February 13, 2024 | Source: Capital & Main, by Mark Kreidler
For most California residents, and the vast majority of the state’s lower income workers, the cost of health insurance has been running away from them for years. That’s hardly news to anyone who has actually used their health policy in the recent past.
But the health care squeeze is largely incremental — an increase in the cost of a doctor visit here, a hike in an X-ray price there. Though those costs almost never go down, they rise in such a gradual, consistent way that many people aren’t aware of just how dramatically they’ve escalated.
A new report from the UC Berkeley Labor Center puts those costs in context, and the result is breathtaking. In short, Californians have been absolutely hammered by insurers and providers over the past 20 years. As a result, many of the state’s residents either don’t use their health coverage even though they need it, or they go into debt trying to pay for the insurance and the medical costs their plans don’t cover.
“I think we know that health care is unaffordable, but to see how much that problem has gotten worse in 20 years is really something,” said Miranda Dietz, a policy research specialist at the center and co-author of the report. “The costs are taking up more and more of a family’s budget.”
The pinch hurts everywhere, but it’s most keenly felt among the state’s lower income workers, more than half of whom said they were carrying medical debt last year. In a 2023 survey, meanwhile, the California Health Care Foundation reported that 52% of residents said they’d skipped or delayed care sometime in the previous 12 months because of the cost — regardless of their income bracket.
It’s the 20-year trend that makes clear what is happening. From 2002 to 2022, the Labor Center’s researchers found, the chunk of workers’ money that had to be directed to cover health care premiums and potential deductible costs skyrocketed from 4% of median household income to more than 12%. In raw dollars, that cost was $1,996 in 2002 and $10,414 in 2022.
The Berkeley study focuses on private sector job-based coverage, since that is the main source of health care coverage for most Californians under age 65. It notes that the expansion of Medi-Cal eligibility has made care more affordable for some of the lowest income residents, and premium subsidies through Covered California, part of the Affordable Care Act, have benefited others.
Those with job-based coverage, though, have been hit in two ways. First, premium costs have continued to escalate, along with the share of that cost that companies force the worker to bear. In 2002, California workers in the private sector paid 24% of the cost of a family premium; by 2022, it was 30% and rising.
Second, the growth of plans that include deductible requirements is astounding. In 2002, only about a third of workers with job-based coverage had a plan that even included a deductible; by 2022, almost 80% of such workers face deductible costs.
That word, “deductible,” rightfully sends a shiver down the spines of patients. Higher and higher deductibles have become the health insurers’ go-to strategy for grinding profit from the system, often by requiring users to spend thousands of their own dollars before the plan begins to cover services. Even then, many plans pay only a percentage of what a hospital charges, and your premium payments don’t count toward your deductible limit.
For private sector workers with single coverage, the size of their deductibles has grown 380% since 2002. For those with a family plan, the hit is 332%. Both median wages and median household income grew by only 3% during that time, the Labor Center found.
Moreover, the average size of a family deductible in 2022, more than $3,600, would break many lower income California households if they suffered a medical emergency. The Berkeley researchers found that Black and Latino respondents were far and away the most prevalent in saying they’d skipped needed physical, dental or mental health care over the past year because of cost.
California’s government has begun an attempt to address this crisis. In 2022, state legislators approved the creation of the Office of Health Care Affordability, and Gov. Gavin Newsom carved $30 million out of his 2022-23 budget to set it up. One of the responsibilities of the Office of Health Care Affordability, which is modeled after a similar program in Massachusetts, is to slow health care spending growth, in part by setting a limit on how much such expenses can rise each year.
Last month, the office recommended a 3% annual cap on spending growth from 2025 to 2029, a proposal that was quickly met with resistance from the California Hospital Association, which lobbies for the state’s hospital groups. That fight looms in the coming weeks before the Office of Health Care Affordability’s final decision. But the bigger challenge, Dietz said, may be in how the office gathers its information.
“A lot of the [spending] data they’re collecting is for the insurers and the hospitals and providers,” Dietz said. “That’s important, but the state should also be tracking to see how that translates to the prices that consumers face. For me as a Californian, as a consumer, that’s what I feel in my pocketbook: How much do I have to pay?”
Very clearly, the answer to that last question has been changing for 20 years, and almost always for the worse. Neither insurers nor providers are interested in curbing the spending patterns and pursuit of profit that drive up premiums and deductibles. A single state agency may not be able to solve all of it, but it’s a start — and it bears watching.