The Public Policy Institute

Managing With Care

Section 2

High Costs = High Numbers of Uninsured

Overall, New Yorkers' spending on hospitals, doctors' services, home health-care, drugs and other personal health-care services and products totaled $67 billion in 1993.(1) That was $3,693 per person—22 percent above the national average. Texas, with almost exactly the same number of residents then, spent less than $50 billion.

Those higher expenses in New York translate into $12 billion more than we would have spent, if medical costs here were the same as the national average—an additional cost that hurts our economy in the same way as our higher taxes. As the table on the following page shows, our health-care costs are far higher than those in competing states such as Ohio, Michigan, North Carolina, New Jersey and Virginia.

A typical premium for family health coverage in Brooklyn, for example, is in the range of $800 a month—nearly $10,000 a year—for a managed-care plan. Traditional, fee-for-service coverage costs even more. Premiums elsewhere in the state vary, but generally are not tremendously lower. It is no wonder that both employers and individuals find it difficult to afford health insurance.

Until recently, public policy in New York made it especially difficult to get costs under control. A 1997 Harvard University study found that, in 1980, both California and New York spent about 20 percent more than the national average on health care.(2) By 1993, California had driven its spending down to the national average—but New York was still 22 percent higher. California's earlier entry into managed care is a prime reason for the difference.

Personal Health-Care Expenditures Per Capita, 1993
Rank State Amount Rank State Amount
1 Massachusetts $3,892 27 Colorado $2,821
2 Connecticut 3,727 28 Maine 2,771
3 NEW YORK 3,693 29 Texas 2,760
4 Pennsylvania 3,451 30 Kentucky 2,738
5 Rhode Island 3,431 31 Kansas 2,726
6 New Jersey 3,275 32 Nebraska 2,726
7 Florida 3,266 33 South Dakota 2,724
8 Delaware 3,233 34 Nevada 2,705
9 Tennessee 3,181 35 Arizona 2,697
10 North Dakota 3,173 36 Oregon 2,636
11 Minnesota 3,137 37 Alaska 2,630
12 New Hampshire 3,074 38 North Carolina 2,623
13 Maryland 3,060 39 Vermont 2,602
14 Missouri 3,047 40 Iowa 2,601
15 Louisiana 3,034 41 Virginia 2,576
16 Ohio 3,025 42 Arkansas 2,520
17 California 3,017 43 Montana 2,501
18 Hawaii 2,989 44 South Carolina 2,489
19 Illinois 2,972 45 Oklahoma 2,488
20 Georgia 2,913 46 New Mexico 2,400
21 Alabama 2,884 47 Mississippi 2,344
22 Washington 2,879 48 Utah 2,214
23 Wisconsin 2,875 49 Wyoming 2,123
24 Indiana 2,874 50 Idaho 2,068
25 Michigan 2,869 U.S. Average $3,020
26 West Virginia 2,859 N.Y.S. % above average 22.3%
Source: U.S. Department of Health and Human Services, Health Care Financing Administration

New Yorkers continue to pay billions of dollars extra—in our health insurance premiums and our taxes—because of years of state policies that expanded government regulations while stifling marketplace efficiency and innovation.

Scott Miller, who owns a small printing company in Amsterdam, worries that too much government regulation of managed care might make it difficult for him to continue providing completely employer-paid health coverage for his 10 or so workers.

"The HMO is organized to deliver a quality product at a fair price," Miller told the Senate Health and Insurance committees during a 1997 hearing. "They are out there every day doing the very best job they can to make sure that I can provide health care to my employees. I can honestly tell you it's all because of the cost-effectiveness of my HMO that I'm able to pay for my workers' premiums."

The reduced paperwork common to managed care is convenient for employees, and especially helpful for small firms where the owner must handle personnel matters while trying to maintain and grow the business, Miller says. And he sees "better quality" than in traditional fee-for-service plans.

"For example," Miller told legislators, "several years ago my wife had breast cancer, which fortunately was treated. However, under my previous insurance, she was only authorized for a follow-up check-up once every two years. And when we wanted her to get a check-up every year, we ended up paying for it ourselves. Now that we have an HMO, she not only gets a check-up annually, but is encouraged to get it, and the HMO does it at no cost to us."

Remember the uninsured?

