Who pays for health care? You do!


Guess Who Foots America’s Health Care Bill? Not Employers.

By Niko Karvounis, Health Beat
Posted on March 12, 2008, Printed on March 17, 2008

In the latest issue of the Journal of the American Medical Association (JAMA), the always-compelling duo of Ezekiel Emanuel and Victor Fuchs — associated with the National Institutes of Health and Stanford University respectively — dispel the myth of “shared responsibility” in health care financing.

What does this mean, exactly? Simple: “the common claim that employers, government, and households all pay for health care is false. Employers do not share fiscal responsibility and employers do not pay for health care.” In fact, the “money [for health care] comes from [our] own pockets.”

As simple as this assertion may seem, it’s actually a ground-breaking statement. As Emanuel and Fuchs point out, most of the political rhetoric surrounding health care reform implies that everyone — individuals, employers, households, and governments — struggle with health care costs equally. Implicit in this formulation is a sad tale of businesses getting crunched: Because employers provide health coverage to most Americans who are insured, employers are often singled out as victims. It often seems like the health care crisis is their burden.

Indeed, “burden” is quite the buzzword here. Barack Obama says it’s a tragedy “when businesses have to lay off one employee because they can’t afford the health care for another.” Hillary Clinton notes that “large American companies compete in a global economy against companies in countries that impose far lower health care burdens on employers.” Congress celebrates reforms that supposedly “takes [the health care] burden off employers.” It certainly sounds like businesses have it bad.

Not so fast, say Emanuel and Fuchs. We need to consider the “health care cost-wage trade-off.” A large body of economic research shows that, when you crunch the numbers, employers don’t lose the money they spend on health care, but rather take the costs out of their employees’ paychecks. In fact, a 2004 study from the International Journal of Health Care Finance and Economics found that “the amount of earnings a worker must give up for gaining health insurance is roughly equal to the amount an employer must pay for such coverage.”

This unsettling trade-off has been going on for the past 30 years.

Consider the fact that over this period “premiums have increased by about 300 percent after adjustment for inflation” while inflation-adjusted corporate profits have “flourished … with … increases … of 200 percent after taxes.” A two-fold increase in profits hardly seems an indication of hard times.

Workers’ earnings, on the other hand, have felt the pinch: “average hourly earnings of workers in private nonagricultural industries have been stagnant, actually decreasing by 4 percent after adjustment for inflation” over the past three decades. If health care costs are burdening someone — as we know they are — its not so much businesses as it is the average Joe.

Working stiffs also lose out when public sector health coverage gets too expensive. Here the trade-off is perhaps more obvious than in the private sector: in order for governments to fund health coverage, they need to tax citizens, borrow money, or cut other services. There’s a “public service” cost that all of us, as citizens, bear. A government that’s consumed with health care can’t do much else.

Troublingly, when states scramble to find health care dollars, education is one of the first things to go. Emanuel and Fuchs reference striking research from the Rockefeller Institute of Government showing that, in times of health care-fueled budget crunches, higher education takes the biggest hit. Looking at 10 representative states, the Institute found that, thanks in part to sky-rocketing Medicaid costs, states “projected spending 4.5 percent less on higher education in FY 2004 than in FY 2003” and “raised tuition and fees by almost 14 percent on average.” Costly health care translates into unaffordable education.

The irony here is that education is a key health care issue. The College Board reports that the higher the level of education, the more likely an individual is to engage in regular physical activity, refrain from smoking during pregnancy, and adhere to Type 1 diabetes treatment regimes. In other words, if we compromise education, then we compromise America’s health — it’s a lose-lose situation.

Any way you cut it, high-cost health care ultimately hurts citizens more than it does employers or the government. On some level, we may grasp this; but too often the discourse around health care reform assumes that people and institutions are shouldering the same load. That’s not the case.

Politically, this is a distinction that needs to be made clearer. Emanuel and Fuchs are spot on in saying that people need to understand that there’s no “free lunch” when it comes to health care. If they don’t — if it’s never made clear that the biggest loser in our health care system is patients — than the motivation for sweeping reform will be diluted. We’ll think that the spiraling health care crisis is someone else’s problem — when really, it’s ours.

Not America’s, not society’s, but literally mine and yours.

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