Medical prices rise three times the rate of consumer inflation, while medical expenditure consumes nearly one-fifth of our economy. A primary reason wage growth has stalled in recent years is because the cost of employer-sponsored health coverage has skyrocketed. The average cost for an employee health plan for a family is about $25,000 according to Kaiser Family Foundation. Economists generally agree that employee health insurance is just a form of noncash compensation. That means about $25k of families’ income per year goes for health coverage they rarely use. An article in The New York Times illustrates how much household expenditures are consumed by health care. Recall how rent and the cost of houses have become unaffordable since Covid? They are still cheaper than health care. American households now spend more money on health care than on housing and utilities combined. Remember how inflation jacked up the price of groceries, furniture, and household appliances and even clothing? As a proportion of household spending Americans spend more on health care than groceries, durable goods, clothing, and footwear combined.
I used to joke that someday we will all be living and working at the hospital when health care becomes our entire economy. Yet, the New York Times thinks health care expenditure is a good thing, saying:
The nation’s corps of nurses, oncologists, lab technicians, anesthesiologists and other health-related workers has been growing steadily, through recession after recession, going from 9 percent of the total workforce in 2000 to 13 percent today. The government expects that trend to continue, as the nation ages and requires more care.
That blistering growth could cool, however, if Republicans in Congress succeed in passing their flagship tax and spending bill. The Senate version is estimated to cut Medicaid, which accounts for about a sixth of total health care spending, by about a trillion dollars over the next decade. About $82 billion would come out of other health care funding, including Medicare and subsidies under the Affordable Care Act.
“It’s going to put strain on the continued operations of quite a few health care providers,” said Brad Hershbein, a senior economist with the W.E. Upjohn Institute for Employment Research.
The New York Times touts how great heath care jobs are. Purportedly we are all supposed to be happy about the inflated cost of health care because of the good jobs it provides for health care workers.
As much as politicians may focus on factory jobs, long idealized as the kind of work that could support a comfortable life for people without advanced degrees, health care is now playing that role for more people.
While medical inflation may fuel health care jobs, those jobs come at the expense of people who do not work in the health care sector. Two days ago I explained that Obamacare is a bad value for most. Should I decide to enroll next year, an ACA plan will likely cost me $9,000 a year for a $10,000 deductible. That means I would pay premiums of roughly $750 a month for a health plan that would provide no benefits until I had spent an additional $10,000 in a calendar year, after which my plan would only pay 60% of my medical bills.
Like most people, I do not enjoy paying large premiums for a health plan that provides virtually nothing of value, except protecting me against an exceptionally low probability, potentially high severity risk. Insurance is a means of transferring risk to another party, but in that regard, Obamacare is a bad deal by design. Money is fungible and there are innumerable things I would rather spend $750 a month on. I could use that same $750 a month to buy a used car or new furniture for my home. My wife and I could even take a nice vacation. Of course, nobody likes paying for insurance. You look back a year later and think, “well that was a waste.” While I think of Obamacare that way I do not think about my car insurance or coverage for my home that way.
Growing the health care sector does not produce tangible benefits for most people throughout much of their lives. The notion that we should all be happy to spend about $11,000 per person per year for the mere expectation that we may someday need medical care is both inefficient and wrongheaded. It would be far better to bank our health care premiums and only use them when we need care. Singapore has a system of personal health accounts that is worth emulating.
Read more at NYT: How Health Care Remade the U.S. Economy