As costs have continued to mount, the problem of the uninsured has grown in New York, too. From 1991 to 1996, the proportion of New Yorkers without insurance rose 34 percent. As demonstrated by the table on the following page, that was more than four times the increase nationwide—despite this state's Medicaid program, the most generous in the nation by far, and despite other taxpayer-funded programs to reduce the number of uninsured. The Empire State used to boast a significantly lower proportion of uninsured residents than the national average. But as of 1996, our uninsured rate was above that of the rest of the nation.

Change in Percent of Population Uninsured: 1991-1996
Rank State Change Rank State Change
1 Colorado 61.2% 27 Wisconsin 3.7%
2 New Jersey 51.8% 28 California 3.6%
3 Connecticut 44.7% 29 New Mexico 0.9%
4 Arkansas 37.3% 30 Florida 0.0%
4 Nebraska 37.3% 31 Louisiana 0.0%
6 Arizona 36.9% 32 Kansas -0.9%
7 NEW YORK 33.9% 33 Alaska -1.5%
8 North Dakota 30.7% 33 Delaware -1.5%
9 Iowa 28.9% 35 Michigan -2.2%
10 South Carolina 28.6% 36 Mississippi -3.1%
11 Washington 27.4% 37 Rhode Island -3.9%
12 Georgia 25.4% 38 Illinois -4.2%
13 Hawaii 21.1% 39 South Dakota -5.0%
14 Wyoming 20.5% 40 West Virginia -5.1%
15 Pennsylvania 18.8% 41 New Hampshire -5.9%
16 Kentucky 17.6% 42 Oklahoma -8.1%
17 Tennessee 13.4% 43 Idaho -8.3%
18 Massachusetts 11.7% 44 Vermont -13.3%
19 Ohio 11.7% 45 Maryland -13.6%
20 Minnesota 9.7% 46 Utah -14.3%
21 Maine 9.0% 47 Nevada -17.5%
22 Missouri 7.3% 48 Indiana -19.1%
23 North Carolina 6.7% 49 Virginia -23.8%
24 Texas 6.6% 50 Alabama -28.7%
25 Montana 6.3% U.S. Average 8.3%
26 Oregon 4.8% N.Y.S. % above average 308%
Source: Preliminary calculations by Morgan Quitno Press, data from U.S. Census Bureau

It's just plain common sense, of course, that high costs would lead to a greater number of families and individuals lacking health insurance. The American Association of Health Plans finds that for every 10 percent increase in premiums, the number of employers purchasing health care for employees goes down 4 percent.

What happens when neither an individual, nor her employer, purchases health coverage?

Lack of health insurance isn't a problem for the well-off. It's not a problem for most of the poor, who are covered by taxpayer-funded Medicaid, or for retirees over age 65, who are covered by Medicare.

It's a critical problem for middle-class families, particularly for low- and moderate-income working people. In 1996, more than two-thirds of uninsured adult New Yorkers were employed during the year (nearly half of them in full-time, full-year jobs).(3)

Every time an interest group or a political figure proposes new regulations on HMOs and other managed-care organizations, it would be worthwhile to consider the small restaurant owner struggling to pay for health benefits for the waitresses(4) and cooks, the cabdriver who already finds it hard to afford health coverage, and the other New Yorkers for whom the cost of health insurance is a critical concern.

The expansion of managed care and other changes in recent years have sharply reduced the growth in costs. Tens of thousands of additional New Yorkers have the benefit of health coverage as a direct result—some 200,000 to 300,000 who would be uninsured if not for the cost-restraining effects of managed care, according to Public Policy Institute estimates based on an actuarial study conducted by the Lewin Group Inc., a nationally recognized consulting organization.(5)

Nationally, there are foreboding signs that prices may be heading higher again. In both public and private health plans, managed care remains our best weapon against renewed spikes in costs that would drive thousands more New Yorkers into the ranks of the uninsured.

No health coverage means poorer health care

Generally, those who have no health insurance suffer from poorer health care.

