and soon, to prevent an even greater healthcare crisis.

Employers ready for change

The business community is on board as well. As the number of uninsured grows, the problem feeds the already-spiraling costs that companies face in insuring workers.

"Employers see health coverage as vital to having a productive workforce, but it's becoming more and more difficult to provide," says Kate Sullivan, director of healthcare policy for the US Chamber of Commerce. "Many are seeing their health insurance premiums go up between 25 and 40 percent for the third and fourth years in a row."

To understand the complex relationship between the number of uninsured and overall healthcare costs, it helps to think of the American healthcare system as one of Rube Goldberg's complex machines – where one push of a button can set off a whole series of unexpected events. For instance, when a person loses health coverage, it has an indirect but very real impact on the ability of almost all businesses to provide coverage.

Studies have shown that the uninsured tend to delay care for what doctors would consider small problems until they reach crisis proportions. Then they go to the emergency room, which is the most expensive and inefficient place to get healthcare. Because the uninsured often can't afford to pay the cost of the care, it becomes what's called "bad debt." Hospitals simply have to absorb those costs, and they often do it by increasing what they charge for the services to people who do have insurance.

That's called "cost shifting" in the trade, and it, in turn, feeds the spiraling insurance costs, which make it more difficult for employers to provide health insurance – which ultimately increases the number of people who are uninsured.

"Basically, we're in a downward spiral, and we sort of have a perpetual-motion machine that's going in the wrong direction," says Henry Simmons, of the National Coalition on Health Care in Washington, an alliance of business and social organizations. "Costs are rising at the fastest rate in our history. We know that for every percentage increase, you probably add a half million people to the ranks of the uninsured."

In the past, however, efforts to find a solution have been thwarted by at least one of the key players in the healthcare industry. Each group – doctors, hospitals, insurance companies, and consumer advocates – came to the table with what they believed was the best solution, whether it was mandating that businesses provide insurance or expanding existing government programs, like Medicaid. But inevitably, the player who lost out in negotiations went onto the airwaves and spent millions of dollars to scuttle the plan with the public.

"Everyone's second choice was always the status quo," Mr. Pollack says. "But now there's a realization that won't work anymore."

Congress fired up again

A year and a half ago, the Robert Wood Johnson Foundation brought together some of the fiercest opponents in the healthcare debate in what came to be known as the "strange bedfellows" coalition. They all agreed that covering the uninsured was key to any successful healthcare reform. While there's still disagreement over solutions, their efforts – along with a recent public-service campaign called "Covering the Uninsured" – have reignited the debate in Congress.

Right now, it's centered around whether to provide tax credits to individuals to allow them to buy health insurance, or to expand existing programs like Medicaid to cover more low-income workers.

Advocates of tax credits, like the Heritage Foundation's Stuart Butler, say they will allow individuals – instead of employers – to make their own decisions about healthcare. They also say Medicaid – the nation's health policy for the poor – has too much negative stigma to attract middle-class people.

But critics of that approach argue that the tax credits being proposed – up to $3,000 for a family – are inadequate. The average cost of a policy for a family of four is about $7,000 a year.

They also believe tax credits to individuals would further erode the nation's employer-based insurance system. They'd prefer to give tax incentives to businesses to provide insurance, and expand Medicaid to cover workers that are still uninsured. For their model, they point to the Children's Health Insurance Program, known as CHIP. Created in 1997, it's based on the Medicaid model. But each state fashions the program to its specific needs and gives the program its own name. The federal government then gives states an enhanced matching grant. About 3.3 million children were covered by CHIP in 2000. But due to budget constraints, some states plan to cut back on their programs.

That's raised alarms with healthcare advocates, who are worried not only about the children who will lose coverage, but also about the impact that similar budget constraints in Washington could have on the larger effort to cover all the uninsured.

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