When will healthcare truly be affordable?
By Mike Wokasch

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With implementation of the Affordable Care Act, the U.S. has taken a huge step in attempting to make healthcare affordable for all U.S. citizens. The objectives are clear and well-intended. The healthcare benefits of the law are significant, but we are kidding ourselves if we really think healthcare is going to be affordable, especially for the currently uninsured.

INDUSTRY PULSE

Will the Affordable Care Act actually reduce healthcare costs?
  • 1. Yes
  • 2. No

First, many people may feel that while healthcare is expensive, it is still affordable. This fortunate group includes those with employer-provided healthcare benefits. Most employees don't have a clue as to how expensive it would be for them to replace their employer-subsidized health insurance.

For many front-line (nonexecutive) employees, a $10,000 to $15,000 per year hit to their disposable income would have a dramatic impact on their quality of life. Many are shaken merely by a modest increase in their nominal share of employer-subsidized insurance and outraged by the ever-increasing co-pays associated with physician visits or prescription drugs. If these same people, for whatever reason, became unemployed or employed by a company that does not provide healthcare benefits, they would feel serious financial pain from even the lowest-cost options available to them today.

Second, I suspect many, if not most, uninsured individuals today are uninsured because of the high cost of healthcare insurance. If you make less than $50,000 per year — as the majority of Americans do — and your employer does not offer significantly subsidized healthcare insurance, how much healthcare can you really afford?

Even catastrophic healthcare insurance (no coverage for preventive care, physician visits or prescription drugs) with a $5,000 annual deductible can cost upwards of $3,500 per year. So, if your healthcare expenses exceed $5,000 in any given year you could end up paying $8,000 or more ($5,000 deductible plus $3,500 in annual fees) and still not have all your medical expenses covered.

Healthcare is affordable when the cost represents a small percentage of your income. If you are in the top 5 percent of income earners (around $160,000 per year) and/or if your employer pays most of your health insurance costs, healthcare may be affordable for you. To make healthcare affordable for low income, unemployed or those employed with no healthcare benefits, you have to increase incomes, significantly reduce the cost of health insurance and/or provide free care for the unemployed.

Because insurers (private or government) merely pass along the cost of healthcare in the form of premiums, the only way to get affordable healthcare for all is to reduce healthcare costs. This allows for lower insurance premiums, increases the willingness of employers to provide healthcare benefits, and is less expensive to subsidize healthcare for low-income workers and the unemployed.

From what I have read about The Affordable Care Act, insurers are being asked to provide more care and better coverage to a larger patient population, but there is little in the law that will substantially reduce the cost of healthcare to a point where it will make healthcare "affordable."

Mike Wokasch, a pharmacist by training, is a 30-year pharmaceutical industry veteran, having held a number of positions of increasing responsibility at several large pharmaceutical companies including Merck, Abbott, Chiron, Bayer and Covance. Wokasch was also an executive at several technology-based companies including Promega, PanVera and Aurora Biosciences. He is the author of the book, "Pharmaplasia," which explores the changes needed in the pharmaceutical industry as it adapts to healthcare reform.