By Michael A. Fletcher
The Washington Post
March 24, 2008
Recent history has not been kind to working-class Americans, who were down on the economy long before the word recession was uttered.
The main reason: spiraling health-care costs have been whacking away at their wages. Even though workers are producing more, inflation-adjusted median family income has dipped 2.6 percent — or nearly $1,000 annually since 2000.
Employees and employers are getting squeezed by the price of health care. The struggle to control health costs is viewed as crucial to improving wages and living standards for working Americans. Employers are paying more for health care and other benefits, leaving less money for pay increases. Benefits now devour 30.2 percent of employers’ compensation costs, with the remaining money going to wages, the Labor Department reported this month. That is up from 27.4 percent in 2000.
“It is clear that benefits have been the biggest issue on collective bargaining tables and in company compensation calculations,” said Thomas A. Kochan, an economist at the Massachusetts Institute of Technology. “They eat up scarce dollars, and that limits the amount of money firms feel they can put on the table for wage increases.”
http://www.washingtonpost.com/wp-dyn/content/article/2008/03/23/AR2008032301770.html
Comment:
By Don McCanne, MD
This report is further confirmation that increases in health care costs are not being absorbed by employers but are being passed on to employees in the form of forgone wage or salary increases. Since the percentage of compensation in the form of health insurance is inversely related to the income of the employees, this is a regressive method financing health care. Furthermore, higher-income individuals also receive a greater tax subsidy for employer-sponsored coverage than do lower-income individuals. Thus employer-sponsored health care financing is doubly regressive. Lower-income individuals pay a much higher percentage of income for their health care benefits than do higher-income individuals.
The employer role in most current proposals for reform ranges from a mandate for employers to provide private coverage for their employees, to removing the employer from any role while shifting the responsibility for obtaining coverage to the individual. These proposals are flawed for many reasons, but one of the most important is that the premium for private plans is determined by the benefits provided and not by the income of the beneficiaries. Whether paid directly by the employee or nominally by the employer, health care financing remains regressive.
Some proposals would attempt to correct this by providing refundable tax credits on a sliding scale based on income. But this would produce an administrative nightmare. The tax credit eligibility for each individual and family would be in a constant state of flux because of changes in employment status, income, family size, plan availability, eligibility for public programs such as Medicare, and numerous other potential factors that might be considered to improve equity. Adding more administrative complexity to a system already overburdened with profound administrative excesses doesn’t make sense from a policy perspective.
Rather than assigning a fee (insurance premium) to an individual or family based on an insurance product, it would be much simpler and much more equitable to assign a tax or combination of taxes, based on ability to pay, that is contributed to a universal risk pool that covers everyone. Plus the administrative savings would go a long way toward financing care for those currently left out of our system. And isn’t it really our goal to provide affordable care for everyone?
