New York, NY, November 17, 2011—Premiums for employer-sponsored family health insurance increased by 50 percent from 2003 to 2010, and the annual amount that employees pay toward their insurance increased by 63 percent as businesses required employees to contribute a greater share, according to a new Commonwealth Fund report that examines state trends in health insurance costs. The report finds that health insurance costs are outpacing income growth in every state in the country. At the same time, premiums are buying less protective coverage: per-person deductibles doubled for employees working for large as well as small firms over the same time period.
Obviously, the fast ramp in medical spending is not sustainable. Medical costs have become too large a fraction of US GDP.
According to the report, State Trends in Premiums and Deductibles, 2003-2010: The Need for Action to Address Rising Costs, by 2010, 62 percent of the U.S. population lived in a state where health insurance premiums equaled 20 percent or more of earnings for a middle-income individual under age 65. Today there are virtually no states where premiums are relatively low compared to income. In 2003, there were 13 states where annual premiums constituted less than 14 percent of the median (middle) income; by 2010, there were none.
With stagnant and declining wages the increasing cost of co-pays means an even sharper rate of decline in living standards.
"Whether you live in California, Montana, or West Virginia, health insurance is expensive. Out-of-pocket costs for premiums and care are consuming a larger share of people's incomes at a time when incomes are down in a majority of states," said Commonwealth Fund Senior Vice President Cathy Schoen, lead author of the report. "Workers are paying more for less financial protection. The steady rise in costs from 2003 through 2010, before enactment of the Affordable Care Act, points to the urgent need for health insurance market and health care system reforms."
We need to cut costs by automation of health care: Web-based diagnostic expert systems; Medical testing done by going to a drug store to provide samples; Wearable sensors tied to web-based diagnostics; Surgical robots; Cheaper imaging systems with built-in image analysis. Boosting productivity of the medical sector would raise living standards.
Peter Orszag, formerly Obama's director of OMB (Office of Management and Budget), says the growth rate in Medicare spending is already slowing.
Even adjusting for these shifts, though, Medicare spending is still up less than 4 percent so far this year. The 2011 numbers come on the heels of relatively slow growth in 2010 as well. Last year, Medicare spending rose just a little more than 4 percent. Compare this with an almost 12 percent average annual growth rate in Medicare spending since the early 1970s.
On the other hand, the average cost of employer-provided health plans is still going up faster than the rate of inflation.
Employers' spending on health coverage for workers spiked abruptly this year, with the average cost of a family plan rising by 9 percent, triple the growth seen in 2010.
Family plan premiums hit $15,073 on average, while coverage for single employees grew 8 percent to $5,429, according to a survey released Tuesday by the Kaiser Family Foundation and the Health Research & Educational Trust. (KHN is an editorially-independent program of the foundation.)
Workers paid an average of $921 toward the premium of single coverage and $4,129 for family plans.
The results mark a sharp departure from 2010, when the same survey found average family premiums up only 3 percent.
Health care is now over 17% of the US economy and still rising. Your buying power for other goods and services is lower because health care costs are so high. Americans can expect higher co-pays, a continued shrink in the fraction of jobs that include health insurance, higher taxes to subsidize the health care of older and poorer and government employees, and lower cash compensation due to higher employer insurance premiums.
The high cost of health care cries out for automation. Measures to make health care delivery more efficient and more automated could reverse the rise in health care costs and at least slow the decline in American living standards. Other limits will still pull down American living standards. But the decline could at least be made less steep.
|Share |||By Randall Parker at 2011 November 20 09:07 AM Economics Health|