First Class

We have a first class healthcare system. It works pretty well for people in first class but if you are in coach you might not be so happy.

By Ian Morrison

We have a first class healthcare system. It works pretty well for people in first class but if you are in coach you might not be so happy. Class (by this I mean socio-economic status) is increasingly the predictor of healthcare outcomes, service, and satisfaction, and here’s the really good part, if you are in first class you pay less of your income for healthcare than if you are in coach. So what’s not to like?

The Role of Class in Health

A number of recent studies are reinforcing a point that we have known for a very long time that socio-economic class is a powerful predictor of disparities in health care treatment and outcome, even adjusted for access. Here are two recent examples, quoted directly from the news feeds or the study abstract:

  • Study of Disability rates in the US. “U.S. residents ages 55 and older with annual incomes less than the federal poverty level are more likely to have disabilities that limit routine physical activities than those with higher incomes, according to a study published in the New England Journal of Medicine on August 17, 2006. According to the study, respondents ages 55 to 64 with annual incomes less than the federal poverty level -at the time, $8,259 for an individual – were six times more likely to have disabilities that limited activities such as walking, climbing stairs and lifting objects than those in the same age group with incomes of $60,000 or more. The study also found that the rate of disabilities continued to decrease among respondents ages 55 to 64 as annual incomes increased higher than $60,000. Study authors said the disparity did not result only because of more limited access to health care among respondents with lower annual incomes. Meredith Minkler, a professor of health and social behavior at UC-Berkeley and lead author of the study, said, “Social class is a tremendously important risk factor for disability,” adding, “If policy makers are concerned about improving health status, they need to focus not only on medical coverage, which only accounts for 10% to 15% of health status, they need to look at how to improve social class.”
  • US and England Comparisons. “The US population in late middle age is less healthy than the equivalent British population for diabetes, hypertension, heart disease, myocardial infarction, stroke, lung disease, and cancer. Within each country, there exists a pronounced negative socioeconomic status (SES) gradient with self-reported disease so that health disparities are largest at the bottom of the education or income variants of the SES hierarchy. This conclusion is generally robust to control for a standard set of behavioral risk factors, including smoking, overweight, obesity, and alcohol drinking, which explain very little of these health differences. These differences between countries or across SES groups within each country are not due to biases in self-reported disease because biological markers of disease exhibit exactly the same patterns. To illustrate, among those aged 55 to 64 years, diabetes prevalence is twice as high in the United States and only one fifth of this difference can be explained by a common set of risk factors. Similarly, among middle-aged adults, mean levels of C-reactive protein are 20% higher in the United States compared with England and mean high-density lipoprotein cholesterol levels are 14% lower. These differences are not solely driven by the bottom of the SES distribution. In many diseases, the top of the SES distribution is less healthy in the United States as well.”

These dramatic differences across socio-economic class are not just about access to healthcare or insurance coverage. They point to the fundamental role of class as a determinant of health. But obviously, these results are further compounded by the well-documented effects on health of both health insurance status and race and ethnicity. For example, analysis by the Commonwealth Fund has shown that among working people, the rate of uninsured is only 5% for those in the top income quintile (roughly $90,000 plus in household income) whereas it is 52% in the lowest income quintile (households earning less than $20,000). The most dramatic recent increase in uninsured rates is among those households earning between $20-35,000 (the second and third quintile of income). All of these effects are even worse when race and ethnicity are added to the mix, as the IOM’s report “Unequal Treatment” carefully documents. (By the way, the UK/England study focused solely on the white population, partially I believe to head off the old canard of international comparison studies, namely that the US is different because of our more heterogeneous population).

The bottom line of these studies is that socio-economic status matters a great deal and there are real smart scientists that believe there are neuro-physiological processes at work affecting human biology that have to do with stress and degree of control. In reviewing the US/UK study with a British journalist from the Financial Times of London, I speculated that we all work too hard in the US, and the poorer you are and the less educational opportunities you have, the harder you have to work. Maybe we should all put down our brooms or our Blackberries and go to the pub and we might be a lot healthier.

Class and Payment

But, I want to link the concept of class to the broader question of who pays for healthcare, because we have a unique set of circumstances in the US, where the income distribution is getting ever more extreme (the very rich getting very much richer) at the same time that we have healthcare financing policies that are regressive in their funding. High deductible health plans, in general and HSAs in particular are regressive forms of payment (rich people pay a smaller share of income to health care than poor people). As I have estimated in this column before, a million dollar a year earner in Canada would pay $150,000 in taxes toward healthcare, a million dollar earner in the US would pay about $58,000 in taxes and premiums toward healthcare. That is why single payer schemes such as the one passed in late August by the California Assembly is an assault to the status quo. The proposed legislation would be paid by an 8% payroll tax and a 3% individual income tax, probably doubling the overall healthcare bill for those million dollar earners. Obviously, only a few hundred thousand folk in America make over a million a year, but we all think we will, if we can’t go the Princeton, Stanford, venture capital route we are betting on the NBA, hip-hop, or No Limit Texas Hold’em to get us to the bling.

The battle that will ensue in the next round of national and state health policy debates will center on whether the middle class associates itself politically with the top or the bottom of the income distribution. Bear in mind that only slim majorities of national or California voters are willing to pay any more in taxes for healthcare and that the support evaporates after about $200 per year in additional taxes. It will be interesting to watch.

A Modest Proposal

Here’s my little idea. What if we took the best of the right and left. High Deductible Health Plans (HDHPs) are cheaper, because they don’t cover everything and when people have to pay out of pocket they use less (which may be good, bad or ugly depending on what care is foregone, but many of us believe it is generally bad or ugly, for example causing people to postpone needed preventive services or not comply with treatment, particularly for low-income people). The reason HDHPs are cheaper is not because of the tax advantage of HSAs but because of the high deductible. We should cover preventive services and chronic care medications on a comprehensive basis. We should have incentives for patients to be mindful of cost (not just drugs) and we should make the financing system a bit more progressive than regressive if we want to mitigate some of the worst effects of class. So here goes: everyone gets a basic preventive package covered on a first dollar basis, everyone gets a $10,000 per household deductible catastrophic health plan (premium sharing would be based on income), everything in the middle (the $10,000 in patient spending) is on a sliding co-insurance scale where the lowest income folk pay zero co-insurance and the top income folk pay a 100% co-insurance rate. According to the latest data from the Census Bureau for 2005, 19.7 million households (some 17%) earn over $100,000 in household income, 2 million households make over $250,000. Those top 1 or 2% earners would pay a larger share of premium, the taxes necessary to cover the premium subsidy to the poor, and up to $10,000 out of pocket making hospitals, doctor visits, and elective surgery a bit more of a retail experience. Oh and we probably should be using after tax dollars, not pre-tax dollars in a Health Savings Account. By making the affluent, well educated, savvy consumers pay more for first class we might even get the effects promised by the consumer-directed advocates, such as more questioning of the prices charged by providers. Enlightened employers like the University of California have some elements that point in this direction such as income-based premium sharing: janitors pay less toward healthcare than tenured professors, but that is a small step toward addressing the disparities created by socio-economic class.

Before the rich readers go up in arms about socialism and income re-distribution being dangerous and seditious, let me point out it is better for you than the single-payer alternative which is, by its nature, an even more massive transfer of income from rich to poor.

While this or other redistributive schemes is unlikely to be enacted as legislation it is important for all of us in healthcare to remember that class matters. It is always good to be in first class, but way too many of us never get the upgrade.

Ian Morrison is an author, consultant and futurist based in Menlo Park, California.