How much do you pay for health insurance? Most people answer that by talking about the co-payment their employer charges them. Others talk about out-of-pocket expenses for prescription drugs and medical supplies.
But the real cost for most people is actually much higher. To economists there is little difference between the wages your employer pays and the benefits your employer provides. Both can be considered income, because both are compensation. So, even though employees don't see the entire health care premium employers pay on their behalf, all of that money is coming out of a worker's paycheck in the form of reduced wages.
This is a political problem now that Congress is trying to decide how much a typical American family should pay for health insurance. This debate falls under the heading of affordability.
While the average health care premium for a family is now just over $13,000, employees pay only $3500 of that.
The health care reform bill before Congress would now require some families to spend 19% of their income to buy a policy. Clearly many Americans will not consider that "affordable."
You can see the political challenge. Is family health care coverage affordable at $10,000 a year? Well, it is cheaper than what employers now pay, but it is much higher than what employees think they are paying.
The affordability debate is just beginning.
Comments
Larry,
The government will spend $15 billion for the tax credit this year, paid to a million and a half people who bought homes and qualify as "first time homebuyers". The National Association of Realtors says 350,000 of those people would not have bought without the credit. Divide the $15 billion by the 350,000 addtional sales and the cost is nearly $43,000 per buyer. Fact is, most of the people who will receive the credit would have bought a home anyway.
This is all about getting legislation passed and fulfilling a campaign promise. Once the plan is in place we'll realize that cost neutral and affordability only fit in the same sentence when claims experience is low. Claims experience can only be controlled only by low-balling the doctors and hospitals on reimbursements and/or reducing benefits. Either way we'll lose.
I wouldn't be willing to pay more than $2000 a year for health insurance, which is what some individual high-deductible plans quote me now. Is there some way I can establish a living-will sort of document that declares that I refuse all medical treatment that costs more than $100? I would much rather die and leave an inheritance to loved ones than experience "medical bankruptcy" just so a doctor can buy another sports car.
Explain to me how spending $829,000,000,000 more on health care is going to bring down health care costs. 10-13-09 show.
Explain to me how a $8,000 tax credit for a first time home buyer cost the government $43,000. 10-12-09 show.