Let’s jump back into the health-care debate. Let’s talk about costs. If you tell people that healthcare spending is out of control, they will probably think about what they can see visibly — which is spending on the government’s books, such as medicare and medicaid. You can see the spending and you can see the cost – either in taxes today or taxes tomorrow (debt). But, as I’ve pointed out before, this is not the main source of healthcare spending. Spending on private sector healthcare is rising at a faster clip than public healthcare spending, and has been for some time (7.3 percent versus 4.6 percent for the average annual increase in premiums over the past decade or so). Let’s go back further — if insurance premiums had risen “only” as much as medicare spending since 1970, they would be a third lower today.
Clearly, then, the main cost problem is with private healthcare provision. But why don’t we hear about this? Because we can’t see it. As Ezra Klein never tires of pointing out, the main cost comes through lower wages, and workers just don’t see this. They think of health insurance as an added benefit, whereas in fact it comes at the expense of high wages. As MIT economist and healthcare economist Jonathan Gruber points out, one of the very few things that economists can agree in is that health-care costs come out of wages. Courtesy of Ezra Klein, just look at the chart below.
This picture tells all. But the empirical research also makes the point- again, see Klein’s links. I think the implications for Catholic social teaching are clear. It becomes increasingly difficult to secure a living wage in an environment of out-of-control private sector healthcare costs. We must either do something about these costs, including by offering a public option.
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