Articles

(April 2006) Health care costs affect the budgets of Pennsylvania’s citizens, employers, and government. And rapidly rising health care costs take away funds that could be used for other purposes such as personal expenditures, increased business productivity, additional government services or lower taxes. Rising costs also make it more difficult to tackle the problem of access and improve healthcare quality.

Simply put, Pennsylvanians in 2006 can’t escape the broad-based impact of health care costs. IssuesPA took a closer look at Pennsylvania’s health care costs and their impact on the quest for available, affordable health care.

What are the numbers?

National health care expenditures totaled $1.9 trillion or $6,280 per person in 2004, representing an increase of 7.9% from the previous year and 48% more than just 5 years earlier. Major components of the 5-year increase are prescription drugs (+80%), hospital care (+44.5%), physician and clinical services (+48.3%), and nursing home care (+36.7%). Overall inflation during this same period was 13.4%.

A February 2006 report issued by the Centers for Medicare and Medicaid Services predicted U.S. health care spending will increase an average 7.2% annually until 2015, when spending will reach $4 trillion and represent 20% of gross domestic product.

The result? Increasing pressure on government and private sector budgets. Pennsylvania state government spends over $18 billion in state, federal and other funds on health care-related programs. To learn more, read this IssuesPA Article.

What about the private employers?

Private employers in Pennsylvania fund health insurance coverage for more than two-thirds (68%) of the state’s non-elderly population, more than the U.S. average of 61%. In Pennsylvania, the average cost of employer-provided health care insurance in 2003 for a single person was $3,449, and $9,133 for a family. Both of these figures are slightly below the national average. See the IssuesPA Scorecard to compare.

Between 1998 and 2003, federal data show insurance premiums paid by private sector establishments nationally increased 60.1% for single coverage and 65.5% for family coverage, far outstripping the 12.9% inflation rate. Pennsylvania also experienced significant increases – 57.4% and 63.6%, respectively.

The rising costs appear to be having an impact on employer coverage levels. According to estimates published by The Kaiser Family Foundation, the number of adults covered under employer-sponsored health insurance declined nearly 416,000 in Pennsylvania between 2000 and 2004, the largest number of any state. All but 17 states recorded lower numbers insured by employers for a net reduction nationally of almost 2.8 million.

Pennsylvania’s reduction in employer-sponsored coverage was offset in part by increases in those covered by individual insurance and Medicaid. The number of uninsured increased more than 284,000. As a percentage of the total, Pennsylvania’s 6.7% reduction in the number of adults with health care coverage was higher than the national rate of 4.9%. See this IssuesPA Scorecard to compare.

How are employees affected?

Facing the challenges of a global economy, employers will continue to find it increasingly difficult to pay for health benefits for employees. This likely will result in decreased availability of employer-sponsored health care insurance and increased employee cost sharing. The employee share averaged 15% for single coverage and 22.5% for family coverage in Pennsylvania in 2003; both are slightly lower than the national averages of 17% and 25%.

Overall, these ominous trends in the cost of health care raise a variety of concerns. 

• Rising costs of health insurance means higher costs for employers. How much will employers pay? How much can they pay? 
• Since in most cases employees pay a share of health care premiums, rising cost also means employee contributions are rising as well. 
• Reduced private sector-sponsored health coverage by employers often results in larger Medicaid rolls – even more pressure on the state’s public system.

Bottom line? Addressing these and other future health care issues won’t be easy. But it will be necessary. Available, affordable health care is a factor in Pennsylvania’s overall economic competitiveness. And it impacts Pennsylvania’s overall quality of life.