Medical Robbery
The rampant price gouging in the medical industry has terrible impacts on the economy as a whole. The OECD, club of mostly rich countries, estimates that the United States dedicates nearly 18% of its economy to healthcare. The average for the OECD as a whole is just a bit above 9%. That is, on average we're spending double on medical services compared to the other rich countries. In money terms this is about $1.3 trillion dollars per year! That's over a trillion dollars that could go to education, roads, investments or other productive uses. But because it's not there for those productive uses, the economy finds it more difficult to grow. Year after year this dead weight on the economy gets heavier and heavier, ironically making it more and more unhealthy.
But are we getting any good results for all that extra money spent on healthcare? Not by two generalized measures of medical well being: life expectancy at birth and infant mortality. For the OECD as a whole life expectancy at birth is 80.1 years. For the US it's only 78.7. Infant mortality for the OECD is 4.1 per 100,000 births. For the US it's 6.1. In the big scheme of things we're simply not getting value for our medical money.
Translated to the individual level, the price gouging results in depressing wages and in mushrooming personal debt. Average premiums for group insurance among US employers is running around $6,000 for single coverage and $16,000 for family coverage, of which the employer pays $5,000 and $12,000 respectively. So an employee with a family costs an employer $1,000 per month even before the employee gets to take the first dollar home! With this burden it is easy to see that an employer may have a hard time giving generous raises and why many opt out of offering health insurance altogether. Seen another way, if we were dedicating the same proportion of the economy to medical costs as the average OECD country (about half of what we are), that employee could be getting an $8,000 raise (half of $16,000). We should take this into account the next time we think "health insurance" is paying our medical bill.
But we know that even when we have health insurance, it doesn't pay for everything. Injury or disease can still cost a family thousands of dollars. As can childbirth. This spot on ABC World News yesterday tells the story of a $50,000 bill for childbirth. So we should perhaps not be surprised that NPR's Science Friday reports that over 60% of personal bankruptcies in this country are precipitated by medical bills. Or that the Kaiser Family Foundation reports that 32% of non-elderly adults are having difficulties in paying medical bills.
I've explained in a previous post that a lack of competition and of transparency make this price gouging possible. Before explaining how all unsustainable this is, I'd like to step back and offer some reasons why such lack of competition and transparency can persist in an American economy that is overall pretty competitive and transparent. That'll be a subject for the next post.
Translated to the individual level, the price gouging results in depressing wages and in mushrooming personal debt. Average premiums for group insurance among US employers is running around $6,000 for single coverage and $16,000 for family coverage, of which the employer pays $5,000 and $12,000 respectively. So an employee with a family costs an employer $1,000 per month even before the employee gets to take the first dollar home! With this burden it is easy to see that an employer may have a hard time giving generous raises and why many opt out of offering health insurance altogether. Seen another way, if we were dedicating the same proportion of the economy to medical costs as the average OECD country (about half of what we are), that employee could be getting an $8,000 raise (half of $16,000). We should take this into account the next time we think "health insurance" is paying our medical bill.
But we know that even when we have health insurance, it doesn't pay for everything. Injury or disease can still cost a family thousands of dollars. As can childbirth. This spot on ABC World News yesterday tells the story of a $50,000 bill for childbirth. So we should perhaps not be surprised that NPR's Science Friday reports that over 60% of personal bankruptcies in this country are precipitated by medical bills. Or that the Kaiser Family Foundation reports that 32% of non-elderly adults are having difficulties in paying medical bills.
I've explained in a previous post that a lack of competition and of transparency make this price gouging possible. Before explaining how all unsustainable this is, I'd like to step back and offer some reasons why such lack of competition and transparency can persist in an American economy that is overall pretty competitive and transparent. That'll be a subject for the next post.
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