Health Care Premiums Could Reach $23,342 by 2020
The cost crisis in our health care system simply can’t be overstated. The rapid growth in cost is the driving force behind our projected long-term public debt and the growth in private health insurance premiums threaten to cripple private industry. The Commonwealth Fund is out with a new study showing just how quickly the situation is worsening.
National surveys have found that family premiums for employer-sponsored health coverages increased 52 percent from 2003 to 2009, while median family income rose 13 percent. Such a rapid increase in the cost of employer-sponsored health benefits has forced difficult choices at workplaces across the country. Studies indicate that slower growth in wages and lower savings for retirement (worker and employer contributions) have been part of the trade-off to preserve health benefits. Despite such trade-offs, the monthly cost of premiums paid by workers and their families is up, consuming an ever-greater share of any wage increases they might receive.
Health care premiums have grown roughly four times faster than income. This simply isn’t sustainable without crushing government and private budgets. And if the problem is not truly dealt with, that is what will happen:
As of 2009, the average premium was $13,027 a year for family coverage for private sector employers, ranging from $11,000 to over $14,000 across states. If insurance premiums for employer-sponsored health plans in each state continued to grow at the same average annual rate seen from 2003 to 2009, the average premium for family coverage would rise to $23,342 by 2020—an increase of 79 percent.
The study looked at what would happen if the new health care reform law reduced the annual projected premium growth rate by one percentage point or 1.5 percentage points. In the former, average premiums would reach only $21,019 in 2020, and in the later they would reach only $19,938.
Even with optimistic projections, the new health care law would still see premiums growing faster than income, and we’d still have by far the most costly health care on earth. This means, even assuming health care reform works well, which I highly doubt, the ever-growing cost of our health care premiums will force it to remain a critical political issue for years. It has not be fully dealt with.
I doubt the ability of the new law to really control cost because much of the “bending of the cost curve” is based on what I think is clearly faulty economagic, thinking pushed by economists like Jonathan Gruber. It is the idea that using things like an excise tax to shift more of the health care cost-sharing on to regular people will reduce cost by making them more savvy health care consumers. Of course, I believe this is pure nonsense for many reasons, including the fact that this Commonwealth Fund study found that, over the last decade, employers have been engaging in massive increases in cost-sharing, yet health care premiums still grew rapidly.
Premiums have gone up even while employers have asked workers to pay a greater share of health care costs—in the form of deductibles and copayments—or have reduced the generosity of benefits in an effort to moderate annual premium growth.
Unfortunately, although the growth of health care costs means it must remain a top political issue, we seem doomed to have our elected officials embrace destructive, regressive “solutions” that don’t fix the problem. The Republican Party, Obama’s bipartisan deficit commission, and even the Obama administration are all devotees of the economic dogma that forcing regular Americans to pay even more out-of-pocket for health care will control costs.
Of course, what is ignored are actual solutions that have been proven to work by other countries, like the way to reduce cost is to collective bargain on behalf of all health care consumers for the best rates possible using single-payer or all-payer systems. But those real solutions would hit the huge profits of politically well-connected large corporations, so we appear doomed as a country to instead see useless economagic solutions that only hurt regular Americans.