Business & Economic Development…read more
Americans are spending $4 trillion per year—about $12,000 per American—on health care. This is more than twice per capita what other countries spend.
Let’s look at this from employees’ perspectives—using a household income point of view. Now, consider that the median US per capita household income is about $34,000—$31,000 in Arizona. The chronic bottom line for Arizona:
Health care is the largest component of federal spending, now even exceeding Social Security. It is the fastest growing major component of the federal budget, and is driving the rapid growth in federal deficits and the national debt. And it is typically the 2nd largest component of state government spending—after education.
The government role in health care continues to grow—thanks to Medicaid (operating under AHCCCS, Medi-Cal & many other state-specific names), Medicare, the Affordable Care Act, the VA, military & other government employees, IRS employer tax breaks, etc. (Yes, even employer health spending is heavily subsidized by the government/taxpayers—through tax deductions.)
To put it bluntly: current and (thanks to federal deficits & debt) future taxpayers—in other words, our children, grandchildren, and great-grandchildren—will end up paying what we can’t and won’t pay.
Ever-increasing deficit-fueled federal health care spending, including major new health insurance subsidies (“Obamacare”), plus massive tax cuts every 15 years to increase working- and middle-class disposable income, have been essential for keeping this Titanic afloat for families.
In addition, each year there is a promised “silver bullet” policy “solution”, which we are assured will reduce health costs, without any real investment or effort on our part.
This happy talk always disappoints in the end—though it does help our political system and society to postpone dealing with the root causes: unhealthy habits.
The financial risks for the public continue to mount. Health cost increases remain high, while long-term wage & salary increases still do not make up the difference.
Meanwhile, we rightly congratulate ourselves for 50+ years of reducing smoking, which we worked very hard to change—while we continue to not address inactivity and unhealthy nutrition.
For middle-income families, health spending requires more than twice as much of their household income as in 1980. In addition, those same families now spend more than twice as much on health care as they pay in income tax.
But it’s actually much worse: when the portion of their income taxes paying for federally-funded health care is factored in (e.g., Medicaid, Medicare, the ACA/Obamacare, the VA, employer tax deductions, etc.), families are typically spending 3-4 times more for (their & others’) health than they are paying in income taxes. For average families, tax cuts can literally no longer even come close to keeping up with health cost increases.
Yet in red-states, political leaders continue to focus on tax cuts—even though health care is a far bigger problem for families. Meanwhile, in blue-states, the focus continues to be on accessibility to and affordability of health care—i.e., expanding public subsidies for increasingly common chronic conditions, rather than preventing them.
Progress in prevention would have enormous win-win upside throughout the economy. Higher productivity from less chronic disease means less hours out sick and more hours worked & paid. It increases profits, GDP, and “organic” tax revenue—without higher tax rates. In addition, combined with lower employer health care costs, much of that health improvement also turns into lower health care premiums and out-of-pocket expenses for employees—which means more money for salaries—and reverses current trends.
In fact, if you really want to increase wages sustainably, it’s essential to keep down health care cost inflation. Health care costs are simply too big a part of human resources costs to absorb in employer profits, and they will continue to be passed on to employees to a large extent.
We pay for our own & other people’s health costs through a broad range of taxes, insurance and out-of-pocket costs. Ultimately, individual employees, business owners, and current & future taxpayers end up picking up the entire health bill of the country. The bottom line: no individual, employer or state can escape others’ health costs.
63% of middle-age adults already have chronic disease already. Meanwhile, 1/3 lower-income children are on the road to diabetes (10x the past)—and will not be able to pay for treatment. We are in increasingly serious trouble.
Let’s do the honest math: our health care costs put the budgets of our families, schools, employers, and governments—and the whole economy—at serious risk.
Unless we dramatically improve our health habits, future generations will be unhealthier and paying even more for their health care. And average health care quality will decline, as the quantity of care needed dwarfs the financial resources available.
At the same time, taxpayers will be trying to pay off a massive health-care-cost-fueled national debt—now growing @$1 trillion annually—even during a “booming” economy.
Please see our latest slide deck for more details.
