An Economic Case for Reform

The White House Council of Economic Advisers has released a compelling report on June 2 which attempts to make the economic case for healthcare reform. It's a comprehensive overview of the issues surrounding the current state of healthcare in the USA. The most important fact, in my opinion, that could generate more momentum for change is the drag that healthcare costs makes on employee salary and wages. This graph from the report makes the case: [caption id="attachment_40" align="aligncenter" width="474" caption="The Effect of Healthcare Costs on Wages"]The Effect of Healthcare Costs on Wages[/caption] As the report says, "Since health insurance premiums are growing more rapidly than total compensation in percentage terms, an increasing share of total compensation that a worker receives goes to cover health insurance premiums.' Ezra Klein of the Washington Post puts it this way:

But workers don't see it that way. That slumping line isn't normally called wages-minus-health-premiums. It's called wages. And most workers think stagnant wages mean their employer is paying them less. They don't know that the main reason for stagnant wages is that their wage increases are going to pay for their health insurance premiums. If they did -- if they realized that compensation is pretty much a zero-sum endeavor and their employers don't so much buy them health insurance as garnish their wages to pay for their health insurance -- you'd probably see a lot more general anger at rising health care costs.
Some more background on this theme can be found in a nice article entitled "Who Really Pays for Healthcare" by Emmanuel and Fuchs. An eye-opening discussion, though a bit more technical.

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