The Impact of Rising Health Care Costs on the Economy

Introduction

Significant increases in health care costs and in health insurance premiums are affecting Americans personally and profoundly -- and have become a major national economic problem.

Annual health care spending in the U.S.has been increasing two to fivetimes the rate of inflation since 2000. These increases translate into high and rapidly escalating health insurance costs for businesses and families. Over the past five years, employers, on average, have experienced double digit increases in their health insurance premiums. These substantial increases -- year after year -- are making it more difficult for businesses to continue health coverage for employees and retirees. Employers, on average, have seen their health insurance premiums increase nearly 120 percent since 1999.

The increases are making it much more difficult for individuals and families to pay their share of the cost of employer-sponsored coverage or to buy health insurance themselves. It is no coincidence that the number of Americans without health coverage has been climbing with nearly 8 million people losing their coverage between 2000 and 2007.

The extraordinary escalation in health care costs and insurance premiums has affected several segments of our economy:

1. Surging health care costs slow the rate of job growth by making it more expensive for companies to add new workers. They also suppress wage increases for current workers by driving up total compensation costs.
2. As health care costs rise, corporate operating margins are cut, which reduces the capacity of firms to grow by investing in research, plant and equipment.
3. High and escalating out-of-pocket costs are forcing families to delay mortgage payments or sell their homes, cut back on normal household expenses such as for food and utilities, and take on onerous medical debt.
4. High medical costs can require retired families to spend hundreds of thousands of dollars out of their savings for out-of-pocket health care expenses.
5. High insurance costs are eroding the ability of firms to fund current levels of pension and health benefits.
6. They put American firms at a steep disadvantage in world markets, where they have to compete against companies with much lower health care costs in the nations where they operate.
7. Rapidly escalating costs are producing severe long-term budgetary problems in the public sector affecting the solvency of federal and state health insurance programs, such as Medicare and Medicaid.

   We have reached the point where the publicÕs main domestic concerns -- the economy, jobs, and health care -- are really one and the same issue. Unless the health care cost crisis is addressed, we cannot assure robust economic growth, strong job creation, or financial security for American families.

   The Coalition has developed a set of fact sheets that point out the impact of rapidly escalating health care costs and insurance premiums on various aspects of our national economy.

   • Effects on Workers and Their Families
   • Effects on Business Operations
   • Effects on Small Businesses
   • Effects on Pension Programs and Beneficiaries
   • Effects on the Federal Budget
   • Effects on State Budget
   • Effects on Local Communities

   © National Coalition on Health Care. All rights reserved