Notes on AZ family chronic costs vs. income:
Notes: Direct chronic disease medical costs, not including indirect economic (productivity/absenteeism/presenteeism) costs, of the major chronic diseases itemized by Milken Institute including heart-disease/hypertension/high-cholesterol, back/musculoskeletal issues, cancer & many other chronic conditions—but not including mental illness. “Obesity [from inactivity & unhealthy nutrition] is by far the greatest risk factor contributing to the burden of chronic diseases…[&] accounted for 47.1% of the total cost [health care + economic] of chronic diseases.” (Milken, 2018; based on 2016 data: 2021+ est. >50%; also, disease-by-disease estimates by Milken & HFUS based on Milken, Mensah & other data confirm 45-55% of key chronic diseases now caused by inactivity & unhealthy nutrition, often leading to metabolic syndrome & presenting first as obesity).
The Good News: realistic potential to reduce direct/medical chronic healthcare costs $5B+/20% over time from school-based strategies—beginning immediately, with students & their parents, also leading to high post-K-12 near-term impact on young adults + significant impact later—in middle-age from postponing on-set & reducing severity of chronic disease (see other slides). AZ, 2016: $23.4B in direct medical costs, $3,341/person: 2019: population 7.3M; 2.6M households = 2.8 people/HH; per capita income $30,694; median household income $58,945; per Census.gov Also see Peterson-Kaiser Family Foundation analysis: average middle-income families in USA spend 15-24% of household income on heath: Household Health Spending Calculator, Health System Tracker (KFF, 2017).
Reference: Waters & Graf, 2018 (Milken Institute): The Costs of Chronic Disease in the U.S. (includes state data) and America’s Obesity Crisis: The Health and Economic Costs of Excess Weight: “Obesity increases insulin resistance, blood pressure, LDL cholesterol, and triglycerides. Further, obesity lowers HDL cholesterol and places the body in a pro-inflammatory state. Extreme fat retention in the body is detrimental because fat cells networked together act as an endocrine organ.” AZ population & household size & income data: census.gov
Note: 11%/16% are total chronic medical costs divided by #Arizonans & Arizona households; per Kaiser FF data, the true total costs are not clear to employers & families, since health costs are paid for from a combinations of: federal taxes, premiums & debt; employer premiums/self-insurance; and employees & individuals (premiums, co-pays, out-of-pocket—including foregone salary in employer premiums to keep employee health insurance premiums affordable)—see other slides. Google: Creativefabrica.com Pinclipart.com Icon-icons.com Slide@03/05/2022
Notes on US family income taxes vs. health care costs
Notes: Based on self-reported BLS household expenditure data, not directly comparable to KFF family data. Direct health costs are approaching 10% of middle-income families’ budgets, plus with about half of those families’ federal income & payroll taxes paying for government health spending (Johns Hopkins study, 2019: 27% fed. spending on Medicare, 11% SS for health costs, 10% Medicaid, 5% VA/Military healthcare, employer health insurance tax deductions, debt interest, etc.), total health-related costs for this quintile approach 15% of income—which is the percentage calculated by KFF for a family of four with a $50,000 income and employer coverage (Health System Tracker, KFF, 2017). Note that major income tax cuts since 1980 have not kept families even—they have not compensated for the huge increase in their health costs—nor can they do so, because health costs are now so much bigger than non-health income taxes. (Also, as Warren Buffett commented in 2017: businesses are focusing too much on corporate taxes & not enough on reducing health care costs.)
Taxes & health expenditures are shown here as % of before-tax income for the middle household income quintile [40%-60%]. Taxes as categorized by BLS consist primarily of federal, state & local income taxes, & exclude social security tax, real estate property tax & sales tax. Health costs include all household health expenditures incl. insurance & out-of-pocket spending on health care. Source: BLS Consumer Expenditure Survey, 1980 & 2019. Notes on changes in BLS modeling in 2004 & 2013. Also: “most people (59%) say they live in a family with someone who has a pre-existing or chronic health condition. About half say they are worried someone in their family will not be able to afford health coverage (54%) or would lose coverage (51%) if the ACA were overturned.” KFF Poll, October 2020 (Bold/color/underlines added.) Slide@03/05/2022