Health Care Honesty And Accountability

Health Care Honesty And Accountability
February 27, 2009

Greg Scandlen

Greg Scandlen is a senior fellow of The Heartland Institute and founder and director of... (read full bio)

During President Obama’s “not quite a state of the union” speech on Tuesday, he called for a new era of honesty and accountability in government.
 
Those are fine words, but he broke that promise even before leaving the podium. Discussing health care reform, he said, “This is a cost that now causes a bankruptcy in America every 30 seconds. By the end of the year, it could cause 1.5 million Americans to lose their homes. In the last eight years, premiums have grown four times faster than wages. And in each of these years, one million more Americans have lost their health insurance. It is one of the major reasons why small businesses close their doors and corporations ship jobs overseas.”
 
None of that is true. Let’s look at each of those claims:
 
Health care “causes a bankruptcy in America every 30 seconds.”
That rate would mean 1,051,200 medically induced bankruptcies per year. But the total number of bankruptcies in 2007 was just 822,590, and only a small fraction of those, possibly as low as 5 percent according to a University of California study, were attributable to medical costs.  Interestingly, the population with the greatest growth in bankruptcy rates is those covered by Medicare. Since 1991, bankruptcies have actually decreased for people below age 65, but increased 125 percent for those between 65 and 75 and rose 433 percent for those over age 75.
 
“By the end of the year, it could cause 1.5 million Americans to lose their homes.”
This one is a mystery. Sure, plenty of people are “losing their homes,” about 3 million this year, but to think that half of those are due to medical bills rather than ARMs or layoffs seems highly fanciful.
 
“In the last eight years, premiums have grown four times faster than wages.”
Actually, premiums have stabilized for the past five years at about a 6 percent annual increase, while wages have been increasing about 4 percent, according to Mercer. Obama may have been thinking about the spike in 2002 when premiums rose 14 percent and wages rose about 3 percent, but that was a one-year exception and not at all representative.  It’s worth remembering, also, that companies that have adopted consumer-directed plans are seeing premium increases well below inflation and wage increases. Watson Wyatt found the “best performing” companies had a two-year cost increase of just 1 percent while other companies’ costs increased 10 percent.
 
“[I]n each of these years, one million more Americans have lost their health insurance.”
That’s not true, either. The most recent report by EBRI, in September 2008, showed the raw numbers of uninsured rose from 39.5 million in 2001 to 45 million in 2007. But raw numbers aren’t the right way to count, because of population growth. The percentage of uninsured between 2001 and 2007 went from 14.8 percent to 15.3 percent according to the Census Bureau, which is lower than the percentage in 1995 (15.4 percent), 1996 (15.6 percent), 1997 (16.1 percent), and 1998 (16.3 percent).
 
“It is one of the major reasons why small businesses close their doors and corporations ship jobs overseas.”

No, it’s not, and it won’t be until the government mandates that employers provide coverage. Small employers drop coverage instead of going out of business because of health care costs. Likewise, the whole “shipping jobs overseas” claim is a myth. When American companies set up foreign affiliates, it is generally to serve foreign markets, as Toyota and others have done in the United States. Any advantage in locating abroad has far more to do with better local regulations, taxes, and wages there than with health care costs.
 
Let’s hope the president starts taking his own advice and applies some “honesty and accountability” to his own speeches and the national budget.  Greg Scandlen is director of Consumers for Health Care Choices at The Heartland Institute, a Chicago-based think tank.

Greg Scandlen

Greg Scandlen is a senior fellow of The Heartland Institute and founder and director of... (read full bio)