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It is time to put the health care crisis in sharp terms everyone can understand. I have one piece of advise for every potential manufacturer and transnational company looking to expand. Don’t build a factory in America. If you plan to compete in the international marketplace, don’t start a single business–or expand an existing one–in this country until we really try to rein in health care costs.
The United States spends nearly twice per capita what any other industrialized nation does on health care. The current rate of increase in our health care spending is faster than any other first world nation. The current health care reform bill working its way through Congress will not go far enough to fix this problem.
The CBO projects that even if reform passes today, seven years from now, premiums for large, employer-provided health insurance plans will only be between 0 and 3% lower than they would be without reform. The average premiums for a family policy provided by a large company would be $20,100 a year.
Take that in because that is a huge number. In 2009, the average premiums for an employer-provided family policy was $13,375. The CBO is predicting that the cost of insurance premiums are going to increase by roughly $6,700. That is roughly a 50% increase in premiums in only seven years. It is a growth rate that will far exceed wages or GDP.
Health care spending currently consumes over 16% of our economy, and that number is going to keep expanding. It is the 800-pound gorilla sitting on our economy, slowing down our recovery. It is a massive drag on every company in this country that tries to compete internationally. It is a huge overhead cost that cripples American manufacturing, and it is only getting worse.
I’m encouraged that Democrats are planning to expand health insurance to millions of Americans in a way that does not add to the deficit or increase the growth rate in premiums. The bill does contain many health insurance regulations that are long overdue. There are some cost control measures in the bill that should help, but they are much too small. As a nation, we will not be able to compete going forward if we are spending upwards of an extra $6,000 on our workers health care compared to Germany, Japan, Canada, the UK, etc.
This will be the easy health care fight. The next fight to truly control cost will be even more heated. Ideally, it will happen soon, before it is too late. Looking at the current trend, with our all-consuming health care costs still growing at a rapid rate, I must honestly advise any company to avoid building a factory in this country. That health care overhead cost is on track to keep growing–without real relief in sight. I’m simply the least important person looking at the trend and giving CEO’s this same advice. That is something that should scare most Americans, and, I hope, scare our representatives in Washington, too.
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It’s really amazing how many different ways the configuration of our healthcare system affects our economics. Limits labor mobility, depresses wages, misallocates capital, reduces productivity, and stifles entrepreneurship.
800-lb. gorilla is right. Thanks for highlighting this oft overlooked connection between our health and our competitiveness.
I don’t believe that CBO forecast of a 50% increase in 7 years. I think it will be more like 40% – 50% between now and the time the exchange takes effect, which I assume will be the middle of 2013. I’m assuming average increases of 10% annually. Scattered stories from around the country suggest that the companies are current raising prices by much more than 10%. Since they’ll be subject to the risk pool in the band-aid period, they’re sure to raise their premiums to cover losses due to the fact that they will have to cover sicker people they would previously have denied insurance to.
So, why doesn’t this bill impose price controls on the insurance companies, restricting allowable price increases to the overall rate of inflation?
Jon, On further consideration, I’m a little puzzled by your sole emphasis on cost issues in this one. I think the same point applies even more to the issue of burdening business with health insurance costs at all.
The present reform bills continue to institutionalize employer-based insurance. If a factory has a choice of locating here or locating in Canada where health isurance is picked up by the Government, why would they even consider locating here and assuming that extra health insurance burden?
i’m confused too.
trying to think this through…. employers don’t compete “as a nation” they compete on, among lots of other things, the cost per employee (taxes, benefits, wages, etc).
jon gives us some figures for per employee healthcare associated costs to employers in the usa:
for the analysis of “where to build a factory”, we’d need to compare these figures with per employee healthcare associated costs to employers in canada. it’s not the $6,000 per capita differential of total national health expenditures.
the issue of total national health expenditures is an issue primarily for how much of that cost gets shifted to households, employers, state and local govs — and their ability/inability to pay those costs and the resulting social, economic and political ramifications.
… do i have that wrong? (jon, lets, anyone?)
I think you have it right, but my point was that the per employee health care cost to any business in Canada is zero. Canadians as individuals pay higher taxes for health care and other services, but the burden on employers as employers is zero.
i don’t know, i thought it possible that there might be some kind of provincial and/or national per employee tax on businesses. maybe not. also i think there are some small supplemental insurance benefits paid by some businesses in canada. i just don’t know and wanted to leave those possibilities open.
still though, the per employee health insurance cost burden to employers (actually same can be said for ss and medicare) in the usa is just stupid policy if we care a bout building a high wage, high employment economy.
so i agree with jon’s conclusions, but not his analysis. and i agree with you that the analysis matters because it affects our thinking about the implications for good policy we can advocate for.