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Tuesday, May 29, 2012

"The Fork in the Road for Health Care"

Uwe Reinhardt wonders how long will workers continue to tolerate an employer-based health care insurance system that allows wage gains to be "wiped out" by increases in health care costs:

The Fork in the Road for Health Care, by Uwe E. Reinhardt, Commentary, NY Times: Milliman, the global actuarial and employee benefit consulting firm, released its annual Milliman Medical Index for 2012 on May 15. ... For 2012, the nationwide average of the total health spending for a typical family of four was estimated by Milliman to be $20,728. ... A just-released study by the Health Care Cost Institute shows that much of these spending increases are the result of rising prices and not of rising use. ...
On average, according to Milliman, employers contributed 58 percent, or $12,144, to the total cost of $20,728, through contributions to their employees’ health insurance premiums. The family itself contributed another 25 percent, or $5,114, toward the premium via direct payroll deduction. In addition, it spent 17 percent, or $3,470, out of pocket for health care.
Although the family’s contribution of $8,584 is by no means trivial, it is less than half of the total average cost of a family’s health care cost. Most employees probably believe that “the company” – that is, its owners – absorbs the other 58 percent of the family’s total health spending.
Economists have long argued that this is an illusion – that over the longer haul the bulk and possibly all of the ostensibly employer-paid health insurance premiums gets indirectly shifted back into the employee’s paycheck through lower increases in take-home pay. ...
This point on backward cost-shifting was driven home recently in a paper in Health Affairs by David Auerbach and Arthur Kellerman. The authors present data showing that a decade of health care cost growth in employer-based health insurance “has wiped out real income gains for an average U.S. family” from 1999 through 2009. Health care has come to chew up American household budgets like Pacman. ...
Americans are fond of the idea that individuals and families should be self-reliant. But a question confronting the American public and their political representatives is how they imagine households with money income of, say, $30,000 to $50,000 will tolerate the ever-larger bites the health care Pacman seeks to take out of their budgets. ...

    Posted by on Tuesday, May 29, 2012 at 09:09 AM in Economics, Health Care, Income Distribution | Permalink  Comments (84)


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