The Healthcare Affordability Crisis: Why Your Premiums Are Soaring

Healthcare in America is reaching a breaking point. In this episode, we sit down with Katherine Hempstead, Senior Policy Adviser at the Robert Wood Johnson Foundation, to unpack the forces driving the affordability crisis — from skyrocketing premiums and a medical debt explosion hitting insured Americans hardest, to new Medicaid work requirements that could leave up to 5 million people without coverage and an estimated 700 rural hospitals at risk of closure.

Transcript:

Jeffrey Snyder, Broadcast Retirement Network

Well, Dr. Hempstead, it’s so great to see you. Thanks for joining us in the program this morning.

Kathleen Hempstead, PhD., Robert Wood Johnson Foundation

Well, thanks for having me, Jeff.

Jeffrey Snyder, Broadcast Retirement Network

Yeah, this is a really important topic, affordability, healthcare, availability of medical services. I’m trying to think where the best place to start and maybe I can tell you and the audience a little story then you can react to it and then we can kind of go. So I was mentioning to you that I just got my premium for 2027 for the, my insurance policy and it went up like 16%.

So I need coverage, my wife and I need coverage. We get it through the exchange, I have to go through it. But affordability for healthcare continues to be a challenge, not only for myself and my family, but for so many Americans.

Kathleen Hempstead, PhD., Robert Wood Johnson Foundation

No, that’s absolutely right. And I think this is a really great time to be talking about this, not that the news is so great because we’re on the cusp of open enrollment. So many people like yourself are getting really hard news from their carriers, their state-based marketplaces, wherever they might get their coverage on the individual market and seeing really large increases.

And it’ll be the second year in a row for many folks. And then from all appearances, the employer market’s also gonna be really rough with many people seeing high single or double-digit increases, which includes some reductions in their benefit generosity. So even kind of after the fact.

And even in Medicare, open enrollment is gonna be stressful, not maybe so much because of premiums, but because of a loss of plan availability for Medicare Advantage and standalone Part D. So it’s a really, really hard time for Americans looking for their health insurance.

Jeffrey Snyder, Broadcast Retirement Network

But you need healthcare. I mean, it’s like, you can’t not, I don’t know what the, I can’t drop my healthcare. I’m middle-aged.

I wanna be able to go to my primary care physician. I wanna be able to have the under, the ability to go to the emergency room if I need to. Those can be very exorbitant costs.

So we need them, but it’s just really hard, I think, for a lot of people to stomach now because it just, in a time that is, we’re all challenged by affordability in so many different ways. This seems like a really critical thing to be challenged by in terms of affordability.

Kathleen Hempstead, PhD., Robert Wood Johnson Foundation

Yeah, no, that’s absolutely right. A lot of people are making enormous financial sacrifices to keep their coverage, and it’s really crowding out their ability to spend on other things like their education, their children’s school expenses, saving for the future. And we’ve also seen an explosion in medical debt, and a lot of that debt is carried by people that have insurance because unfortunately, benefit designs are changing so that so much out-of-pocket responsibility is being pushed onto consumers that you may, for example, you might need to get an MRI or something like that if you have a typical deductible, which could be $2,000 in the employer market, and as you know, much more in the individual market, you may be asked to come up with a very large payment. And many American families just don’t have that liquidity, and so we’re seeing so much medical debt. And of course, the uninsured are at the highest risk of medical debt, but most people with medical debt, unfortunately, are insured.

So I think it’s a really sad commentary on what’s going on with our system.

Jeffrey Snyder, Broadcast Retirement Network

Yeah, I don’t want to give my opinion, but I think it is hard. It puts a lot of pressure on people, and for those that maybe can’t afford it, you shouldn’t have to choose between getting your back looked at if your back kind of goes out like mine does, or you have a heart murmur or something like that. It just seems like you shouldn’t have to forego that because that’s going to impact so many other parts of your life.

Let me ask you about the impact to the healthcare system, and what I mean by that is our hospitals, both hospitals in urban areas, but also in rural areas. The rural hospitals and healthcare systems are facing big challenges as well.

Kathleen Hempstead, PhD., Robert Wood Johnson Foundation

Yeah, that’s right. There are a lot of different headwinds coming at hospitals, largely because of, or one of the main factors is HR1, which has changed a lot of the way states are allowed to leverage federal funds in the Medicaid program just to kind of make it simple. States are not allowed to do things that would have allowed them to give hospitals more money, so it’s really showing up as a reduction in funding to hospitals to help run the Medicaid program, and so it’s putting states in a really difficult situation, and also it’s really experienced as a funding cut for hospitals.

And at the same time, they’re faced with the fact and the worsening trend of millions of people losing their coverage. So with the, for example, Medicaid work requirements, which go into effect in January, there’s predictions of up to 5 million people losing their coverage, either because they don’t qualify or because they’re not able to navigate the paperwork that they need to navigate. And then what that means for hospitals is those people don’t show up for routine care, elective surgery, preventive screenings, all these things, because they don’t have coverage, but when really terrible things happen to them, they will show up, but they won’t be able to pay.

