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Phil Greenspun Has a Consistently Sane and Interesting Blog
Old 10-03-2010, 01:41 PM   #1
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Phil Greenspun Has a Consistently Sane and Interesting Blog

Comparing health care costs to median income
philg - August 25, 2010 @ 12:56 pm ∑ Filed under Uncategorized

I got a look at a benefits statement for a 40-year-old worker at a large Boston-area employer. This worker has a medical and dental plan that covers a family of two adults and one child. The deductibles are low, which makes these costs a good estimate of the total expected cost of health care for this family. Massachusetts already has a universal coverage system almost identical to the one the U.S. will adopt nationwide in 2014, so the cost in Massachusetts today is probably a good guide to what health care will cost nationally.
Here are the numbers: $19,022 for membership in an HMO, which was supposed to be the magic bullet for controlling health care costs in the U.S; $1,781 for dental; total = $20,803.
Letís compare this to median income in the U.S. The Census Bureau estimates that median household income in 2008 was $52,029, which might include two working parents plus the kidís lemonade stand revenues. Bureau of Labor Statistics says that the median hourly income in the U.S. was $15.95 in May 2009, which works out to $31,900 for a person working 40 hours per week, 50 weeks per year.
When you consider that local, state, and federal governments need to collect substantial tax revenues from the median worker in order to fund their near-50% share of the U.S. economy, this means that health care for a small family is likely to consume 100 percent of the after-tax income of a typical U.S. worker.
Another way to look at this is that weíve produced a great health care system for rich people, but we forgot to make most Americans rich!
[The mismatch between income and ability to pay for health care should be widening. Median wages in the U.S. are surely falling, if only because so many Americans now have a wage of $0. Health care and health insurance costs have risen every year in both Massachusetts and nationally. Sources: A 2009 article on health care inflation outpacing salary increases; an article today comparing health costs to reported inflation]

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Old 10-03-2010, 02:39 PM   #2
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"Another way to look at this is that we’ve produced a great health care system for rich people, but we forgot to make most Americans rich!"

Actually, we've produced a great health care system for people who get insurance through their employers.

One problem I have with many gov't statistics is that they only look at a piece of the issue. For example, median household income looks at cash earnings only; in my mind, the income should include the value of employer paid benefits.

Looking at it that way, and presuming the employer is paying all of the health care (may not be the case), a household making the median of $52k with an employer paid health of $21k is actually earning $73k.

Now, this doesn't make the household any better off, but a) it would be a more appropriate base to compare households, especially over time; b) it's like earning $73k and getting a $21k off the top deduction for taxes and c) perhaps more interestingly, would enable us to see just how total employer compensation has grown over time (addressing the issue of employers not raising wages).

That $21k is $10/hour. Not insignificant. And since it is in the form of a benefit, it applies to all those in the same class (employee + spouse + child): an employee making $30k a year gets the $21k benefit and the $150k employee gets the $21k benefit.

[This is part of the hurdle of fixed costs to employment.]

Going on a tangent, it also seems odd to me that we, as a nation, can discriminate in total compensation based upon "medical class": a single person's company paid health care may be 50% of the married person's paid health care.

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