Who really robbed the middle class? Health Care

[clifp]

I found this Atlantic article showing the huge rise in health care cost as largely crowded out wage gains to be very interesting. Basically it shows that the total cost for employers to hire somebody has remained pretty constant since WWII but benefits have risen dramatically leaving less room to increase wages.

Corporate profits aren't really the culprit.

Now it is certainly the case that top have garnered an increasingly large share of the pie, but better health care has hurt wage growth.

 

[GregLee]

Basically it shows that the total cost for employers to hire somebody has remained pretty constant since WWII but benefits have risen dramatically leaving less room to increase wages.

Since WWII? But the charting of health insurance starts at 1960. WWII ended before then. And if your conclusion concerns the cost to "hire somebody", shouldn't you take account of the difference in number of workers in 1960 versus 2009? Comparing the costs as a percent of GDP doesn't seem to do that.

 

[clifp]

Since WWII? But the charting of health insurance starts at 1960. WWII ended before then. And if your conclusion concerns the cost to "hire somebody", shouldn't you take account of the difference in number of workers in 1960 versus 2009? Comparing the costs as a percent of GDP doesn't seem to do that.

I guess I meant since 1960, I was looking at the second chart which went back to WWII. I am not sure what impact having more workers would have. Clearly more workers means a higher GDP, especially if the workers are more productive.

I think the important thing is the shift of the compensation structure from 92% wages and 8% benefits in 1960 to 80% wages and 20% benefits today

 

[landover]

I guess I meant since 1960, I was looking at the second chart which went back to WWII. I am not sure what impact having more workers would have. Clearly more workers means a higher GDP, especially if the workers are more productive.

I think the important thing is the shift of the compensation structure from 92% wages and 8% benefits in 1960 to 80% wages and 20% benefits today

Workers also include CEOs?

 

[Closet_Gamer]

Healthcare value

I don't think we do a good job of valuing healthcare improvements. Costs are off the chart, but even when compared with when I was a kid, the quality of the care/technology has really improved.

Just thinking about my own experiences over the last few years.

Massive back pain...pop me in the cat scanner (no cancer, no kidney stones), pop me in the MRI (minimal disc damage)...we had incredibly clear diagnosis and treatment plan in an area that used to resemble witch craft.

My daughter had an inregular heart beat/murmur. Off to the pediatric cardiologist for a 3D ultrasound. Everything is fine. Mental peace restored. 25 years ago? "Something's wrong with your kid's heart. Not sure what. Could be nothing. Could be something."

Or think about the CDC. We go from some sick people in Mexico to a national swine flu program in 18 months. That is a stunning combination of IT and biotech.

The real issue is productivity. Other industries see step function improvement like these, but they find a way to squeeze cost at the same time. Here we just have costs running up alongside the emerging capabilities.

But let's honest: anyone want to go back to 1970s medicine?

 

[ziggy29]

But let's honest: anyone want to go back to 1970s medicine?

But at what point does technology cost so much that we have to reject it as a practical matter?

 

[Mulligan]

But at what point does technology cost so much that we have to reject it as a practical matter?

Might be getting closer. I just read today, that Britain passed on providing treatment for the deadliest type of skin cancer. The Bristol Meyer Squibb treatment was $126,600 per person, and was cited as too expensive. Critics called it a death sentence. However, this brief article in the newspaper did not mention the actual success rate of the treatment, so there could be more to the story than just cost issues.

 

[samclem]

Might be getting closer. I just read today, that Britain passed on providing treatment for the deadliest type of skin cancer. The Bristol Meyer Squibb treatment was $126,600 per person, and was cited as too expensive.

One small bright spot: When governments stop paying for particular medical procedures, drugs, etc, then their price will come down in the private market (if the treatments are available).

 

[Gumby]

I don't think we do a good job of valuing healthcare improvements. Costs are off the chart, but even when compared with when I was a kid, the quality of the care/technology has really improved.

Just thinking about my own experiences over the last few years.

Massive back pain...pop me in the cat scanner (no cancer, no kidney stones), pop me in the MRI (minimal disc damage)...we had incredibly clear diagnosis and treatment plan in an area that used to resemble witch craft.

My daughter had an inregular heart beat/murmur. Off to the pediatric cardiologist for a 3D ultrasound. Everything is fine. Mental peace restored. 25 years ago? "Something's wrong with your kid's heart. Not sure what. Could be nothing. Could be something."

Or think about the CDC. We go from some sick people in Mexico to a national swine flu program in 18 months. That is a stunning combination of IT and biotech.

The real issue is productivity. Other industries see step function improvement like these, but they find a way to squeeze cost at the same time. Here we just have costs running up alongside the emerging capabilities.

But let's honest: anyone want to go back to 1970s medicine?

It seems to me that our improved diagnostic and imaging tools may be a mixed blessing. Yes, they allow doctors to discover more abnormalities, but of course, that then means the doctors will feel compelled to "treat" what they find. Sometimes that treatment may not be necessary or efficacious, but it flies in the face of normal human behavior to do nothing. Ignorance truly may be bliss on some occasions, and is often cheaper.

 

[eytonxav]

In terms of healthcare costs, I suspect the level of fraud in the healthcare system has not remained constant from 1960 to present day and that we are getting ripped off far more today than ever before.

 

[MichaelB]

One small bright spot: When governments stop paying for particular medical procedures, drugs, etc, then their price will come down in the private market (if the treatments are available).

This doesn't seem to have happened with dental costs and might not with medical either. Prices respond to competition and the industry of health care products and services is not sufficiently competitive from a consumer perspective.

