A RAND Corp study, released in September of 2011, examined the health care an the average American family's budget from 1999 to 2009. While the average family saw a 30% increase in their income, much of that was wiped out by greater gains in the cost of medical care. Inflation and higher taxes further decimated the gains.
They found that monthly premiums for health insurance grew by 128% over the decade studied. This is well beyond the rate of inflation. Prices on all goods tend to go up over time due to the devaluation of currency called inflation. But when a price for a good goes up faster then inflation, it becomes relatively more expensive then other goods in the economy. This is precisely what is happening with health care. When people are forced to spend relatively more on a good, they feel they are taking a step backward in terms of the living standard.
Making matters worse, many people who receive their health benefits through their employer are seeing lower wage gains. An employer has to take the total cost of an employee into account, and that includes what the employer spends on health benefits. When health care costs increase for the employer, they have actually increased the amount they spend per employee, only it doesn't feel that way to the worker. The worker is indeed getting a raise, it is just going directly to their health care costs. As health care costs for employers continue to rise, it will put downward pressure on wages.
Health care costs are going up for a variety of reasons. First and foremost, patients now have access to cutting edge - and expensive - medical procedures that were not available before. While these procedures extend people's lives and well being, they are very expensive and have to be paid for. Additionally, with few patients paying the direct cost of medical care, rather paying their insurance company, the market for medical care becomes distorted.
Another reason for the recent surge in health care costs is the recent Affordable Care Act. One of the new requirements is that employer plans now cover children up to the age of 26. While that may help provide insurance to young adults, it comes at a cost. A survey by the Kaiser Family foundation found that the cost for premiums on employer heath insurance plans increased by 9% in 2010. The increase in premiums has put even more downward pressure on wages during the weak economy.
Many employers are now putting some, if not all, of the cost of health care on to their employees. Many workers are now paying part of the monthly premium and often a large deductible as part of their plan. Often times, if they are young and have no pre-existing conditions, they can purchase private health insurance at a lower price then they are paying for their work plan.There is no end in sight to rising health care costs. Medical advances will continue, the American population is aging, and reforms in Washington do not seem likely to help reduce the cost of health care.