"Lack of health insurance limits access to quality, timely, cost-effective health care," New York's Public Health Council said in a report to Health Commissioner DeBuono in 1996. "The uninsured use fewer primary care visits than insured individuals, but remain hospitalized longer than their insured counterparts, reflecting a more advanced stage of illness on admission. Lack of coverage results in limited access and deferred care, which in turn leads to increased severity of illness and higher costs when services are used."(6)

A group of experts writing in the Journal of the American Medical Association concluded: "Research has documented decreased access to health-care services, and increased burdens of economic hardship, ill health, and mortality that the uninsured and underinsured experience."(7)

Even advocates of more government mandates—which drive up costs—recognize that higher costs mean fewer insured people.

"There is pretty good data that whenever you have significant increases in premium costs, significant numbers of people drop their insurance," the president of New Yorkers for Accessible Health Coverage told The New York Times. "If they become ill, it means they are going to be looking at charity care or spending down to Medicaid instead of having coverage, which is not the best way to guarantee access to care."(8)

An example of the problems caused by lack of coverage: "Mothers who lack health insurance are less likely to seek and obtain prenatal care," says the Annie E. Casey Foundation, which lobbies and sponsors research and education on issues affecting the poor. "Research shows that women who do not receive adequate early prenatal care are more likely to give birth to a low birth-weight baby."(9) Fully 45 percent of uninsured Americans had problems getting needed medical care in the previous year, compared to 11 percent of those with insurance, according to the AMA journal's report.

More than 41 million Americans—including some 3.1 million New Yorkers—were without health coverage at some time during the year 1996. These are the families and individuals who don't have a good job that carries health benefits; aren't financially secure enough to make monthly payments to a health insurer on their own; and are not poor enough or old enough to qualify for help from the taxpayers.

More than half of the uninsured work for a living.(10) They are cooks, cashiers, salespeople, janitors, waitresses, carpenters, gardeners, construction workers, secretaries, auto mechanics, painters, stock clerks and hairdressers. And of those who work, most are in a small business—or are self-employed—with a profit margin so low that the high cost of health insurance makes it just plain unaffordable. Many earn more than minimum wage, but most less than $10 an hour. Federal, state and local taxes often take 20 to 25 percent of their income (and reducing that burden would help solve the problem of making health insurance affordable—but that topic is beyond the scope of this report). After paying the costs of a home, food and other needs, what's left over for these low-income workers is not enough to buy health insurance on their own.

No 'political urgency' for the uninsured

These are the people who are hurt most by the high cost of health care, and by the high cost of health insurance. They are often ignored by the news media and political candidates more interested in talking about—and to—those who already have good health plans.

"While the political urgency of these concerns has subsided, we know that gaps in insurance coverage remain for a sizable number of Americans," the scholars who wrote about the issue in the AMA journal commented.

"President Clinton doesn't talk about it much anymore, but the ranks of the uninsured keep growing—and may surge as health costs rise," National Journal, a respected, independent observer of U.S. government and politics, reported in a recent article titled: "Oh, Yeah, the Uninsured."(11)

While the political rhetoric over health care in New York usually focuses on proposals for new mandated coverage or the concerns of those who provide health-care services, a much more urgent cause for concern is the large and growing number of New Yorkers who are uninsured in a given year. Until their needs are addressed, mandating chiropractic, mental health coverage or some other benefit is rather like requiring that one group of schoolchildren have the latest computers—while ignoring poorer students who are allowed to graduate without knowing how to read.

Ironically, when policymakers think about the uninsured at all, their first thought is often of enacting another mandate—requiring that employers pay for coverage of mental illness, for example. But that just drives the overall cost higher, which forces even more employers and individuals to forego buying health coverage.

Across America, the number of uninsured is rising in large part because the cost of health care—and thus the cost of health insurance—continues to rise. In New York, it seems safe to say, the rise in the uninsured during the early 1990s was exacerbated by our loss of more than 500,000 jobs—many of which had provided good health benefits. The state's imposition of community rating in 1991 probably has played a role, as well. That step raised premiums sharply for many individual policy holders, some of whom responded by dropping coverage altogether.

The "rampant medical inflation" that President Clinton targeted in 1993 was largely gone in the following four years, and experts say double-digit cost increases for all are unlikely to return anytime soon. But that doesn't mean cost is no longer a problem.

Some health plans in New York sought premium increases of more than 50 percent for individual policies this year. The state's drawing down of insurance pool funds paid by policy holders is making those increases smaller than initially proposed, but some of this year's price hikes are larger than usual nonetheless. That's further reason to do everything possible to keep costs down. (A good way to start would be to eliminate the government-imposed costs that drive health-care premiums higher, as detailed in Section 4.)

