What Does the Future Hold For Health Insurance?

Health care costs are rising in the United States because of distortions in consumer demand, the high cost of new technology, and the luxury of affording advancements that increase longevity and improve health, according to Robert Topel, Isidore Brown and Gladys J. Brown Professor in Urban and Labor Economics.

“Our decisions of how to consume health care are distorted because the employer coverage plan is tax deductible, so there is distortion in our demand,” Topel said during a panel discussion at the seventh annual Healthcare Group Conference sponsored by the student-led Healthcare Group, at Harper Center on October 24. “Most of the increase in costs is created by new technology. It’s very difficult for providers to deny use of technology once it’s in the marketplace, no matter how costly it is.”

Because the market economy is not adequately addressing important health care issues for many Americans, the government must assume responsibility for more of those services – for “some of the drivers of change,” said Linda Diamond Shapiro, AM ’77, AM ’78, MBA ’88, vice president for strategy, planning, and external affairs for Access Community Health Network.

Eighty percent of the lowest-earning 20 percent of Americans are uninsured, Shapiro said. “One thing you can say about the employer-based system is that for lots and lots of people, it doesn’t work,” she said. In Illinois 58 percent of the uninsured are employed or dependents of the employed, Shapiro said. “The uninsured are in the labor force and have turned to the labor force for part of the American dream,” she said.

The key factor is that more people today work for businesses with 25 or fewer employees than did 10 years ago, said Prashant Srivastava, ’05, founder of Evive Health LLC. Such employers are likely to offer more in wages than benefits, because benefits income is not as obvious to their employees, Srivastava said.

Some market solutions provide access to the uninsured, but an adequate safety net is needed, he said. “Morally speaking, we’re sort of stuck in this place where we are saying, ‘What do we do with high-risk people who no commercial insurer would want to take on? What do we do with people who are just sick?’” Srivastava said. “Unfortunately, the people who need insurance the most are also the people who are closest to the poverty line and cannot afford it.”

Rena Conti, instructor in the Department of Pediatrics and Medicine at the Biological Sciences Division of the University of Chicago, WHERE???? AT U OF C???, predicted health care will change incrementally under either John McCain or Barack Obama, regardless of who wins the November election for president.

Americans want change in health care, but 65 percent are worried about switching from employer-based insurance to buying their own in the marketplace, Conti said. “Incremental change can be the only way to do it,” she said.

Although conventional wisdom suggests Obama has targeted the demand side of health care, his proposal clearly focuses on cost containment on the supply side, Conti said. “That may have a short-term impact on getting prices down, but it may actually have a long-term impact on what types of therapies are brought to market,” she said.

The panel demonstrated that public policy will likely have a tremendous impact on the health care industry in the next decade, said Sally Gheng, a student in the Evening MBA Program. “I think the key takeaway was that, generally, things are changing and you need to be prepared,” Gheng said. “The market is very competitive and regulators have not been as friendly as expeditious as they once were.”