Insured Americans Still Choosing Gas and Food over Healthcare

I still have the visual of a senior sitting at her kitchen table trying to decide between buying food or buying her medicines. We all remember the sad stories on the network news a few years ago. While Medicare Part D has largely alleviated the issue for seniors, now the working insured must decide between gassing up the car and visiting the doctor. Working Americans with health insurance are deferring care as long as possible to pay for life’s necessities. Americans are even beginning to defer healthcare for their children, waiting to see if the child recovers on their own first.

The New York Times has two articles at opposite ends of the healthcare spectrum. “Prepping Robots to Perform Surgery” reports on the wildly successful Intuitive Surgical (ISRG) selling the da Vinci robot for prostate surgery at an average price of $1.3M plus disposables. Hospitals advertise the machine’s benefits to attract patients, but insurers don’t see enough added benefit to increase reimbursements. Hospitals also contend that they need to stay up to date to attract the best doctors. Just like the FDA told Isis Pharmaceuticals (ISIS), Wall Street analysts are starting to focus on clinical outcomes to judge future growth.

The second NYT article “Even the Insured Feel the Strain of Health Costs”, focuses on how Americans are growing reluctant to use even the medical services covered in their health insurance policies. Despite the employees’ payment toward premiums nearly doubling since 2001 (to an average of $3300 per year) employees are deferring ever more care. Routine or preventive doctor visits are playing second to gas and food. Employees are finding it difficult to manage their co-pays and high deductibles. Providers are realizing this and demanding the patients “responsibility” upfront. (I would be more than happy to have a policy with the $25 or $50 co-pays, and deductibles cited in the article.)

The NYT further explores alternatives to employer plans such as the individual insurance market and state run high-risk pools. The article reinforces that there are no cost effective alternatives for most. I wrote in "McCain Healthcare: An Evil Play on Words" that high-risk pools are not functioning.

The medical device and drug industries continue to lure hospitals into more expensive “high tech” care. At the same time, most consumers struggle just to obtain basic healthcare. Over the past decades the insurers caved in to consumer outcries over restrictions, and just continually raised premiums. Now consumers are crying for cost restraints, a 180 degree turn. I wrote in "GE’s Healthcare Disappointment" and "Should Very High Cost Treatments be Covered?" that the need for more high cost medical equipment and very high cost drugs are being challenged. General Electric’s (GE) latest results confirm this.

The bad news for all providers of medical goods and services is that household out-of-pocket expenses for healthcare are as much as five times greater now than in the last recession. Each industry participant (insurer, doctor, hospital, and equipment and drug manufacturer) is focused on their own profitability. For the first time, enough middle class insured Americans are deferring care to threaten the profitability of the entire system. I wrote in "United Healthcare: Beyond the Numbers" that United (UNH) is starting to run out of customers.

The risk to the entire system is that if no one gives a little, the middle class might actually demand national healthcare. “Socialized medicine” might even sound good to insured Americans that cannot actually afford to use their benefits. Investors need to realize this.

No Disclosures.

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