Through our federal tax dollars, Americans will pay about 6 percent more this year for the health insurance that covers 9 million federal employees, retirees and family members. Those cost increases for the federal bureaucracy—often a trend-setting employer, because of its huge size—are the first such in five years. In the New York metropolitan area, premiums are expected to rise by 5 to 10 percent this year, according to The New York Times.(12)

Within the smallish circle of health-care observers nationwide, some claim that managed care was only capable of producing "one-time savings" by wringing excess costs out of the system. But their argument seems shaky. Compared to old-style plans that pay no need to patients' long-term health care, managed care by definition is likely to reduce costs in two equally important ways. First, it provides more preventive care—so that, for instance, breast cancer can be detected and treated earlier, at greater benefit to the patient and at lower cost. Second, managed care minimizes spending on needless tests, visits to the emergency room and other services that drive up costs without improving care. As the population grows, the number of people covered by health insurance will grow. Every new enrollee means new savings from managed care.

Health-care costs: The numbers

Regardless of this year's increases, high health-care costs are already a problem—especially in the Empire State.

From 1980 to 1993, New Yorkers' spending on hospitals more than tripled, rising to some $24 billion a year, according to the state Health Department. Spending on physician services and prescription drugs in the state rose at rates nearly as high. All three increases were far greater than overall inflation during the period, which was about 75 percent.

The need to control costs will only become more intense in coming years, partly because of the growing number of older Americans who typically require more health care. The number of individuals aged 85 and over is projected to grow 25 percent, to 4.9 million, by the year 2005—meaning 1 million more of the very old nationwide. The number of senior citizens aged 75 to 84 will also grow by roughly 1 million in that period, the Census Bureau says.

New York is among the states that will see more than its share of those older residents. At last count, 13.4 percent of our residents were over 65, compared to 12.8 percent nationally. (Yes, many New Yorkers move South during their golden years—but they often move back home in the twilight years, the period that produces the highest medical bills.)

Reality check: There's no free health care

OK, everyone knows health coverage is expensive. But businesses pay most of the cost—so who cares?

Well, everyone should.

First of all, rising costs over the past decade or so have forced employers to watch their health-care spending (along with every other cost) as never before. They simply can't afford spiraling cost increases. As a result, workers and their families are also paying more—both in net dollars, and as a proportion of the total bill.

And, as seen above, the record high cost of health insurance is forcing more and more employers to conclude they cannot provide health benefits at all. That's a problem—not only for the uninsured workers and their families, but for society as a whole.

Employers with the greatest commitment to providing employee health coverage are usually large businesses. Those companies are also the most subject to stockholder and competitive pressures to reduce costs where possible—and to locate operations and jobs where, other things being equal, costs are lowest. That's why New York's high health costs are a competitive problem, in the same way as our high taxes and other employee-related costs, such as workers' compensation.

Finally, the high cost of health care hits us all in the wallet as taxpayers. Our taxes—federal, state and local—fund 46 cents of every dollar of health expenditures nationwide. That proportion is even higher in New York, home of the most generous publicly funded health care of any state.

Sometimes the rhetoric suggests that laws or regulation might somehow be able to repeal the economic reality known as "scarcity,"(13) as it applies to health care or the dollars to pay for it. Yet, for proof that resources are not limitless, and must be allocated with care, one need look no further than the health coverage New York State government provides for its own employees—including members of the Legislature.

A health plan not designed by 'bean counters'

While it's popular these days to bash managed care, anyone with actual responsibility for workers' health coverage understands why managed care is a blessing. That includes union leaders who negotiate benefits for their members.

New York State, for example, has traditionally been considered one of the most generous of employers, and for good reason. "State employees, on average, enjoy higher salaries and more generous benefits than private-sector workers," a 1990 study by The Public Policy Institute found.(14) That difference was especially striking when comparing health and other benefits. At the time of the study, state workers contributed 10 percent of enrollment costs for their own participation in an HMO or the state's Empire Plan, and 25 percent for dependents. A private-sector survey at the time showed employee contributions averaging 28 percent for enrollees and 45 percent for dependents.

