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5% of Americans spend 50% of annual health care dollars–how will the Cadillac tax work? January 13, 2012

Posted by medvision in Chronic Disease, health data, Healthcare Costs, Healthcare Reform, Insurance Plans, Rx Costs, Uncategorized.
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Health Costs, Rx CostsMy firm has had the opportunity to analyze years of medical claims from multiple self-funded employer health plan sponsors, covering thousands of members. Across employer groups, various industries and  state to state, one metric is virtually identical, the member expense claims distribution. This metric examines the annual plan dollars spent as a percentage of covered plan members. Here’s the common finding:  The top 1% of members account for 25%-30% of annual expenses and the next 4% account for an additional 25%. As recounted in USA Today, the top 5% of Americans spend 50% of all dollars! http://tinyurl.com/7wp9frh

What’s this got to do with the famous Cadillac Tax? The article shows a picture of HHS Sec. Kathleen Sebelius. Not mentioned is the Secretary’s firm stance on the wisdom of the Cadillac tax as a funding vehicle of PPACA. They define a Cadillac plan as containing very rich benefits, better than those enjoyed by average Americans. Starting in 2018 Americans covered under high-cost Cadillac plans will pay substantial taxes for these rich benefits!

Oh–but the article reports just 5% of Americans spend 50% of all dollars, $36,000 each and the top 1% averaging $90,000 of annual medical charges. I bet everyone knows the top 5% suffer from multiple chronic diseases/acute injuries and are suffering. They are not enjoying life compared to the bottom 75% not spending significant dollars. Here’s the issue!

PPACA (ObamaCare) plans on taxes from the Cadillac plans to fund care in the future. What makes plans high-cost? It isn’t what Washington considers a high-cost plans as having low deductibles or low/no co-pays. In reality these “rich gold-plated” plans spend less as their benefits encourage low-cost doctor visits and facilitate the prevention of high-cost disease through the identification of emerging disease at the earliest, low-cost stages. Don’t believe me? Then why are employers slashing health cost by adopting on/near site clinics which employ physicians seeing members for 0 deductibles, no copays and dispensing generic drugs at no member cost? They are preventing disease. The best deal in healthcare is someone living a healthy, disease free life.

The upcoming result of Cadillac plan taxing will confront/afflict groups of older Americans with the sickest populations of members with chronic diseases! Doesn’t seem fair? The 5%-50% fact highlighted by this USA Today report is the most important issue in our national healthcare debate. High cost equals much disease and suffering. If a discussion of healthcare fails to mention chronic disease, the discussion is moot! A famous bank robber was once asked by a reporter, ” Why do you rob banks”? His answer– Fool, because that’s where the money is”.  A meaningful discussion American healthcare inflation, must include chronic disease because that’s where the money is!

I’d call it a new version of voodoo economics, but I’m afraid that would give witch doctors a bad name.
 Geraldine A. Ferraro
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