Unemployment cause: Health care costs

[Dr Dave]

I've abridged the following story from today's NY Times. You can see the whole story by clicking here. Free registration required, blah-blah-blah.

August 19, 2004
Rising Cost of Health Benefits Cited as Factor in Slump of Jobs
By EDUARDO PORTER

A relentless rise in the cost of employee health insurance has become a significant factor in the employment slump, as the labor market adds only a trickle of new jobs each month despite nearly three years of uninterrupted economic growth.

Government data, industry surveys and interviews with employers big and small indicate that many businesses remain reluctant to hire full-time employees because health insurance, which now costs the nation's employers an average of about $3,000 a year for each worker, has become one of the fastest-growing costs for companies. Health premiums are sapping corporate balance sheets even more than the rising cost of energy.

In the second quarter, the cost of health benefits rose at a 12-month rate of 8.1 percent - more than three times the inflation rate and the rate of increases in wages and salaries.

"Health care is a major reason why employment growth has been so sluggish," said Sung Won Sohn, the chief economist at Wells Fargo.

Although the economy emerged from recession long ago, posting 11 straight quarters of growth, there are still about a million fewer jobs in the United States than there were at the beginning of 2001, just before the country sank into recession.

A spurt in job growth between March and May raised hopes that employment would emerge from the doldrums. But job growth slowed sharply again in June and came to a virtual standstill last month. In July, businesses added a mere 32,000 jobs, and for the first time this year more businesses let workers go than hired new ones.

Because of the cost of health insurance, "we are making decisions not to hire people," said Steve Hayes, the owner of Custom Electronics in Falmouth, Me., which installs electronic systems like home theaters and communications networks in homes and offices. "Before, we hired based on workload," he added. "Now it's a question of affordability."

Mr. Hayes said his health insurance premiums had risen by 22 percent a year in the last four years. He now pays $4,150 a month in health insurance premiums for his 33 employees, and the workers contribute an equal amount from their own pockets. The company's revenue - less than $5 million annually - has been growing briskly, he said, but outlays for health benefits are growing even faster, eating into the company's profits.

The increase in health insurance premiums reflects the rising cost of health care, which is being driven by expensive new drugs, many of them heavily advertised to consumers; medical advances including diagnostic tests that require costly new machines; and a reaction to past restrictions in managed care health plans that sought to rein in costs.

In the presidential campaign, both candidates have proposed measures for tackling the high cost of health insurance, including tax credits for small businesses and low-income people.

President Bush has pointed out that consumers can buy relatively inexpensive, high-deductible insurance to protect against catastrophic illnesses and can pay for routine care with new tax-free health savings accounts.

He also favors pending legislation that would let small businesses get volume discounts by buying insurance through trade associations, a plan that is opposed by many insurers, state insurance officials and some influential Senate Republicans. Critics say they are concerned that those associations would be largely exempt from state regulation and their insurance pools might attract healthier people, driving up costs for those who stay in the traditional insurance market.

Senator John Kerry's campaign plans to weigh in today with its own study of the link between rising health care costs and the employment slump. A summary of the report, which was prepared by Laura D. Tyson, who served as an economic adviser to President Bill Clinton, contends that industries with more health care benefits - like automobile manufacturing - have suffered the biggest losses in jobs and that those, like food service, that typically offer few benefits have realized the biggest gains.

"We're losing jobs in high-wage, high-benefits sectors like manufacturing, where employers are responding to this surge in health care costs,'' Ms. Tyson said in an interview yesterday.

A centerpiece of Mr. Kerry's plan would be to reduce health insurance premiums by having the federal government pick up 75 percent of the cost of catastrophic medical care. That would reduce the cost to employers and employees about 10 percent, or $1,000 a year, according to campaign officials.

Businesses, meanwhile, are trying all kinds of coping strategies. Some companies have responded by shifting part of the health insurance burden onto their workers or by ratcheting up premiums and deductibles. Some have eliminated coverage for dependents, while others have canceled their medical plans altogether. Many have frozen or reduced wages to compensate for ever bigger health insurance bills.

-30-

I like Kerry's plan better than Bush's, but neither plan begins to address the magnitude of the problem. Private health insurance has proved to be a disaster: The whole point of having insurance is to have a large pool of insured, so risk is spread widely. Private insurers did exactly the opposite, taking only the least-risky (and therefore most profitable) customers. Pharmaceutical companies appear to have lost all forward motion in research: The market is filled with me-too drugs. And this business of re-importing drugs from countries with price controls is just surreal. Let's have price controls, then, and stop kidding ourselves. Physicians see more patients per day than ever before, and pay hugely for malpractice insurance. And hospitals...oh, my God...have any of you had the misfortune to be in a hospital recently? They're drowning in good intentions and terrible management.