So there’s a big concern about, and we’re already seeing it actually, growth in charity care, reduction in revenue, and that also is seen when millions of people in the individual market have decided not to renew their coverage and dropped it, and those are also people that are now not getting routine care, but when they are really in a crisis, they will show up at often a more expensive setting like a hospital because things have gotten to a bad point. And once again, there’s a real difficulty with paying.

So those federal policy changes have put a lot of pressure on hospitals, for sure. And we’re seeing increased hospital closures across the board, but I’m glad you brought up rural because I think the rural situation is more kind of an extreme version of what everyone else is going through because in rural areas, you see the population is less healthy, the population is less wealthy, you have more dependence on public coverage, and you have hospitals, many of which are financially strapped to begin with because they have kind of high fixed costs and sort of low volume. And then this reduction in revenue that is a general problem is kind of acute in the rural context.

And so I think there are many people that are very worried about whether a lot of rural hospitals could close. One organization has estimated that there are 700 rural hospitals that are at some general or extreme risk of closure. And the impacts of hospital closures in rural areas is really significant because very often there are very few hospitals to begin with.

People already have to travel great distances to go to the hospital compared to in urban areas. So hospital closures can have really almost kind of existential consequences for communities because people, if you get too far from healthcare, it’s sort of not viable to live places. And we’ve already seen many hospitals in rural areas close important services like chemotherapy.

I’m sure you’ve heard about maternity care so that people already are in a situation where many people have to travel really far distances to get services like chemotherapy, for example, something you need routinely if you’re in treatment for cancer, people driving long distances. So it is a bad problem for all of us, but I think rural areas are really at the greatest risk.

Jeffrey Snyder, Broadcast Retirement Network

So, yeah, I mean, you know, just kind of, you know, I don’t know anything about healthcare other than I use it. I try my best to be healthy, but economically speaking, it just doesn’t seem like traveling longer distances to come into an urban area, or you may not have access to ambulatory services or things like that. Like say, God forbid you get in, you can cut your finger or worse, and you have to go by ambulance.

And that means you go longer or have to travel further to get that, which increases, I would think, your risk of succumbing to the illness or when you don’t get treatment. So you mentioned some of these, I guess, policy changes that are being made. How are people looking at addressing maybe some of these shortfalls?

So, you know, we don’t want these urban, or excuse me, these rural hospitals to close. Is it creating clinics, like the 24-7 clinics that maybe can do some of the things that a hospital… I’m just wondering what you see happening.

Kathleen Hempstead, PhD., Robert Wood Johnson Foundation

Well, I think there are a lot of different attempts. You know, every state’s a little bit different, but there are some ideas to try to compensate in certain ways by, you know, reducing costs and increasing the availability of certain services. You may have heard about the Rural Health Transformation Program, which came sort of on the heels of HR1 and really was a kind of attempt to soften the blow a little bit by providing a certain amount of federal grants to states in rural areas to try to experiment with how to redesign or, you know, improve the efficiency and sort of what you could do with a dollar in rural healthcare.

And I think that that’s a, you know, it’s a laudable effort. And I think states are taking those opportunities really seriously and trying to do the best that they can do with the money. But I think it’s also important to acknowledge that it’s no way does it make up for what is being cut from rural hospitals with HR1 because it’s a lot less money, first of all.

It’s the amount that can be used to actually pay hospitals or pay providers is capped at 15% of the total. So that’s really consequential. And it is targeted at more kind of upstream kinds of solutions or, you know, maybe transitioning to more digital care or using technology differently or trying some pilot program to improve workforce problems or things like that, rather than the kind of more immediate cashflow problems that hospitals are gonna have.

So I don’t think anyone should look at this as a saver. I mean, I think it could be helpful and every state applied for that money, obviously, and is taking the opportunity really seriously. But I think people are thinking about things like, you know, how could you maybe make more use of mobile services?

How could you make more use of remote services? How, you know, if you maybe it makes sense to think about, you know, some kinds of reorganization or, you know, it’s kind of strategic staffing of specialties and services at hospitals to try to maximize efficiency. But I mean, I think there are limits to what can really be done in the current context.

But yeah, I think people are looking to try some new things to see if we can deliver healthcare more efficiently and more expansively with limited resources.

Jeffrey Snyder, Broadcast Retirement Network

And if I may ask, and again, I’m not an insurance expert, but I know that states regulate the insurers. Are there things that the insurers can do? And again, I’m thinking selfishly about my own premium, you know, but are there things that they can do to incentivize?

So like, if you have certain behaviors that you do correctly, maybe your health insurance is better. Again, you know, there may be legal or discriminatory issues that I don’t know about, but I’m just trying to think about, you know, are there ways that they can kind of reform what they’re doing? Because it sounds like it’s kind of a shared responsibility.

