Page 2 of 2 Middle-class suicide
By Julian Delasantellis
For millions of Americans these days, the answer is that they're not - either
they're losing their jobs or having their hours radically cut back, both of
which would result in a sharp cut back or elimination of health insurance; or,
faced with its ever increasing costs, the employers are keeping workers on but
no longer contributing to their health insurance premia. These are the key
reasons why the vast majority of US uninsured, now 47 million and climbing, are
still workers or the families of workers gainfully employed - uncovered by
health insurance in a nation where health insurance is supposed to come from
employment.
Why pick up the tab?
When commentators and bloviators talk about the crisis in US healthcare costs,
they're not talking about how expensive it is for somebody to buy a bottle of
aspirin with their own money; nobody
really cares about this spending. This is called first-party spending, directly
by the consumer, on a product. What really is the issue is what is called
third-party spending, spending by the medical system which gets passed on to
health insurance companies, which then pass these cost increases to the
companies paying the workers' insurance. Since here is where the costs are
rising, here is where the cutbacks are occurring, so here is where the crisis
is now centered.
Why would an employer pick up the bill for most, if not all, of an employee's
healthcare tab? The original reason certainly no longer holds much water; with
unemployment around 10% wages and benefits are currently being cut, not raised,
as they were during World War II.
Employers may pay health insurance benefits to keep workers, especially highly
trained and specialized workers, happy and productive; then again, there are
plenty of employers enjoying fat and happy lives even though there are pictures
of them with devil's horns and cloven hooves underneath the words "OUR LEADER"
in the employee cafeteria.
In the US, employers get a tax break for providing employees health insurance.
A simple example demonstrates why, as it now is, this system was always
destined to explode.
For the sake of example, let's say an employer pays $10,000 for an employee's
health insurance - about right for one urban worker with lots of pre-existing
conditions, or a rural worker with a small family. Once again let's say, for
the sake of example, that the employer calculates his business tax on his
personal tax form, specifically, IRS form 1040 Schedule C - Business Gains and
Losses, as most small businesses do.
Once again, for the sake of example, let's say the employer is paying taxes at
the common marginal tax rate of 28%, the rate assessed when the combination of
his, from the businesses' profit and any other income, and his wife's income is
between $137,050 and $208,850.
At the 28% rate, when he does his taxes, the business owner gets back $2,800
(0.28 x 10,000) of the $10,000 he spends on his employee's health insurance,
meaning that $7,200 of it is from his own pocket.
So, is any employee worth the $7,200 it's going to cost, from the simple
example, to cover him? If the answer is no, and if healthcare coverage is
essentially unobtainable in America except through employment, then both the
employee and general society have a problem, and that problem is the current
healthcare crisis.
These days, moving from the bottom of the income scale into at least the lower
middle, employers are deciding that, no, the employee is not worth it. Where
once America had a broad middle class that almost universally received health
insurance from its employers, now an argument can be made that, with large
numbers of the uninsured, no person without health insurance can truly be
called middle class, since just one brief illness will most like irrevocably
eject them from it.
Increasingly, for full-time private sector employment paying less than $50,000
a year or so, and for all of the burgeoning ranks of part-time and temporary
workers, there is little or no expectation that health benefits will be part of
your new job's pay packet. If you're part of a 10-person shop doing graphic
design that grosses $2 million a year. you'll probably get health benefits; the
five employees of a coffee shop grossing $250,000 probably won't.
Taking a look at the problem macroeconomically best illustrates the problem.
For about the past 15 years or so, healthcare costs in the US have been rising
at an average of about 5% a year, while productivity per worker, what the
employer actually receives for each new worker, has only increased at a rate of
a little over 2% a year.
As these lines rise and diverge, the growing space between the two lines
becomes a veritable Potter's field where many workers' dreams of an American
middle-class lifestyle are being entombed. With medical care costs, and thus
health insurance premia, rising faster than what the average employee brings to
the business, it's no wonder that the obvious solution to employer's high cost
of health insurance as a third payer is to stop paying the subsidy and let the
employee try to get sufficient healthcare from the almost impossible position
of an individual first payer.
