Expert Perspective by Robert Cirkiel
PwC Reports That Employers Will Continue to Throw Good Money After Bad in 2010
A Wall Street Journal article published June 18, 2009, shares that “Employers who offer health insurance coverage could see a 9% cost increase next year, and their workers may face an even bigger hit, according to a report from consulting firm PricewaterhouseCoopers.”
When was the last time that US employer costs for group medical benefits increased at a smaller rate than overall CPI? I tried searching the web for the answer and best I can tell it was during the Adams administration (the first one, not Quincy.) At this pace the good news is that eventually it will again, perhaps in your lifetime. That bad news is that is because medical benefits will have reached 100% of the CPI. Think that’s crazy? It was less than 20 years ago that the conventional wisdom was that 16% of CPI was the ceiling. Guess what, we’re there. Current health care spending is about $7,500 per person in the US. For historical perspective, in 1965 when Medicare was passed health care cost $210 per American.
Some argue that spending $2.25 trillion dollars a year on health puts us at economic disadvantage in the global economy. Others argue that spending one out of every six dollars on health is not so bad. After all, what would be a better way to spend than to ensure a healthy America? Actually, $2.25 trillion dollar annually ($7,500 per person) ought to make for some pretty freakin’ healthy Americans. Sadly, however, the US ranks 37th in the world (between Costa Rica and Slovenia) on the WHO health index. If it’s any consolation the US ranks higher on the “happiness index” (coming in at #16), which proves that money buys happiness if not health.
Americans have continued to enjoy an envious standard of living for just a handful of reasons – free markets that engender ingenuity, plentiful natural resources, and high worker productivity. I wouldn’t take any of that for granted any longer. An unhealthy population won’t be able to maintain high productivity or for that matter defend our country’s safety and security. Still think the current administration’s focus on education, energy independence and health care is misguided?
Unless you’ve been on a total news blackout for the last 6 months, you are aware that we are on the verge of enacting a massive national health care initiative. This could not happen soon enough in my opinion. Regardless of the details, we cannot continue to maintain a system that has out-of-control cost increases. Don’t think so? – the PwC article suggests that the increase next year of “only 9%” is relatively good news. Given that diabetes and obesity are at epidemic proportions, the population is aging, and a pandemic may be just around the corner, I suppose 9% IS good news. I’ve practiced in the health care arena for the last 20 years and haven’t seen a recession in that business yet! Costs just keep going up, up, up and to date the customers (i.e. employers) have yet to incent the merchants to do otherwise. In fact, in “12 Step” parlance, employers are the enablers.
In upcoming blogs, I’ll begin to discuss the health care reform proposals as they are released. In the meantime, riddle me this…. What’s the difference between approving everyone for a mortgage regardless of their financial health and approving everyone for medical insurance regardless of their physical health?
Email Robert Cirkiel at email@example.com