The Empire Plan's current marketing materials call it "the only health insurance plan designed by and for the people who use it—New York State employees." The plan also uses the phrase "Designed by People. Not by Bean Counters." Details of the health plans covering state employees show that the union leaders and state officials who designed the plans through the collective bargaining process reached the same conclusion as most private employers: Managed care is a good way to approach health care.

The state maintains separate health plans for employees in each of several bargaining units (represented by the Civil Service Employees Association, Public Employees Federation and AFSCME Council 82, for example), as well as a plan for management/confidential employees in the executive branch and for members and staff of the Legislature.

Interestingly, the state employee plans—the ones "designed by people, not bean counters"—do not include the laundry list of specific items envisioned by the various groups that have prevailed on legislators to propose mandates for special, narrow interests (see Section 4).

Incentives to avoid needless treatments

As is common among other employers, each of the state's health-care plans creates incentives for employees and their dependents to avoid needless (and needlessly expensive) treatments. For example, the CSEA plan's coverage for mental health and substance abuse has no deductible, and no annual or lifetime benefit maximums, if participants receive treatment from a provider in the plan network. If using providers outside the network, participants have an annual deductible of $500 for outpatient care and $2,000 for inpatient treatment—as well as limits on what the plan will pay for, both in any year and over the participant's lifetime. For mental health treatment, medically necessary care is unlimited when provided within the plan; a 30-day limit applies each year if participants use an out-of-network provider.(15)

Medical-surgical coverage also encourages enrollees to seek treatment from providers who have agreed to accept the state's fee schedule and fulfill other requirements to be included in the Empire Plan. Covered services received from a participating provider are paid in full; those from outside the plan—known as the Basic Medical Program—are subject to deductibles and co-payments that can run over $1,000 a year.

The plans negotiated by employee unions and the state require enrollees to call a managed-care office known as Health Call before a non-emergency hospital admission, before a maternity hospital admission, and within 48 hours after an emergency hospital admission. The requirement also applies before having non-emergency magnetic resonance imaging: "If you do not call, you will pay the entire cost or a large part of the cost," a plan summary for state employees says. "If you go ahead with the MRI after HealthCall has determined that the MRI is not medically necessary, you will be responsible for the entire cost."

The financial incentive for enrollees to choose a plan participant—and thereby limit the cost to the state—also appears in Empire Plan provisions for hospital outpatient services, skilled nursing facility care, hospice care, doctor's office visits, laboratory and radiology services, routine pediatric care and other services.

Such features are common practice in managed-care plans. They're an example of the fundamental purpose of managed care—to improve health care, while restraining costs, by directing limited resources away from non-essential uses. Such features are among those most commonly vilified by the critics of managed care, who often choose to ignore the inevitable limits on health-care resources.

With regard to the ever-expanding calls for new health-care mandates, it's worth noting that all state employees are not treated the same when it comes to health insurance. Under the Basic Medical Program, for instance, members of the CSEA plan have an annual deductible of $161 per enrollee; employees in the management/confidential unit and the Legislature have a deductible of $226. Workers in the CSEA bargaining unit may make up to $776 a year in co-payments for various treatments, after the state pays 80 percent of reasonable and customary charges. In some other plans, such as PEF's, co-payments may total $1,089.

The co-payments for each bargaining unit are the product of negotiations between the union and the state; differences are attributable to the differing needs of employees as determined by their elected union leaders. Lower co-payments for CSEA members, for instance, may reflect a decision by union leadership that the bargaining unit's workers—whose salary scales are lower than those of the state's other unions—cannot afford higher co-payments. PEF and other unions negotiated contracts that result in their members making higher co-payments—presumably choosing a better benefit in another area. The more that state laws and regulations decree what must be in every health plan, the less freedom employers and unions will have to make such choices.

Managed care works for taxpayers

The savings created by managed care, and the accompanying improvement in quality of care, are especially important to New York taxpayers because of our huge Medicaid program. New York State's Medicaid program cost $22 billion in 1995, more than twice that of California, which had 75 percent more residents and 40 percent more Medicaid recipients. In 1996, Governor Pataki and the Legislature made managed care mandatory for all Medicaid patients who are not in long-term care. The result, as in privately paid plans, will be lower cost and better quality care.