If ever there was a time to start taking single-payer health insurance seriously, the time is now. Like a lot of things in this country, there are heavily entrenched interests involved in maintaining the status quo. But we gotta start somewhere. There is a resolution in the House, HR 676, that calls for a national healthcare system. Click here to go to Campaing For A National Health Program Now.

OK, who'd be the first dunderhead to scream "socialized medicine"??

[patricia]

If, as President Bush suggests, people buy low-cost, high-deductable health insurance, that may protect them from financially ruinous major illness decimating their families, but how does that protect them from merely serious, but not immediately life-threatening illness?
It seems to me that regular, general health-care would lead to better general health and the worker would be more productive as well as being healthier in the long run.
Why do so many people object to some sort of National Health Care?? Would a healthier population not be a good thing??

But, employers seem to be taking advantage of the fact that if they hire two part-time employees, instead of one full-time, the work is produced, but they don't have to provide benefits. Isn't there some sort of regulation that only a small percentage of employees can be part-time, since this seems to be a method by which employers seek to circumvent having to look after their people by providing health benefits? Theoretically, a company could now run their operation using ONLY part-time employees, increasing their bottom line and still producing the work.
Also, hiring part-time employees makes the employment stats look as if they are improving, when they really are not. That IS one way that the stock of the employer will rise, thus making the general economy look like it is bouncing back, as the Bush Administration said it would. Seems kind of underhanded to me.

[Jazzzoline]

Healthcare is becoming a big thing here in Canada. We are at building systems for helping differents actors in helthcare field. But the thing is, those systens use mostly US components. So the job are created in the USA.

http://www.globetechnology.com/servl...er/?mainhub=GT

[Jazzzoline]

Originally Posted by patricia

If, as President Bush suggests, people buy low-cost, high-deductable health insurance, that may protect them from financially ruinous major illness decimating their families, but how does that protect them from merely serious, but not immediately life-threatening illness?
It seems to me that regular, general health-care would lead to better general health and the worker would be more productive as well as being healthier in the long run.
Why do so many people object to some sort of National Health Care?? Would a healthier population not be a good thing??

But, employers seem to be taking advantage of the fact that if they hire two part-time employees, instead of one full-time, the work is produced, but they don't have to provide benefits. Isn't there some sort of regulation that only a small percentage of employees can be part-time, since this seems to be a method by which employers seek to circumvent having to look after their people by providing health benefits? Theoretically, a company could now run their operation using ONLY part-time employees, increasing their bottom line and still producing the work.
Also, hiring part-time employees makes the employment stats look as if they are improving, when they really are not. That IS one way that the stock of the employer will rise, thus making the general economy look like it is bouncing back, as the Bush Administration said it would. Seems kind of underhanded to me.

Employers should know that it's exactly how permanent employees get exhausted. When you have to start over every 3 months with new poeple, burn out is not long to come.

[Darryl G. Thomas]

Patricia,

There would have to be a total collapse of health care in this country before a government-sponsored system is started. As the author suggested there would be screams of socialism from the right. Plus there are a couple of industries making a ton of money off of health care, they've got a legion of flesh-eating lobbyists in DC and those guys and gals are writing legislation these days.

And Doc, as a free-market advocate you've got to love the drug companies.

[patricia]

Originally Posted by Darryl G. Thomas

Patricia,

There would have to be a total collapse of health care in this country before a government-sponsored system is started. As the author suggested there would be screams of socialism from the right. Plus there are a couple of industries making a ton of money off of health care, they've got a legion of flesh-eating lobbyists in DC and those guys and gals are writing legislation these days.

And Doc, as a free-market advocate you've got to love the drug companies.

Socialism in it's purest form looks after the people. Now, I know that it's a dirty word to most Americans, equal to communism.

But, it seems to me that in a democracy, there should be some upside for the citizenry of the richest country in the modern world, besides being able to say that the U.S. is the most militarily mighty nation in the world. What good is that, if the ordinary person cannot, even if they are employed, expect some sort of healthcare? After all, the employer benefits if their workers are working and producing goods and services for them. The idea that a country would not provide at least basic healthcare for all it's citizens is astonishing. What exactly is it that tax dollars should be used for, if not to look after the basic health needs of the nation?
The government seems more than willing to sink billions of tax dollars into a war which is killing thousands of people in Iraq, but is reluctant to make sure that it's own citizens are healthy. Strange priorities.

