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Decreasing Income Inequality with Better Health

Health is the greatest wealth speech bubble

So, does lack of health literally make you poorer? Unfortunately…YES!

As chronic disease has surged in recent decades, the increase in out-of-pocket deductible spending limits for health insurance has far exceeded wage growth, while employee health insurance premiums have also increased faster than wages.

Spending graph

In fact, according to an analysis by the White House Council of Economic Advisers: if we really want to increase wages and disposable income sustainably, it’s essential to keep down health care cost inflation.  (Coming from a totally different ideological perspective, the Cato Institute makes the same point.)

Projected annual compensation graph

How can we reduce income inequality, when wages are not growing enough to make up for health cost inflation?

We also know, from the Milken Institute studies (and common sense), that increased absenteeism due to chronic disease reduces hours worked and therefore wages, especially for working-class hourly workers.

Yes, many lower-income hourly workers qualify for “free” Medicaid public health insurance. Yet many, perhaps most, of those individuals and their families then have a de facto “Catch-22” cap on their take-home pay:

If their income goes up a lot, they lose access to free Medicaid public insurance— and ironically could end up on balance worse-off financially. That increase in salary may not make up for having to start paying a private insurance premium PLUS much higher out-of-pocket costs for their health care.

[ACA/“Obamacare” subsidies may help some people who work for small businesses or are self-employed to pay premiums, but most people do not qualify. Even if they qualify, they are still often stuck with high private out-of-pocket deductibles.]

If we are serious about increasing incomes and reducing income inequality,
we must improve health habits and prevent chronic disease more effectively…
(and we can!)

Another hard truth on so-called alternative reforms: in pursuit of a better life for lower-income families, we have focused on potential “solutions” that are very hard and very expensive to change on a large scalefor example:

  • We want to dramatically increase postsecondary education attainment
  • We want to provide affordable housing for all
  • And we want all lower-income workers to have much higher-paying jobs
  • We even try to “end poverty”…

Instead, it is time to prioritize something we can actually realistically accomplish at-scale and at a reasonable cost: improving child health habits through schools. This will finally allow us to make a true permanent difference in disposable incomes—well into adulthood, across entire states and the nation. With that extra income, Americans will both better health and more disposable to improve their lives.

Healthy Students Healthy State gets us there.