New evidence suggests that often, even when employers provide coverage with only a modest employee co-payment, workers decide not to take it. In 1996, about 6 million workers nationwide who could have been covered by job-related health benefits turned them down, the journal Health Affairs reported recently. While some obtained coverage through a source other than their employer, some 4.6 million chose to remain uninsured. The journal did not provide state-by-state figures, but the nationwide number would seem to indicate that hundreds of thousands of New Yorkers were among the latter group.

"Workers are deciding that health insurance is not valuable enough to them for the cost," one of the study's co-authors told reporters. Obviously, the same is true for those who have no way to obtain coverage other than to purchase it on their own.

For some such workers, even the cost savings provided by managed care may not be enough to make health coverage an affordable option. Still, there's little question that greater cost increases—of the magnitude we'd likely be seeing without managed care—would only make things worse.

There's also plenty of evidence that many more employers would provide health coverage for workers, if a less expensive option were available. A Public Policy Institute survey of 627 small businesses across New York State in 1989 found that a majority of those which did not offer health benefits said they would be willing to make a contribution—the average was $510 a year—to health insurance for their employees. A recent survey by the United Hospital Fund found that, among employers who do not provide health benefits, one in three either had offered coverage in recent years or had sought a premium quote within the previous two years.(16) The obvious conclusion: There are thousands of employers around the state who do not now offer health insurance, but would do so if lower-cost coverage were available.

Who's uninsured in New York?

How can state leaders ensure that more New Yorkers have health insurance—and therefore the expectation of better health? A closer look at the state's uninsured population helps provide some answers.

As noted in the Introduction of this report and earlier in this section, New York State already goes much further than other states in providing taxpayer-funded coverage. Some 14.4 percent of state residents were covered by Medicaid in 1996, compared to only 10 percent nationwide. At the same time, we're peculiarly low in the proportion of residents who have privately paid coverage through an employer or individual coverage—53.4 percent, compared to a nationwide average of more than 61 percent. To some extent, those latter figures may be explained by our high proportion of residents on welfare, our high number of recent immigrants, and our lower rate of residents' participation in the workforce. Whatever the reason, it's a problem—it's simply not realistic to expect that taxpayer funding alone can solve the problem of the uninsured.

Declining private health coverage, in fact, is the reason for the increase in our overall population of uninsured. In 1991, 70.8 percent of insured New Yorkers had private health coverage; by 1996 that proportion had fallen to 63.1 percent.

Lack of insurance is especially concentrated among lower-income workers. Roughly two-thirds of all uninsured New Yorkers have incomes below 200 percent of the poverty level. Within that income group, the proportion of uninsured is around 30 percent—more than half again the percentage of the state's overall uninsured population.

About a third of the state's uninsured in 1996 were not U.S. citizens. That may indicate the rise in uninsured during the first half of the 1990s was partly a natural result of the boom in immigration during the period, rather than any inherent problem with our system of health coverage. On the other hand, it presents a potentially huge challenge if recent high levels of immigration continue. Given federal restrictions on public health coverage for immigrants, the need for growth in private insurance will be even more acute.

Partly because of New York City's status as a worldwide center of immigration and its high number of residents in poverty, lack of health insurance is especially predominant in the city. With roughly 41 percent of the state's population, the Big Apple is home to 60 percent of uninsured residents statewide. In 1996, nearly 30 percent of the city's residents were uninsured, compared to 13 percent in the rest of the state.

Lack of health coverage is more common among Hispanic and black New Yorkers—at 23.4 and 19 percent, respectively—than whites and other ethnic groups, of whom 11.2 percent were uninsured in 1994.

Managed care cuts costs—and that's good

Managed care can help reduce the number of uninsured—or, at the very least, help avoid the cost increases that would otherwise surely make the problem still worse. Despite the continuing criticisms of managed care, there is an emerging consensus about its success in restraining costs.

"H.M.O.s have kept premiums steady, or even falling, for four years—a dramatic improvement over the double-digit increases of a decade ago," The New York Times editorialized recently.(17) While saying that some of the cost savings may simply reflect a temporary business strategy to attract customers, and that premiums will likely rise in the coming year, the Times added: "Even so, managed-care costs are rising less than the cost of fee-for-service coverage. ... Studies also show that in regions where managed care gains a strong foothold, health-care costs for all rise more slowly."