The premise in the article in the OP is

Health care stole your wages

That would be true if wages and employment costs were distributed today similar to how they were over the past decades. That does not seem to be the case, so there must be a piece missing from this puzzle.

 

[Nords]

Now it is certainly the case that top have garnered an increasingly large share of the pie, but better health care has hurt wage growth.

So it's literally come down to "your money or your life".

But at what point does technology cost so much that we have to reject it as a practical matter?

I'm not sure... but you go first!

 

[samclem]

This doesn't seem to have happened with dental costs and might not with medical either.

I dunno. In medicine, there are a few places where costs have been contained well, wait times are low and procedures/outcomes keep improving. Two standouts are cosmetic surgery and surgical vision correction (PRK, LASIK, etc). These also happen to be two areas largely untouched by government (or private) insurance. I don't think that's a coincidence.

 

[Dogman]

Probably my wife, she's been robbing me for years! If not her it my brother-in-law wife, she is a secret spender.

 

[MichaelB]

I dunno. In medicine, there are a few places where costs have been contained well, wait times are low and procedures/outcomes keep improving. Two standouts are cosmetic surgery and surgical vision correction (PRK, LASIK, etc). These also happen to be two areas largely untouched by government (or private) insurance. I don't think that's a coincidence.

Vision surgery is a good example of declining cost probably due to competition. Cosmetic - based entirely on anecdotal evidence I understand that general availability has brought the cost down but increased the likelihood of undesirable outcomes. Insurance companies are also less involved and that may play a factor.

You could conclude that healthcare that is mostly voluntary might become less expensive as competition increased. It is not clear that would apply to most healthcare. Regardless, rising healthcare costs do not explain the real decline in median income in the US over 4 decades.

 

[clifp]

You could conclude that healthcare that is mostly voluntary might become less expensive as competition increased. It is not clear that would apply to most healthcare. Regardless, rising healthcare costs do not explain the real decline in median income in the US over 4 decades.

The author doesn't claim that explains all of it, but it certainly explains a lot of it. If the ratio of wages to benefits had remained constant there would roughly a 12% increase in averages wages which is pretty large.

 

[samclem]

The author doesn't claim that explains all of it, but it certainly explains a lot of it. If the ratio of wages to benefits had remained constant there would roughly a 12% increase in averages wages which is pretty large.

Another thing- - -The health insurance costs for a CEO are about the same as every other employee who has health insurance with the company. The figures you've cited are the average for all workers. As a share of total pay, the health insurance costs of lower-wage workers are a much bigger portion than for higher-paid workers. So, I'd expect that these higher health care expenses over time (being a straight per-capita increase) have eroded the takehome pay of lower-wage workers much more than higher-wage workers.

I wonder how much this impacts those frequent reports of the growing gap between the incomes of upper quintile vs lower quintile workers? If "pay" vs "compensation" is used as the metric, it probably biases the results quite a bit. Likewise--payroll taxes are shown, but not income taxes. That's another factor that hits folks differently depending on income.

 

[eytonxav]

And how much impact is caused by increasing drug costs. Now many pharm houses are dropping generics altogether since the profits are not there.

 

[MasterBlaster]

It isn't just health care squeezing the middle class since the days of Woodstock.

costs of housing and obtaining a college education are equally culpable.

 

[Ed_The_Gypsy]

So it's literally come down to "your money or your life".


I'm not sure... but you go first!

Spot on, MacGrew!

 

[nun]

Might be getting closer. I just read today, that Britain passed on providing treatment for the deadliest type of skin cancer. The Bristol Meyer Squibb treatment was $126,600 per person, and was cited as too expensive. Critics called it a death sentence. However, this brief article in the newspaper did not mention the actual success rate of the treatment, so there could be more to the story than just cost issues.

In the UK an independent panel assesses the efficacy of treatments. So there is rationing in the UK, but not to the extent that private health insurance rations care in the US by excluding many because of pre-existing conditions.

 

[pb4uski]

... But let's honest: anyone want to go back to 1970s medicine?

No, today's medicine is amazing and I don't want to go back to 1970's medicine - but what good is is today's medicine if we can't afford it and it bankrupts us?

I think the unfortunate reality is that we will need to draw lines somewhere (like the expensive cancer treatment that has been passed on by the UK).

 

[Chuckanut]

One thing for sure, there are good paying jobs still available. The WSJ recently reported on jobs for welders, machinests and big motor electricians that are going begging. Part of it is the working conditions (lots of travel, outdoor bad weather work), but a lot has to do with our inability to train people for these jobs. Our schools are stuck on the 'college' track for every student, even those who don't want to go and can't qualify to go. But, highly skilled technical jobs that ONLY require an AA or special training often pay as much or more than many degreed jobs.

 

[HFWR]

One thing for sure, there are good paying jobs still available.

The WSJ recently reported on jobs for welders, machinists and big motor electricians that are going begging.

Perhaps they're not high-paying enough if they're not getting any takers...

 

[ziggy29]

Perhaps they're not high-paying enough if they're not getting any takers...

Perhaps. And then they will use that as proof that there are "not enough qualified Americans" as an excuse to either bring in "guest workers" who will work for a lot less or, where feasible, move the jobs to China. And no pesky health insurance to pay! I think it's another example of our "health insurance tied to employment" example of making American labor less competitive internationally.

We also have a big problem in terms of unprecedented (at least in the post-WW2 era) unwillingness to provide on-the-job training. As long as companies can offload training costs on taxpayers (through subsidized public colleges and universities) and on job seekers (expecting them to rack up tens of thousands of debt to get all the "entry level" training), why would they do something to take a penny or two off of quarterly earnings?