WASHINGTON, D.C., September 4, 2018 — Rising health care costs are diminishing U.S. workers’ take-home pay and putting the American Dream further out of reach, particularly for lower income earners, according to a new analysis released by the Council for Affordable Health Coverage and Willis Towers Watson. Health Care USA: A Cancer on the American Dream, co-authored by renowned health care consultant Sylvester Schieber and Steven A. Nyce, director, Willis Towers Watson’s Research and Innovation Center, depicts how health care costs have eclipsed compensation growth and whittled away at Americans’ disposable earnings, concentrating income among the wealthiest Americans.
“While a number of economic forces have created barriers to the American Dream in recent years, one culprit generally overlooked is our singularly expensive health care system,” said Schieber. “Our analysis illustrates the escalation of health care premiums, which have absorbed most or all compensation growth in recent years for many workers — leaving little or nothing to add to their paychecks. Wage gains have often been more than absorbed by higher employee premiums. If we continue ignoring the reasons for our out-of-control health care spending, there will be destructive effects that exact an ever-higher claim on the American Dream of economic progress for all those willing to work for it.”
“This report offers a stinging indictment on our health care system — one that’s eroding hardworking Americans’ wages, exacerbating income inequality and offering too little value in return,” said Joel White, president, Council for Affordable Health Coverage. “At the Council for Affordable Health Coverage, we have long said the cost of health coverage is too high and growing too fast, but these findings show in stark detail what’s at stake. This analysis will fuel our coalition’s continued work to protect employer health coverage. We must foster competitive, transparent markets that align incentives to place consumers at the center of a value-based care system.”
The report also explores specific ways the organization and delivery of health services in the U.S. sustain our abnormally high health costs, discussing examples including the questionable development of clinical guidance for a particular heart surgery and the inertia a hospital leader in value-based care had to overcome to reduce reliance on C-sections. Finally, it suggests several practical solutions that can both bring costs down and encourage evidence-based best practices.
“This economic analysis underscores the need for policymakers, care providers, employers and individuals to work together to revamp not just access to health care but also how patients use it, how care deliverers provide it, and the expectations for medical versus nonmedical management of health and wellness,” said Nyce. “At leading-edge providers nationwide, we have seen such physician-patient efforts work. And with our large employer clients, we have seen new employer-employee benefits drive improvements in financial and physical wellbeing. It’s time to move the conversation beyond who has insurance. We must talk about the underlying costs of care and what role we each play — as employers, as caregivers, as policymakers and as individuals.”
The report also notes concerning developments, trends and practices that call out for a “new public health response.” Such trends include:
- Market concentration of hospitals and health care providers
- Uneven and often irrational pricing of medical goods and services, including drugs
- Inadequate medical management of treatments, often resulting in inefficiencies and waste
- Insufficient testing of the efficacy of medical procedures and drugs, and failure to curtail those that are found to be ineffective
- Failure to incorporate study results and best practices into physicians’ treatment patterns
Among the report’s data findings:
- Growing health premiums have played a significant and increasing role in skewing net earnings toward higher earners, e.g., workers in the 90th to 99th percentile of earnings had average pre-health premium compensation increases 7.6 times those of workers in the 40th to 49th percentile. After deducting employer and employee premiums for single coverage, those in the higher earnings group had remaining disposable wage increases 26.2 times the lower group on average.
- Average workers in the bottom 40 percentiles of the earnings distribution saw their disposable earnings decrease over a 16-year period: In constant dollars, annual premiums for full-time, full-year single workers rose from $415 in 1999 to $1,068 in 2015, an increase of $653 per year.
- Average U.S. health expenditures rose to $10,348 per person in 2016.
- While the Affordable Care Act promised to moderate health cost inflation, average premiums for individual coverage under an employer plan increased by 18.25% in constant dollars between 2010 and 2017, and increased 21.6% for family coverage during a period when compensation and wage growth was flat or negative for a large swath of the workforce.
- Rising health care costs are encroaching on retirement benefits: In 2001 employer allocations to health and retirement benefits were 41.9% and 58.1% respectively. By 2015, the split was in the other direction: 63.5% for health benefits and 36.5% for retirement.
Read the full report here and read an executive summary of its findings here.
About the Council for Affordable Health Coverage
The Council for Affordable Health Coverage (CAHC) is a broad-based alliance with a primary focus: bringing down the cost of health care for all Americans. CAHC promotes policies that lower health costs through increased competition, informed consumers and more choices. Learn more at CAHC.net.
About Willis Towers Watson
Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory,brokingand solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has more than 40,000 employees serving more than 140 countries. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential. Learn more at www.willistowerswatson.com.