During the past few weeks, a number of very large, high-profile companies have announced that they are dropping existing health benefits for part-time employees. In the past year, other large companies have announced that they are suspending health benefits for spouses. With the pre-eminence of health care in the United States these days (and few would argue with the fact that health care is arguably the biggest and most consistent news item in today’s media world), one would assume that these companies are undertaking such moves from real or perceived necessity. That’s especially true since most middle income workers today regard health care benefits as one of the most important parts of their compensation package. Taking such benefits away, one would think, would be a serious de-motivating factor for workers.
But when one looks at the numbers, and the escalation in health care costs, it’s hard to argue with any company’s decision to reduce or eliminate benefits. In fact, it would be hard to imagine that this trend will not escalate during the next 2-3 years.
Consider the following facts as reported by the federal government:
In 1960, a little more than 50 years ago, total health care spending in the United States represented about 4.4 percent of the country’s GDP. That means that the remaining 95.6 percent went to entities other than health care providers.
Fast forward to 2012. Total health care spending in the United States represented over 17 percent of the nation’s GDP. This means that only about 83 percent of the GDP went to entities other than health care providers.
This would seem to indicate that industries and businesses other than health care must have given up a very great deal of money relative to the GDP. The trend seems obvious: when any single sector of the economy grows faster than the GDP grows year after year, other sectors must be declining relative to the GDP. One could argue that offshoring has been a result of this shift, as companies sought and found ways to reduce their labor and manufacturing costs.
Yes, many high paying jobs have undoubtedly been created in health care. But we’ve also seen a corresponding decline in what we would think of as the “blue collar middle class,” and millions of families have slipped down the economic slope as a result.
Consider also the growth in health care spending in the United States versus other developed nations, based on OECD numbers.
In the U.S., health care spending in 2012 was 17 percent of our GDP, the highest among all developed nations in the world. In the United Kingdom, the number is 9.6 percent. In Japan (reportedly with the world’s longest life expectancy), it’s 9.5 percent. In France, it’s 11.6 percent. In Australia, it’s 9.1 percent. In Canada, it’s 11.4 percent. And like Japan, most of these nations have longer life expectancies than the United States.
This is not in any way disparaging to the American health system, as there are many, many health professionals who work in a dedicated and tireless fashion to deliver quality health care to millions of those in need. Instead, it’s simply a question of sustainability.
If the current trends continue, health care spending in the U.S. will reach and top 20 percent of our GDP within the next several years. That means that other sectors of our economy will have to give up many more billions of dollars annually in order to fund the increase in health care spending. Wouldn’t that suggest much less investment in new facilities, new jobs, and new development (outside of health care)?
All of us want access to quality health care. Obviously, none of us would choose to be sick, or die, due to lack of vital health care services. The question is: can we afford it if the ongoing trend continues? If not, where do we go from here?
MBJ Publisher Alan Turner, can be reached at email@example.com