In 1996, managed care saved American families an average of between $408 and $549, including savings in premiums and out-of-pocket health costs, and increased wages, according to a study performed for the American Association of Health Plans.

Savings are most significant in parts of the country where the greatest percentage of people join managed-care plans, the study found. In California, for instance, where 37 percent of residents were enrolled in managed care in 1996, estimates of average savings per family ranged from a low of $577 to as much as $770. In New York, the estimated savings were from $441 to $589.

Managed care drives down costs even for individuals and families who remain in traditional fee-for-service plans, the AAHP study found.

This year's increases in premiums suggest that even managed care can't actually reduce costs long-term on an absolute basis—not with overwhelming countervailing pressure from an aging population, more use of lifesaving but expensive technology, and other factors. But there's no doubt that managed care will at least reduce the level of increase. That means it will continue to make it easier for more people to afford health insurance—and to enjoy better health as a result.

While expansion of government health insurance cannot be the only answer to the problem of the uninsured, that doesn't mean government has no role to play. For all the public debate over the future of Medicare, few argue for its elimination. The same goes for Medicaid, and for New York State's Child Health Plus program.

While recognizing the role of publicly financed health care, though, it's essential to remember that the private health-care marketplace is far more important—it covers more than two New Yorkers for every one covered by a government program. Despite huge growth in government health plans over the past three decades, a majority of New Yorkers still rely on privately funded coverage—usually through an employer—for their health care.

1. Personal health-care services make up more than 91 percent of all health expenditures nationwide. The net cost of insurance and administration, contrary to the claims of those who favor nationalized health insurance, is a small fraction of the total—less than 5 percent in 1995.

2. "Health-Cost Trims Hold Inflation Down," The Wall Street Journal, June 30, 1997, p. 1.

3. U.S. Bureau of the Census, Current Population Survey, March 1997.

4. In the recent hit movie As Good As It Gets, the plot line features a waitress who expresses anger at the medical treatment her son receives from an HMO for his asthma. Ironically, asthma is one of the many diseases for which managed care typically is a better choice than traditional health insurance. Asthma sufferers benefit most from early diagnosis and regular preventive care—two areas in which managed care works especially well.

5. In a 1997 study, the Lewin Group found that economic studies indicate every 1 percent increase in premiums reduces employer-paid health coverage by 0.4 percent. If not for managed care, it found, higher costs would have increased the number of uninsured nationwide by 3.1 million to 5.0 million. The total number of additional uninsured would have been distributed among the states roughly in proportion to the number of privately insured individuals in each state. In 1996, New York State had 10.6 million privately insured residents, about 6.4 percent of the national total of 165.8 million.

6. Communities Working Together for a Healthier New York: Opportunities to Improve the Health of New Yorkers, September 1996.

7. "Whatever Happened to the Health Insurance Crisis in the United States?", Journal of the American Medical Association, October 23/30, 1996; p. 1346.

8. "Governor Plans State Subsidy for Very Sick," February 16, 1998.

9. Kids Count Data Book: State Profiles of Child Well-Being, The Annie E. Casey Foundation, Baltimore; 1997.

10. Data on New York's uninsured come from U.S. Census Bureau's March 1997 Current Population Survey, presented at a forum sponsored by the United Hospital Fund, November 1997.

11. November 15, 1997.

12. "H.M.O. Premiums Rising Sharply, Stoking Debate on Managed Care," The New York Times, January 11, 1998; p. 1.

13. "The scarcity of resources, both natural and man-made, makes it vital that we stretch our limited resources as far as possible," explains Economics: Principles and Policy, a textbook co-authored by one of President Clinton's former economic advisers, Alan S. Blinder. "It is nonsense to assign top priority to everything. No one can afford everything. An optimal decision is one that chooses the most desirable alternative among the possibilities permitted by the quantities of scarce resources available." (Italics in original)

14. The Zero Option: Collective Bargaining in a Fiscal Crisis, December 1990.

15. Information about state employee health plans is available through the state Department of Civil Service website, http://www.cs.state.ny.us.

16. "Employer-Sponsored Health Insurance in New York State," paper presented at United Hospital Fund conference, November 19, 1997.

17. "The Challenge for Managed Care," The New York Times, October 31, 1997.

contents introduction section 1 section 2 section 3section 4 appendix

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