http://www.mydd.com/story/2009/9/15/22853/1453Numbers That Matter
by Charles Lemos, Tue Sep 15, 2009 at 10:08:53 PM EST
Dr. Drew Altman of the Henry J. Kaiser Family Foundation today published a very simple and must-read one page summary of their annual benchmark survey of employer health coverage and costs. The summary highlights two numbers: the average cost of a family health insurance policy and the astoundingly large differential between between increases in health insurance premiums and the overall inflation rate.
Two numbers jumped off the pages.
The first number was the average cost of a family health insurance policy in 2009: $13,375. To put that number in context, if you are an employer, you can hire an employee at the minimum wage for about $15,000 per year. If you are a consumer, you can rent an average two-bedroom apartment nationwide for $11,136 per year (though it is quite a bit more here in Menlo Park, California where our Foundation is based). You can also buy a new Chevy Aveo for $12,000, and it gets 35 miles per gallon on the highway.
The other result that jumped off the page was the stark contrast between increases in health insurance premiums and overall inflation in the general economy. Premiums went up 5% and prices overall fell 0.7% (mainly driven by a big drop-off in energy prices).
The 5% increase we found in premiums is moderate by long-term historical standards. For example, two different times during the last decade premiums increased by 13% a year, in 2002 and 2003. This year's increase continues a multi-year period of relative moderation in premium increases. Still, over the last ten years premiums have increased by 131%, while wages have grown 38% and inflation has grown 28%. Consider this: If people (and businesses) are as concerned as they are now about rising health care costs in a period when they are actually moderating, how much more concerned will they be when rates of increase return to historic averages?
It's a fair question and the Kaiser Family Foundation goes on to do some simple arithmetic.
Let's do some very simple arithmetic. Start with a fairly conservative assumption: If we assume that premium increases over the next ten years will average what they did over the last five (about 6.1% per year), the average premium for a family policy in 2019 will be $24,180. That's a big number. On the other hand, if we assume increases revert to the average of the last ten years--an average annual increase of about 8.7% and a very plausible scenario--premiums in 2019 will average a whopping $30,803, a very scary number.
Indeed,
these numbers are sobering and reflect a broken health care system that threatens to subsume the American economy and thus American living standards. Healthcare costs in the United States consume one-sixth of GDP. It is imperative that we bring this number in line with other advanced economies who are spending one-tenth of their GDP on healthcare providing universal coverage and obtaining better life metrics.