Got a raise? Give it to health care

Study finds that rising health costs have far outpaced wage increases over the last two decades

 A new report finds that increased health costs have far outpaced wage increases over the last two decades. (Shutterstock)

A new report finds that increased health costs have far outpaced wage increases over the last two decades. (Shutterstock)

By Ted Cox

If you got any kind of raise at all over the last two decades, it most likely went straight into health costs.

That may not be news to anyone earning a paycheck, but it’s confirmed in a new report by the Economic Policy Institute.

“Rapid growth in the cost of U.S. health care has put sustained downward pressure on wages and incomes,” writes the EPI’s Josh Bivens in a report called “The Unfinished Business of Health Care” released earlier this month. “Rising premiums, out-of-pocket costs, and public health spending are crowding out income gains and spending on other goods and services.”

A new study published by the Pew Research Center this summer found that spending power for U.S. workers had remained almost level since the mid-’60s, with health-care costs accounting for much of the increased spending to wipe out raises, as the cost of benefits has outstripped wages and salaries since 2000.

The costs are not associated with improved care. “The cost of American health care is exceptionally expensive while its quality is subpar when compared with health care in similarly rich nations,” Bivens writes. “The Affordable Care Act (ACA) was a major step forward in addressing some key problems with the American health-care system. The ACA expanded coverage to millions and established clear and popular rules to eliminate bias against pre-existing conditions. Its provisions provided much better protection against personal bankruptcy due to medical costs. These advances notwithstanding, the provisions of the ACA were insufficient for achieving the aim of reining in the fast-rising costs of American health care without sacrificing households’ access to needed medical care.”

That’s the “unfinished business” referenced in the title. “Since the ACA was passed, the Republican-controlled Congress has done nothing to usefully reform or strengthen the ACA but has instead sought to subvert its gains,” Bivens writes. “A full repeal of even the most popular ACA provisions (like the ban against discrimination on the basis of pre-existing conditions) just barely failed in Congress, and the Trump administration has engaged in numerous efforts to thwart the ACA’s effectiveness.”

The weight of the empirical evidence in this report indicates clearly that policies to ‘bend the health-care cost curve’ should focus on efforts to control prices, not use.
— Josh Bivens of the Economic Policy Institute

The report finds politicians pulling in opposite directions, with Republicans seeking to weaken health-care regulations and access to health care, while progressive Democrats seek a “single-payer” or “Medicare for all” system. “On the cusp of the 2018 election, this has left the American health care system in limbo,” it says. With no one seeking to contain rising costs, “Prices for pharmaceuticals, physician salaries, and medical procedures are almost uniformly higher in the U.S. than in peer countries — sometimes staggeringly so,” without a corresponding gain in the quality of care.

The report finds that premiums for the average family health-care policy purchased through an employer more than tripled from 1999 to 2016, from just under $6,000 a year to just over $18,000. That was compounded by a rise in out-of-pocket expenses such as deductibles and copays that proved to be even higher than the increases in total costs and costs paid by insurers, thus shifting an additional part of the burden onto working families.

Most stunning is that health spending went from 5.2 percent of the U.S. economy in 1963 to 8.4 percent in 1979 to 17.4 percent in 2016 — meaning more than one in six of all dollars spent in measuring the U.S. Gross Domestic Product went to health care.

The report urges politicians to focus on controlling prices, not access to health care. “The weight of the empirical evidence in this report indicates clearly that policies to ‘bend the health-care cost curve’ should focus on efforts to control prices, not use,” it states. “The common root in strategies to contain prices in the health-care sector is the need to bring countervailing market power to bear against monopoly-like pricing power currently wielded by health-care providers.”

It suggests setting uniform “all-payer rates” for the costs of care and medicine, calling for “more robust public negotiation of prices and the extension of this public-sector pricing power to all payers.” For example, it adds, “policymakers should strongly consider setting caps on rates as a tool to slow growth and provide greater transparency and accountability to consumers.”

A recent study by the Kaiser Family Foundation found that health care is the top issue on the minds of U.S. voters heading into the Nov. 6 midterm elections.