Distributed by MinutemanMedia.org
- March 16, 2005
Topeka Capital Journal
(KS) - March 17, 2005
The Elephant in the Parlor: Health Care Costs
By Heather Boushey
As part of his budget proposal to Congress, President Bush called for cuts in Medicaid, $45 billion over the next ten years. These are part of a larger agenda to broadly cut domestic spending on things like health care, the environment, and education, in order to fund tax cuts for the wealthiest Americans.
Cutting domestic programs significantly hurts families. The proposed Medicaid cuts translate into an average of 1.2 million fewer children accessing the Medicaid system each year between 2006 and 2010.
Further, the president’s plan is potentially a step toward capping Medicaid expenditures in future years. This might sound like a good idea: putting a limit on Medicaid expenses would keep program spending from rising along with health care costs over time, it might be thought.
However, the problem has been misidentified. Medicaid spending is not out of control. In fact, Medicaid costs less per beneficiary than private health insurance plans. The problem is that health care costs have been outstripping inflation for years. Over the past three years, health insurance premiums have risen over 10 percent per year and medical care costs have risen twice as fast as inflation.
Plus the proposed budget fails to address the largest issue facing millions of American families: rising health care costs in the midst of falling employer-based health insurance. The real crisis is that our private health care system, based on employer-sponsored health insurance, is failing the over 40 percent of Americans under the age of 65 who do not have consistent access to the system.
Over the most recent recession, the share of Americans with employer-provided health insurance-from either their own employer or a family member’s-fell by 5.9 percentage points, down to 58.1 percent.
But this overall decline masks the increased hardships for children. The share of adults with employer-provided health insurance who included a child on their plan fell by 4.1 percentage points from 1999 to 2003, down to 32.1 percent. Now, only about half of all children-53.0 percent-are on an employer-based health insurance plan for the full year.
Luckily, between 1999 and 2003, Medicaid spending increased by over 26 percent. Much of the increase was to due to expansions under the State Children’s Health Insurance Program, which was implemented in 1997 to encourage states to cover the children of working parents up to 200 percent of poverty. This program, however, was not an entitlement. When budgets got tight in the early 2000s due to the fiscal crises, many states cut back on their spending.
Thus, the president’s proposed federal budget would cut Medicaid spending just when low-income working families need it most. As employers are passing more health care costs on to workers and as more workers are unable to afford coverage for their families, cutting programs that help fill in the gaps is a bad idea.
Further, working mothers need Medicaid to help them stay in the labor market. Women continue to be less likely than men to get health insurance from their employers, and low-wage working mothers often find that Medicaid is their children’s only potential source of health insurance coverage. Mothers who begin working with Medicaid, but then lose it before they are able to acquire employer-provided health insurance are nine times more likely to drop out of the labor market, compared to moms with an employer-based health plan.
Families are trapped by rising health care costs. On the one hand, as costs have risen, employers have pushed more costs onto them, through higher premiums, co-pays, and deductibles, or through making it more expensive to include coverage for their children. On the other hand, this budget will make it even more difficult to access the public insurance systems because of funding cuts.
This year’s budget does, however, include increased tax cuts for the wealthiest Americans. The tax cuts that have been implemented since 2001 make up the largest share of the increase in the deficit, yet rescinding these tax cuts is not on the agenda. It should be.
The reality is that as health care costs rise, we cannot pretend that there isn’t an elephant in the parlor. A fiscally responsible budget would address how American families can access health care, rather than pretend that the problem with health care is government.
Center for Economic and Policy
Research, 1611 Connecticut Ave, NW, Suite 400, Washington, DC 20009
Phone: (202) 293-5380, Fax: (202) 588-1356, Home: www.cepr.net