Survey: Healthcare costs rise at greater pace than workers’ wages
Thursday, October 31, 2019
There is a reason that healthcare is so contentious in the Democratic Party’s presidential debates this year.
“The single biggest issue in healthcare for most Americans is that their health costs are growing much faster than their wages are,” Kaiser Family Foundation (KFF) President and CEO Drew Altman said in the group’s Employer Health Benefits Survey. “Costs are prohibitive when workers making $25,000 a year have to shell out $7,000 a year just for their share of family premiums.”
While economic growth is slowing — falling below 2% in the third quarter of 2019, and the rate of unemployment is at a 50-year low, the amount of money that “employers and workers pay toward premiums continues to rise more quickly than workers’ wages and inflation over time,” the survey found. One outcome of this trend is to reduce households’ buying power, economically speaking.
That means that workers and their families have less income to spend on the goods and services that businesses provide. Economists call this a weakening of demand.
Weak consumer demand is a negative for businesses. They can and do cut back on hiring new workers and the hours that current employees work.
Businesses also can and do cut back on investment in new equipment and infrastructure to offset rising costs in operating expenses. The investment share of GDP has dropped during the past 12 months, according to Dean Baker, a senior economist at the Center for Economic and Policy Research based in Washington, D.C.
According to the KFF survey, there are 153 million Americans with employer-sponsored healthcare coverage. Against that backdrop, Sen. Bernie Sanders, I-Vt., has stated that a Medicare for All healthcare system, which he and fellow candidate Sen. Elizabeth Warren, D-Mass., support, would in part eliminate premiums, along with co-pays and deductibles.
Democratic presidential contender Joe Biden, former vice president of the U.S., has countered with the view that workers would rather retain their current employer-paid healthcare than replace it with Medicare for All. In other words, stay with the devil they know versus one that is unknown.
The KFF survey would seem to suggest otherwise. For example, consider the rising cost of deductibles.
“Currently 82% of covered workers have a deductible in their plan, similar to last year and up from 63% a decade ago,” according to the KFF survey.
“The average single deductible now stands at $1,655 for workers who have one, similar to last year’s $1,573 average but up sharply from the $826 average of a decade ago. These two trends result in a 162% total increase in the burden of deductibles across all covered workers over the past decade.”
Wendell Potter, the president of nonprofit group Business for Medicare for All said of the research, “The study's findings are just the most recent evidence that the employer-based system of health insurance is rapidly collapsing.”
Potter, who was formerly vice president of communications at Cigna, continued, “This and other studies also make clear that private insurers are not able to control rising drug, hospital and other healthcare costs. Because of that inability, insurers increase premiums year after year, often by double digits, and employers in many cases have little choice but to force their employees into high deductible plans.”
The growing gap between workers’ income and healthcare costs would appear to call for a restructuring of the system. There are many moving parts; thus, the solution is difficult to obtain.
“Employer-sponsored coverage doesn’t come cheap for employers or workers, and many who work at low-wage firms or small business likely find it too costly to cover their families,” said Gary Claxton, a KFF senior vice president.
One thing is certain. Expensive healthcare will continue to be a hot topic in the 2020 run for the White House.
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