The increase in health-care costs
Health care expenses have been slowly and steadily increasing over the past few decades. This trend has been affecting employer-sponsored insurance premiums, out-of-pocket costs, and insurers’ payments. All of this means that people are spending record amounts on health care – medical expenses accounted for 17.4% of the U.S. GDP in 2016, more than double the 8.4% in 1979.
Premiums rising faster than wages
Family premiums and single premiums have been increasing much quicker than the wages, making no difference in out-of-pocket costs. This trend of increased health care is causing families to lose thousands of dollars every year in wages, out-of-pocket costs, and increased taxes. Josh Bivens, the research director at EPI, said: “rising health costs are the clearest sign of how dysfunctional the American health care sector is.” Compared to other nations, we spend more money on the same, or worse, quality of health care, and this negatively affects an employee’s wages and their ability to receive and establish continuity of health care.
Health spending growing faster than the economy
The health spending as a share of potential GDP has been increasing steadily since the 1960s. Similarly, the annual growth rate of health spending per capita, has been larger than the annual growth rate of potential GDP per capita. With these trends in mind, in addition to more expensive co-pays and deductibles, employers have no choice but to put a larger chunk of their employees’ wages to cover insurance premiums. Unfortunately, employees are unable to directly assess how these expenses affect their paychecks, but it is one of the multiple reasons that wages have not been increasing drastically. It is estimated that if employer contributions to employees’ premiums had remained constant to the rate in 1979, cash compensation for the entire labor force would have been $387 billion higher by 2016, or $327 billion higher for the bottom 90%. This increase would have represented an average increase in cash wages of $2,740.
Ironically, despite the fact that the US spends the most on health care per capita, the U.S. health care system ranks last in multiple categories and markers amongst other wealthy, developed countries. This data was released by the Commonwealth Fund last year. Further compounding the problem, medical offices, and health insurance providers do not have a standardized list of what treatment and health care is covered by insurance companies. This lack of standardization makes it difficult not only for the consumers but the providers as well. Rising health care costs are a trend that involves multiple factors; however, one thing is clear. It is necessary to implement a multifaceted approach in order to not only save people money but also ensure that they have an opportunity to receive appropriate healthcare.