[Dr Dave]

Originally Posted by Darryl G. Thomas

Patricia,

There would have to be a total collapse of health care in this country before a government-sponsored system is started. As the author suggested there would be screams of socialism from the right. Plus there are a couple of industries making a ton of money off of health care, they've got a legion of flesh-eating lobbyists in DC and those guys and gals are writing legislation these days.

And Doc, as a free-market advocate you've got to love the drug companies.

As a matter of fact, health care is one of the businesses that fails as a free market. All power is concentrated in the hands of the seller: The hospital, the physician, the pharmaceutical company, the health care insurer. When you're sick, you're not really in a position to comparison-shop.

Part of being a true free-market advocate is recognizing that free markets don't work in every situation. Markets are "free" only when there are many buyers all of whom are empowered to choose sellers. Health care is not one of these situations.

Finally: Does anyone beside me notice that every industry that's getting rich by gouging American citizens has a fleet of flesh-eating lobbyists? Energy, sugar, drugs, insurance...

[clinthopson]

This is one of the very major issues in this election (not the bullshit about who served in the military).

As an employer, I see that health insurance coverage costs. We are currently budgeting about 10-12% of payroll for health benefits, plus the outrageous California Workers Compensation premiums and other health related payroll taxes.

It's not just direct medical care, but the huge prescription drug costs for hypertension, cholesteral, thyroid imbalances and so on that clobber your pocketbook.

As Doc says, the flesh eaters have government in their pocket. I'm not at all sure that the Dems will do anything about it. After all, when Hill and Bill tried to reform health care, their own party shot them down.

[Darryl G. Thomas]

Here is a review of a book I just ordered from Amazon:

"The American Dream is in decline. Americans are increasingly overworked, underpaid, and squeezed for time. But there is an alternative: the European Dream-a more leisurely, healthy, prosperous, and sustainable way of life. Europe's lifestyle is not only desirable, argues Jeremy Rifkin, but may be crucial to sustaining prosperity in the new era.

With the dawn of the European Union, Europe has become an economic superpower in its own right-its GDP now surpasses that of the United States. Europe has achieved newfound dominance not by single-mindedly driving up stock prices, expanding working hours, and pressing every household into a double- wage-earner conundrum. Instead, the New Europe relies on market networks that place cooperation above competition; promotes a new sense of citizenship that extols the well-being of the whole person and the community rather than the dominant individual; and recognizes the necessity of deep play and leisure to create a better, more productive, and healthier workforce.

From the medieval era to modernity, Rifkin delves deeply into the history of Europe, and eventually America, to show how the continent has succeeded in slowly and steadily developing a more adaptive, sensible way of working and living. In The European Dream, Rifkin posits a dawning truth that only the most jingoistic can ignore: Europe's flexible, communitarian model of society, business, and citizenship is better suited to the challenges of the twenty-first century. Indeed, the European Dream may come to define the new century as the American Dream defined the century now past."

Rifkin was just interviewed on NPR and he touched on a few things I've been thinking about. Patricia's comment about how rich America is and its resistance to things like universal health care, etc., basically the common good. Rifkin believes (my interpretation) that America overemphasizes "rugged indivdualism".

I believe we have the resources to provide health care for everyone, to establish a reasonable living standard for more people than we do now. I'm not advocating socialism, but maybe a hybrid of socialism and capitalism. But it seems to me that so many Americans have the attitude expressed by Dave Thomas (of Wendy's fame) "no work, no eat" when referring to programs like welfare.

I was talking to one of my co-workers the other day about the privatization of Social Security. My thinking is that Social Security is "sure money" while with privatization the only sure money will be for Wall Street and money managers because most people, including myself has neither the training or expertise for investment. Our educational system certainly doesn't provide it. My co-worker's response was "tough".

Sometimes I get the feeling that America's heading towards a form of social darwinism. That you're a sucker if you believe the whole society benefits when the weaker among us are secure, have a decent roof over their heads, etc.

[Dr Dave]

off-topic post deleted.

It is worth remembering that getting health care coverage through your employer is an artifact of the immediate post-World War II era, when employee wages were federally regulated. Providing health insurance was a way of rewarding employees without raising their pay. Nowhere was it ever graven in stone that this was the only way to deliver health care.

[Dr Dave]

Up for Lois.