Health Care Costs Will Be Higher Than Half Of Country’s Income By 2037

From Huffington Post

Health insurance will cost more than the median income of an American household by 2037 — and that’s the best-case scenario, two doctors contend in a new study.

The reason: Wages for U.S. workers are stagnating and health care costs are rising so quickly that even if the health reform law enacted two years ago by President Obama works as advertised, health insurance premiums will surpass income for many Americans in the coming decades, according to an article published in the journal, Annals of Family Medicine (h/t U.S. News and World Report).

Under a less rosy scenario, insurance costs will reach the tipping point in 2033, Richard Young of John Peter Smith Hospital in Forth Worth, Texas, and Jennifer DeVoe of Oregon Health Sciences University in Portland, who conducted the study, found.

Things are going to get worse without more aggressive efforts to rein in health care spending, they say:

If health insurance premiums and national wages continue to grow at recent rates and the U.S. health system makes no major structural changes, the average cost of a family health insurance premium will equal 50% of the household income by the year 2021, and surpass the average household income by the year 2033. If out-of-pocket costs are added to the premium costs, the 50% threshold is crossed by 2018 and exceeds household income by 2030.

Meanwhile, fewer workers are getting insurance from their jobs and those who do have coverage are paying higher premiums while also seeing their benefits cut back and their out-of-pocket costs grow. Health care composed 17.3 percent of the entire U.S. economy in 2010 and grew faster than gross domestic product by 2.4 percent from 2000 to 2009, the study says. Almost 50 million Americans had no health insurance in 2010, according to the U.S. Census Bureau.

Obama’s health care law aims to fix that last problem. By 2021, health reform is projected to provide insurance to 24 million people through “exchanges” that allow them to find coverage and to qualify for financial assistance. In addition, the law would provide coverage for 17 million people through the Medicaid program for the poor, according to the Congressional Budget Office.

In a similar study DeVoe published in 2005, she projected that health insurance premiums would outstrip median income eight to twelve years sooner. But the reprieve isn’t because anything good happened in the meantime, Young and DeVoe say in their new paper.

Health care costs are still growing, though the rate slowed in recent years, in large part because because people without jobs or insurance went without medical care during the economic downturn. At the same time, those who had jobs had less money to spend on health care as average household income declined from $50,300 in 2008 to $49,800 in 2009, the study says.

Obama’s health reform law contains myriad policies designed to slow escalating health care costs. The law cut Medicare payments to hospitals and other medical providers and created financial incentives for health insurers, doctors, hospitals, and others to band together to reduce waste, improve care, and save money. Health reform will also impose a tax in 2018 on the most expensive insurance plans in an aim to encourage people to buy cheaper coverage.

Young and DeVoe are skeptical about health reform’s impact on costs and favor cutting “administrative overhead” in the health care system, namely profits earned by health insurance companies.


  1. Public Health Over Private Profits on March 20, 2012 at 5:34 pm

    The answer isn’t Obama’s health care “reform” bill designed around what’s best for Big Pharma and the private insurance industry. The answer is to go after the real root cause of the problem with American health care: the fact that it is operated as a business first and a public service a veeeeeeeeeery distant second. So distant it’s hard to see with the naked eye. The inherent contradiction in for-profit health care means as long as it is the system that is in place there will always be a conflict between providing affordable care on the one hand and turning a profit on the other. The two are like oil and water. When we’re talking about people’s health and well-being the matter of profit shouldn’t even be considered. Some things just shouldn’t be a business. If many electric companies in the U.S. are operated as non-profits whose sole purpose is to provide the lowest cost electrical service to the consumer as possible then why on earth should something as critically important as HEALTH CARE be anything but a non-profit as well?

    A company whose main motivator for being in existence is to earn the largest possible profits for its shareholders is, to put it mildly, not going to consider such things as consumers’ health and well-being as anywhere near as important. Why sell pills for $15 a bottle when the same captive audience will pay $55 a bottle for the same pills because it is (still!) illegal for us to import the same pharmaceuticals from Canada with the only difference being price? What incentive does that company have to lower its prices to make them affordable when they’re obviously still salable at an outrageous price, the consumer’s financial sacrifices notwithstanding and not considered by the company? What incentive does a doctor have to recommend a cheaper alternative to a costly medical procedure if to do so he would be cutting his own profits? The American health care system (with the exception of non-profit hospitals) is designed around milking as much money out of the consumer as possible to enrich the shareholders of the companies in the insurance, pharmaceutical and health services industries. Take the profit motive out of the equation. Make health care a non-profit public service with a single-payer insurance framework to cover everybody. Do this and we solve the problem of rising health care costs which solves the problem of the long-term insolvency of Medicare, Medicaid and Social Security.