Today’s New York Times reports that “Health Care Costs Climb Moderately, Survey Says”. The average annual insurance premium for a family rose 4% in 2013 compared with a 1.1% overall rate of inflation, according to the Kaiser Family Foundation which conducted the survey. Since 1999 health insurance premiums have increased by almost 300% while consumer prices have increased by 40%. As insurance premiums rise, deductibles are also getting bigger. About 38% of all covered workers now face an annual deductible of $1000 or greater. Dr. Drew Altman, CEO of the Kaiser Foundation, refers to this “quiet revolution” as an attempt by consumers to keep the cost of health insurance from rising even more quickly.
A 4% increase in insurance costs may seem moderate, but at almost four times the rate of inflation, it is really very large. Obama Care is unlikely to have any impact in holding down such a rapid increase and, in fact, is likely to make matters worse because of massive new health care regulations which are coming. The basic problem is that America spends 18% of GDP overall on health care, almost twice as much as any other country.
What can we do about this? One major step would go a long way. We need to remove the tax exemption from employer provided health insurance. Employers could still provide health insurance for their employees, but the cost would be added to an employee’s salary for tax purposes. This can be offset with a lower tax rate, of course. But it would make employees, i.e. all consumers, far more conscious of the cost of healthcare and therefore to have a direct incentive to hold down these costs. For example, Dr. Altman’s “quiet revolution” would pick up steam as employees raise deductibles even higher in order to lower overall costs.
How can we get going in this direction? The Employer Mandate of Obama Care should be repealed, and not just postponed for a year. Ideally, removing the tax exemption for employer provided health insurance would become part of the broad based tax reform which is so badly needed to stimulate the economy.
Our fiscal and economic problems can be addressed with smart leadership. We should insist that our national leaders get going on such badly needed reforms!