We can’t all rely on, you know, the federal government or the state government to bail us out. At the same time, these private insurers are insuring us. So, you know, is there a happy medium somewhere, I guess?

Kathleen Hempstead, PhD., Robert Wood Johnson Foundation

Well, there’s sort of different problems in different lines of business. I mean, with the Medicaid work requirements, the, you know, the biggest thing that’s happening is just a lot of people are gonna lose their coverage. So it’s not great for insurers in a way, because when a lot of people lose their coverage, it tends to be the case that the population gets a little more acute.

Because, you know, as you can imagine, the people that jump through all the hoops to keep their coverage are more likely to be the ones that are using a lot of services, taking a lot of medications. So that actually kind of raises the cost to the insurers to cover the populations that per member costs, even if their volume’s down. So they’re, you know, they’re negotiating for higher rates.

And I don’t know if you’ve been following this, but there’ve actually been some Medicaid exits recently in some states, which we don’t often see. I think, you know, in the ACA marketplace, again, a little bit the same thing is happening where you’re seeing insurers raise their rates because the population’s becoming riskier, because again, the people that won’t pay that 16% increase would be the people that feel like, well, maybe I don’t really need my coverage that much. And that makes the population that remains more acute.

You know, I think insurers are pretty regulated in the ACA marketplace, for example. They have to provide a refund if they make too much money. I think there’s always an attempt in times like this to talk about kind of reinventing the way we value primary care, to try to do more upstream things, to keep people healthier.

And I have heard that conversation in a lot of different contexts. And I do think it’s important, but I think that, you know, what’s happening here isn’t just that people aren’t getting the primary care that they need, although of course that could be helpful to reduce costs. And, you know, Americans have a lot of bad habits for sure, and could all be healthier.

But really it’s very large increases in just the price of healthcare services, more than a large increase in utilization, although there has been some increased utilization. And it’s also the development of new therapies, like new prescription drugs that are very helpful, you know, do a lot of great things, but cost a lot of money. So I think people really look at, well, it’s kind of inflation, it’s also utilization, and it’s also the mix of services that people are using that have really been driving up premiums, kind of across the board in recent years.

But then you have to add to that, a lot of people losing their coverage due to HR1, and due to the enhanced premium tax credits expiring in the ACA marketplace, and then all this withdrawal of federal funds from the Medicaid program. So it’s kind of a, you know, a tsunami of bad effects that are, you know, driving up prices in every segment and making it really hard for people to keep their coverage and then if they have their coverage to afford care. So it’s a kind of unprecedented mix of problems.

Jeffrey Snyder, Broadcast Retirement Network

My last question, I could talk to you for hours, I don’t think you wanna spend hours with me, but I think it’s a very important topic that we’d probably have to come again, but bring you on again. But let me ask you, as I was listening to you talk about this, I was thinking to myself, are we the only society in the world that are going through this? That’s my first part.

And then second part, are there some lessons to be learned across the globe from, because every society is like aging, right? I mean, we’re not, America is not the only aging society. We have China and all parts of the world.

So are there some lessons that maybe we can get from elsewhere, someone else doing this better than we are? Or maybe we’re the best, I don’t know.

Kathleen Hempstead, PhD., Robert Wood Johnson Foundation

I will. You’re right, the aging’s similar. Some of the health issues are similar.

Some of the cost of the new therapies are kind of similar. I think America has a very unique health system compared to a lot of other countries that we would compare ourselves to because we don’t have a universal system like Canada or Germany or England or other countries that we might think that we’re kind of like. So we actually pay about twice as much per person as really any other country to which we would compare ourselves.

And that is because our system’s very fragmented so that we don’t have leverage to negotiate lower prices. And there’s also an enormous amount of administrative costs we have in our system because people are always churning between one plan and another plan depending on where they work, where they live, how old they are, and going through these different enrollment processes. There’s just a lot of money expended on administrative costs in our country.

So yeah, I mean, I think, I mean, there are a lot of really talented clinicians and wonderful hospitals that people come to from all over the world. But I think in terms of how we run our healthcare system, I think we’re outliers in how much we pay and how little we get for what we pay. Because some of the things that we’ve been talking about like medical debt, it’s really unknown in other countries that we would compare ourselves to because everyone has sort of the same relatively affordable system.

Are those systems perfect? No. And people in other countries often complain about having to wait for things or not getting exactly what they want when they want them.

So every health system has some strains, but I think ours is unique in terms of how expensive it is and how sort of incompletely it covers us.

Jeffrey Snyder, Broadcast Retirement Network

Yeah, well, I guess TBD. I mean, unfortunately, this is not something that both you and I can solve, but hopefully with the next Congress coming in in January, maybe this is something they can pick up. I think they have a lot on their plate, by the way.

Dr. Hempstead, it’s a pleasure to talk to you. Thanks so much for joining us. And we look forward to having you back on the program again very soon.

Kathleen Hempstead, PhD., Robert Wood Johnson Foundation

Sure thing. Thanks for having me.

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