NCHC Writer
Default Image

For Immediate Release: Wednesday, April 9, 1997

Marianne McInerney

1997 Cost Increase to Middle-Income Families between $500-$1000.00
America’s Small Business Community Particularly Hard Hit

Washington, DC US health care costs will rise 2 to 2 1/2 times as fast as inflation over the next five years, with middle-income families paying a greater percentage of their income than any other group. Married couples with children will pay 5.5% above inflation and single-parent families will pay as much as 10% above inflation for their health care costs, according to a new study commissioned by the National Coalition on Health Care (NCHC).

The study conducted by Kenneth E. Thorpe, Director, Tulane University Medical Center Institute for Health Services Research, dramatically illustrates the impact of health care cost inflation across a wide range of purchasers. The study reports that the slower growth in health care spending of the last two years has subsided and costs are now expected to rise 6.4 percent annually beginning in 1997, with continued acceleration over the next five years.

While increases will affect all income sectors, middle-income households, those with incomes between $20,000 and $60,000, will lose the highest percentage of their incomes to health care inflation. Indeed, had health care costs remained a constant share of household budgets during the 1990s, middle-income households would, today, have between $500 and $1000.00 more to either spend or save in 1997.

“The data confirms the trend we have anticipated, that health care cost pressures have resumed and will continue to build,” said Dr. Henry E. Simmons, President NCHC. “Unfortunately, it appears that the ‘easy’ savings in health costs have already been squeezed out. What we’re seeing now is a return to the inflationary pressures of the ’80’s.”

The study projects that the typical family will directly spend $2000.00 on health care: health care insurance, medical services, pharmaceuticals and medical supplies, during 1997. Nearly 50% of the out-of-pocket expenses are directly attributable to health insurance premiums. Imbedded in those premiums are the costs of care for the 42 million Americans who are uninsured, creating, in effect, a regressive income tax, since cost shifting exacts a higher percentage cost for middle-income Americans than for the affluent.

The study estimates that, nationally, health care expenditures exceeded $1 trillion in 1996 and projects that they will rise to 1.5 trillion by 2002, an increase of 50%. Based on the study, health care currently accounts for approximately 13.8 percent of our gross domestic product and will rise to nearly 15 percent by the year 2002.

The increase in health care costs will also have a strong effect on America’s businesses, although the impact will differ substantially across firms. Across all business entities, health care expenditures are expected to increase faster than wages. The small business community, those who employ fewer than 100 and lack the economic leverage of larger employers, are predicted to experience substantially higher growth in premiums with a projected increase of approximately 6.3 percent annually.

“Unfortunately, the nation’s dominant employer, small business, is already being hit by the return of rising health care costs,” said Dr. Henry E. Simmons. “With trends indicating a significant increase in health insurance premiums, small businesses, without bargaining power, are, and will, continue to be most at risk.”

The study was funded by The Henry J. Kaiser Family Foundation in support of the National Coalition on Health Care’s multi-year national campaign to educate the public and business community on the rapidly changing and increasingly complex health care system.

The National Coalition on Health Care is an alliance of close to 100 organizations united in the belief that we can achieve better, more affordable, most equitable health care for all Americans. The Coalition, representing 100 million Americans, is a nonpartisan organization, bringing together large and small business, consumer groups, health providers, labor unions, and the nation’s major religious organizations. In existence since 1990, the National Coalition on Health Care has as its Honorary Chairmen former Presidents Carter and Ford.

Full copies of “Changes in the Growth of Health Care Spending: Implications for Consumers” are available by contacting the National Coalition on Health Care at (202) 637-6830.

Key Findings on Health Care Spending

More from releases