Healthcare costs are increasing by double digits each year, at double the rate of inflation, and now consume at least 16 percent of the national gross domestic product. In Los Angeles County, one in four persons under the age of 65 are uninsured. Of those, nearly 500,000 live in the San Fernando Valley region. The two issues are closely related, said Keith Richman, executive vice president of Lakeside Systems, at a March 17 roundtable hosted by the Valley Economic Alliance. Think about it like this,” said Richman. “If you go out to dinner with four people, and one person doesn’t pay, the other three of you have to divide that cost up between yourselves.” Taking that analogy a step further, two of those at the table are the federal government (Medicare) and the state (Medi-Cal). The third is private insurance, while the wallet-less friend represents the uninsured. Richman likened the cost of uninsured people to a hidden tax on the healthcare system that causes the premiums for all of the other participants in the system to go up. It’s important to remember that more than 70 percent of the locally uninsured are employed, working in low-income jobs. “They are not people living off the government dole,” said Richman. And since hospitals are severely limited in the reimbursements they can get from federal and state governments, they turn to the private sector to make up the difference. But an even bigger contributor to the staggering price increases of the past decade is new technology, including pharmaceuticals. Hospitals vie to have the newest imaging and diagnostic equipment and doctors prescribe ultra-expensive medications. So if technology costs are one of the biggest drivers of cost increases, why don’t healthcare providers just stop buying high-ticket, newfangled diagnostic equipment or stop prescribing medications that cost hundreds or thousands of dollars a dose? “Liability,” said Richman. “If a patient feels they are not getting the best care possible, or if someone dies because they did not receive appropriate treatment, they will likely sue the hospital and the insurer.” Also, Richman added, if doctors can get access to better equipment and treatment at another facility, they will jump ship and move to where the shiny new stuff is. So there’s a competitive aspect to it as well. Hospitals in distress Most hospitals operating in California have been running a budget deficit for at least four years, he told the group. He provided Providence Saint Joseph in Burbank as an example, saying that the facility is operating in the red to the tune of $1 million a month. “But how do they keep the doors open if they’re losing money,” asked attendee Peter McCarty, a financial advisor with Northwestern Mutual and one of the co-chairs of the Livable Communities Council of the Valley Economic Alliance. Primarily thanks to donations from their charitable foundations, said Richman. In the past 10 years the region has lost a number of hospitals due to insolvency, including Granada Hills Community Hospital, the Sherman Oaks campus of Northridge Hospital and the Motion Picture & Television Fund facility in Woodland Hills. Just last month, Pacifica Hospital of the Valley, in Sun Valley, filed for bankruptcy and it’s not clear whether someone will be able to turn that operation around. So how do businesses respond to these rising costs? Smaller companies may go so far as to stop offering coverage completely, Richman said, whereas larger organizations may drop dependent coverage, or offer plans with higher co-pays and deductibles. In other words, the employees themselves are forced to pick up the tab. While more than 90 percent of large businesses offer some level of employee health coverage, only 50 percent of small businesses do. And the number of companies who offer coverage is decreasing each year by 1 to 2 percent. Richman said there was little that could be done to fix the problem by well-meaning groups like the Alliance, saying that the onus on fixing the problem lies with the legislative bodies of the federal and state governments. One of the concrete suggestions latched onto by roundtable participants was finding and promoting ways to get the 80,000 uninsured children in the region enrolled in the Healthy Families insurance program offered by the state of California.
