The Cost of Employer-Provider Healthcare Just Topped $20,000. Medical costs are spiraling out of control but supposedly this is not inflation.
The average total cost of employer-provided health coverage passed $20,000 for a family plan this year, according to a new survey, a landmark that will likely resonate politically as health care has become an early focus of the presidential campaign.
Annual premiums rose 5% to hit $20,576 for an employer-provided family plan in 2019, according to the yearly poll of employers by the nonprofit Kaiser Family Foundation. On average, employers bore 71% of that cost, while employees paid the rest.
“It’s a milestone,” said Drew Altman, chief executive of the foundation. “It’s the cost of buying an economy car, just buying it every year.”
At Elkay Manufacturing Co., a closely held company in Oak Brook, Ill., with around 1,500 U.S. employees, the cost of coverage has been going up around 5% to 6% a year, said Carol Partington, senior manager of total benefits. For 2019, the company introduced its first high-deductible plan, and put in place a new $250 penalty for employees who get imaging scans without checking prices through a price-transparency program.
Medical Care Services vs CPI
Medical Care Services vs CPI Percent Change From Year Ago
Those charts look ominous and they are. But they dramatically understate the problem.
The reason is in plain sight. The BLS measures the CPI, the Consumer Price Inflation.
Employer costs are not included, anywhere.
The Fed's favorite measure of inflation, PCE, Personal Consumption Expenditures, does not look at employer costs either.
The BLS reports a 4.3% year-over-year rise in medical care costs. It arrives at that figure by excluding all employer increases, then it averages prices paid by the self-insured with those on Medicare.
Those buying their own insurance will tell you costs are up as much as 100%, not 4%.
Percentage of Healthcare Uninsured Jumps From 8.0% in 2017 to 9.1% in 2019
On September 16, I reported the Percentage of Healthcare Uninsured Jumps From 8.0% in 2017 to 9.1% in 2019.
Here is one of many charts.
The young and healthy are opting out. And why shouldn't they?The Obamacare design forces them to overpay.
“It’s just too expensive,” said Grace-Marie Turner, president of the Galen Institute, a public-policy free-market research organization. People are siphoning themselves off.”
Those over 65 are the most likely to have insurance. Their costs artificially lower reported inflation for every group but themselves.
Wage Growth for Men About 1/4% Per Year Since 2000, Women About 1/2% Per Year
Despite soaring medical care costs, please note that Wage Growth for Men About 1/4% Per Year Since 2000, Women About 1/2% Per Year.
Bear in mind, that chart of real (inflation-adjusted) wages assumes you believe the CPI.
Some readers challenge the chart based on advancement. It's a false challenge. Those are "median" wages. By definition, 50% make more and 50% less no matter what the starting point.
Don't confuse nominal wages with real wages. The median nominal wage was $568 in 2000. It is now $911. That's a 60% wage hike in nominal terms. Inflation took most of it.
Home Prices Another Measure of Inflation Under-Reporting
Last Chance for a Good Price
Home prices are not in the CPI. Only rent is.
Those who want to buy a home quickly discover wage growth has not kept up with home price growth.
In case you missed it, 68% of Millennial Homeowners Regret Buying a Home
The top regret "too costly to maintain".
Meanwhile, the Fed is concerned about the lack of inflation.
What a sorry joke.
Mike "Mish" Shedlock