Earning Less and Dying Younger: How the Growing Strain on America's Middle Class Is Pummeling Our Health

By Maggie Mahar, Health Beat. Posted September 4, 2008.

This article originally appeared on Health Beat.

Last week, the Census Bureau came out with a report that provides a compelling window on poverty and health in America.

It's somewhat modestly titled "Income, Poverty, and Health Insurance Coverage in the United States: 2007." I would suggest it deserves a headline that does justice to its sweep, perhaps "Connecting the Dots: Health and Poverty, America's Shifting Priorities, 1960-2007."

Begin with this chart:

At first glance, what is most striking is how well President Lyndon B. Johnson's "War on Poverty" worked in the late 1960s. Seniors -- who were then the poorest group in the United States -- benefited most. The share of Americans over 65 scraping along somewhere below the poverty line plummeted from roughly 30 percent in 1965 to just over 15 percent in the early 1970s. Johnson made Medicare and Medicaid legislation a priority, and when it passed Congress in 1965, it made an enormous difference.

The War on Poverty also helped kids: The share of the nation's children trapped in poor households fell from roughly 23 percent in 1965 to 15 percent during the Carter years.

By contrast, look at what has happened during the latest economic cycle. As the Economic Policy Institute's Jared Bernstein points out, "Despite strong overall economic growth, the cycle that began in 2000 and ended late last year has turned out to be "one of the weakest on record for working families."

Today, our children are our poorest citizens. Since President George W. Bush took office, the number of children living in poverty has climbed from 16 percent to 18 percent. In other words, a larger share of American children are poor today than in the early 1970s -- when the nation was mired in a deep recession.

"Overall" from 2000 to 2007, "the poverty rate grew from 11.3 percent to 12.5 percent," Bernstein notes. "In contrast, poverty rates fell significantly in the 1990s." The period from 2000 to 2007 marks a span when one would have expected prosperity to "trickle down."

Instead, the dollars shot straight upstream, like a school of salmon heading back to their breeding ground. Bernstein quotes income analysts Thomas Piketty and Emmanuel Saez [MS Excel], who show that "after falling with the stock market bust of 2001, the average income of the top 1 percent grew about 50 percent in real terms from 2002 to 2006, from roughly $850,000 to $1.3 million."

He adds: "Coming on top of the long-term trend in rising inequality since the late 1970s, this recent surge has resulted in the second-highest level of income concentration on record going back to 1913, as the richest 1 percent of households held 23 percent of income in 2006. The only year of greater income concentration was 1928 (24 percent)." (That, of course, marked the end of another era, the Roaring Twenties -- which would give way to the Great Depression.)

As for the middle class, from 2000 to 2007 median household income fell by more than $2,000 to $50,233.

What does all of this have to do with health?

The Uninsured, Medicaid and the Underinsured

The Census Bureau report attempts to put a happy face on U.S. health care by announcing that the percentage of Americans who are uninsured declined in the last year -- from 15.8 percent of the population to 15.3 percent. But as Jonathan Cohn points out over at the New Republic:

... before anybody gets the idea that we no longer need health care reform, take a closer look at the numbers. Enrollment in private insurance continued to decline in percentage terms, mostly because the percentage of people with employer-sponsored coverage fell from 59.7 to 59.3 percent. The reason the overall numbers look good is rising enrollment in public insurance programs, particularly Medicaid.

The fact that more people are eligible for Medicaid is not good news. This only confirms that the ranks of the poor are growing. (Over the past seven years, eligibility rules were not relaxed in most states; in many states they were tightened.)

Meanwhile, as the 21st century began, the number of Americans protected by employer-sponsored insurance slid while health care spending skyrocketed. In the 1990s, HMOs kept a lid on spending by saying "No" to many treatments. The trouble is, they denied coverage for effective as well as ineffective treatments. By the late 1990s, the backlash against managed care was so strong that insurers loosened their restrictions. As a result, from 1999 to 2005, the amount that insurers laid out for medical care rose by 8 percent to 8.5 percent a year.

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Maggie Mahar is a fellow at the Century Foundation and the author of Money-Driven Medicine: The Real Reason Health Care Costs So Much (Harper/Collins 2006).

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