Health Care Part 1

Health Care part 1

What follows was an enclosure to an e-mail from a somewhat conservative friend:

       “The Urban Institute has no motive to attack Warren. It's a progressive think tank. They likely didn't even account for the cost of Warren's pledge to “give free health care to every illegal alien who sneaks into the country” (no motive?). Who's going to pay for all this? Divide $3.4 trillion a year by 320 million Americans and you get more than $10,000 per person. Not per taxpayer. Per person. That includes every child, every retiree, every prison inmate. That would be the largest tax ever assessed in American history, by far. It would change everything. An awful lot of people would just leave the country.”

        He then asked me (because he knows I’ll respond): “Is this true?”  I should point out that the individual referred to above is a dear friend, and also a senior military reserve officer. As usual the first though I had was, “Well, XXX, why don’t you do the research and tell me?” Even as I wrote it, I knew that the answer was that he’d rather goad me into it. I then included links to four separate recent blog posts on single payer and health care costs.

       However, as XXX knew I would, I looked closer at the numbers and wondered how accurate they were. Off the top, I found data which cast the claims above in a far different light.

       It is critical to note that only one population segment comes close to the $10,000/year spending claim. So, having that kind of time, and rather than just guessing, I researched US population demographic data with the aim of determining what percentage of total population falls into which age group, calculating the total expense per group, and dividing by the total population to find a real “average" cost per individual. 

 The (rounded) percentages of the total represented by each population segment in the graph below is:

Ages 0-5 – 6.8%, 

Ages 5-17 - 22.2%,

Ages 18-44 – 36.9% 

Ages 45-64 – 22%

Ages 65 + - 12.4%

The immediate and obvious “takeaway” here is that about 1/8 of the population spends more than the $10,000 figure and the rest spend far less. The other and very persuasive factor here is that the figures above include the current abusive drug pricing which, apparently, only we in the USA are “privileged” to pay. Calculating the weighted averages, the actual national average spending per patient in the USA is $4299. It is only fair to point out that these are 2016 demographics, but they are reasonably representative.

       But wait, as they say, there’s more: on average, employers pay 82 Percent of health insurance for single coverage. In 2018, the average company-provided health insurance policy totaled $6,896 a year for single coverage. Yes, that’s more than the average expenditure for the earning age group, but, “Hey, it’s a business!” Again, on average, employers paid 82 percent of the premium, or $5,655 a year. Employees paid the remaining 18 percent, or $1,241 a year. This is money neither the employer nor employee ever see as spendable income. It’s a cost to the boss and a deduction from the worker. Additionally, the average employee (and the boss!) also “contributes” $1537 to Medicare. What the Urban institute study does is to grossly inflate the per-person cost by using the high spending of 12.4 % of the population over 65, and ignoring the following:

       Average (2017, latest data available, it’s surely a bit higher in 2019) US Employer contribution (per person, the expenditure is more for family policies) is $5655, the Employee contribution for single coverage (family coverage is usually MUCH higher) is $1241, and the employee also pays an average of $1537 in Medicare deductions from salary. [As an aside, New results from an industry organization's annual study shows that large employers expect the total average per-employee cost for health insurance benefits — which includes premiums and out-of-pocket costs for employees and dependents — to rise in 2018 to $14,156 from $13,482 this year!].The crux of all this is that for the average US individual worker, there is a total of around $8433 annually, never seen in a pay envelope except as a deduction, which goes to healthcare spending! There is a much higher figure for family coverage, (as much as $6000 more annually, which I did not even factor in) Using the best estimate of the number of employees under those circumstances (155,761,000 in 2018) that means that over $1.3 trillion is already going to health care spending under current circumstances.

        This is a low estimate since many, if not most, of the workers counted singly here (and their employers) are paying significantly more for family coverage.  Just as a math exercise, that means that right now (and these numbers exclude some high earners in business not considered industrial) between employer contributions to insurance and employee payroll deductions there is already about $4,000 for every individual in the country sent to either private insurers or Medicare annually and if family plan costs were factored in, probably more like $7,000!

        Summarizing: The “study” used exaggerated numbers to begin with and then further ignored the dollars already spent on health care. Using the real, mathematically derived “average per person annual health care spending” of $4,299 and subtracting the roughly $4,000 per every member of the population (actually even higher), already taken from either employer or paycheck, what do we have left? Yep, about $300 more per year, vice $10,000. Remember, it's actually better than that because I didn't factor in extra deductions for family coverage.  

As Mark Twain famously said, “There’s lies, damned lies, and statistics.”   

Additionally, single payer systems are simply more efficient. Even another good friend, the very Republican dentist, concurs. I will expand on this, National Health Care, Drug costs and Medicare “advantage” plans in part II.