NCHC Writer
Default Image

Despite continued low general inflation in United States, health care spending continues to rise at two to three times the inflation rate. While the Consumer Price Index which measures general inflation, is projected to increase 3.0% for each of the next four years, health care inflation is projected to be 8.0% annually during that same period.

Health insurance premiums for employers are now rising at double-digit rates with many health plans expected to raise premiums 15% for large employers in 2002. It is anticipated that these premium increases will add another one million people to the ranks of the uninsured not counting the effects of an economic recession.Rising Costs

  • National health care spending in 2001 will exceed $1.54 trillion. That is four times what we spent on health care in 1980 and is projected to exceed $2.3 trillion by 2009. (Source: Health Care Financing Administration)
  • The U.S. is spending over $5400 annually on every man, woman and child in this country; which is the largest per capita health expenditure in the world.

Paying the Price

  • Despite a brief period between 1994-1997 when health insurance premiums rose less rapidly, health insurance premiums for employers rose overall 8.3% in 2000 — and 11% in 2001, which was four times the rate of inflation and the largest increase in premiums since 1992 (Source: NCHC).
  • Small businesses in some sectors will experience 25-30% premium increases in 2002 (Source: NCHC).
  • The Federal Employees Health Benefits Program (FEHBP) – a bellwether of insurance pricing – had a 10% increase in 2000 and 10.5% in 2001.
  • In 1986, businesses spent an average of $1,600 per employee on health insurance. By 2000, that had risen to almost $4,600.

Impact on American Families

  • A typical family’s health care bill in 1998 was $6300 if you take in lowered wages, higher prices for goods and services, and part of their tax bill.
  • One in six households headed by a person under age 65 spends 10 percent or more of its income on out-of-pocket costs plus directly paid premiums (Consumers Union). Experts agree that level of health care spending often makes it difficult to pay other bills.
  • The price of health insurance for workers has more than tripled over the last 13 years. In 1988, workers paid an average $48 a month for family coverage obtained through their jobs. By 2000, workers were paying $150 a month on average for that coverage (Health Research and Educational Trust).
  • Workers at firms with fewer than 200 employees paid 47% of the premium for family coverage in 2000, up from 34% in 1998 (HRET).
  • The percent of family income spent on insurance premiums and out-of-pocket payments ranged from a high of 17 percent for families with income under $10,000 to 3 percent for families with income of $100,000 and more.

Future Challenges

Many experts agree that our health care system is riddled with inefficiencies, excessive expenses, inflated prices, poor management, inappropriate care, waste and fraud. These problems significantly increase the cost of medical care and help push up the cost of health insurance for employers and consumers.

Policymakers have not yet agreed on the best ways to address these serious problems. Some favor price controls and imposing strict budgets on health care spending. Others believe that free market competition is the best way to solve the problem. Other experts believe that we can “innovate” our way to a less costly system through medical breakthroughs that cure or reduce the incidence of major diseases. Public health advocates believe that if all Americans adopted healthy lifestyles, health care costs would plummet as people required less medical care.

There appears to be no single solution to medical care’s high price tag. Most of the means mentioned above – and others – will have to be used in the years ahead to control costs. If they are not, the impact on consumers, employers and the government will be severe and the number of people without health insurance will continue to grow.