This is the insane manner in which the system currently is trying to deal with
high and rapidly rising healthcare costs - to deny access to it for those with,
as measured by their wages, marginal economic benefit to the economy, and to
keep on re-marking the sufficient social utility line ever upward.
As I said, when you lose your health insurance you go from having a third payer
pay your costs to you trying to do it as a first payer, which very few can
successfully do for any length of time. Nevertheless, the system is spending a
lot less on your health needs (unless you start showing up in emergency rooms,
another story in and of itself) than previously. This reveals the true nature
of the uninsured problem to the ruling classes - instead of being a critical
public policy problem that must be addressed, their suffering with little
proper medical care frees up resources that affords the elite to be cosseted
and comforted with the super care they believe their station deserves.
Thus, Blade Runner's 2019 bifurcation of society into lots of poor and a
few rich moves ever closer. Frank Luntz's pollsters and focus groups have
apparently found that the argument that the Republicans now proffer (as they
did in 1993), that covering the uninsured is interpreted by many middle-class
Americans as forcing them to share use of the specimen room with the
underclass, resonates powerfully all across all but the bluest of blue-state
America.
The irony is that many of those who didn't want to share their medical care
with the uninsured will soon probably be doing precisely that, as the "not
pulling your productivity quota to earn it" machine ejects them from the
doctors they see with their health insurance, those with the Manet lithographs
on the wall, onto the long, hard benches of emergency rooms and urban health
clinics, with their interminable waits, screaming babies launching infected
phlegm projectiles, and "FIGHT AIDS" in 50 languages posters on the wall.
The policy wonks at present negotiating healthcare reform in Congress are
looking at various small fixes to the problem. With universal care, ejecting
the economically marginalized from the system will no longer be available as a
cost-containment strategy. A proposed so-called "public option" government-run
healthcare program might put some competitive pressure on the cozy relationship
between the health industry and the health insurance industry, by forcing
efficiencies in the present practice wherein the insurance companies take the
distended cost structures of the doctors, hospitals and health clinics, add on
their own bloated management costs and profit margins, and then pass the costs
of the entire inflated monstrosity to insurance payers.
Will it work? Well, it's going to cost probably between US$1.5 trillion to $2
trillion (compared with the $1.8 trillion 10-year costs of George W Bush's 2003
tax cuts) over the next decade; that has to account for something. It probably
will do little to improve America's currently lousy healthcare outcome
standings vis-a-vis almost all developed, and a whole lot of non-developed,
countries; these are due to the country's very poor rural infant mortality
statistics, as well as the growing plague of what is sometimes called diabesity
- maladies such as diabetes and obesity which accrue to a society as it grows
wealthy enough to enjoy the sedentary lifestyle brought on by workers not
having to break their back with manual labor to earn their keep. The rest of
the industrialized world should be seeing this soon enough.
But, speaking of costs, what is the value to the world of a stable American
middle class? Not even counting the fact that the American middle class has
time after time proved its mettle as the group willing to buy all the consumer
products the developing countries of the world can hurl at it, what is the
value of an America not descending to levels of social desperation reminiscent
of Germany in the 1920s or the former Soviet Union in the 1990s?
What is the value of an America impervious to the siren songs of nativist
irredentists sweeping down into Washington (perhaps originating in Fairbanks,
Alaska?) at the head of an army of the sickly, hungry and dispossessed, blaming
all the country's troubles on the usual suspects - the foreign, the black, the
brown, the yellow, the non-Christian, the people who actually read math
textbooks?
Another future-as-hell epic, Richard Fleischer's 1973 Soylent Green, has
New York City police detective Robert Thorn (Charlton Heston) investigating the
source of a mysterious new food product, Soylent Green, designed to feed an
overpopulated and starving world . He is none to happy to find out the truth.
"It's people. Soylent Green is made out of people. They're making our food out
of people! Next thing they'll be breeding us like cattle for food. Soylent
Green is people!"
Well, the American middle class is at present being voluntarily consumed so the
rich can have their healthcare. Still, a great many of them oppose any Obama
health plan; it's not easy to warn somebody that they're about to be eaten
alive when you find them waiting patiently under the ketchup nozzle.
Julian Delasantellis is a management consultant, private investor and
educator in international business in the US state of Washington. He can be
reached at juliandelasantellis@yahoo.com.
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