Guess Who Foots America's Health Care Bill? Not Employers.

By Niko Karvounis, Health Beat. Posted March 12, 2008.

In the latest issue of the Journal of the American Medical Association (JAMA), the always-compelling duo of Ezekiel Emanuel and Victor Fuchs -- associated with the National Institutes of Health and Stanford University respectively -- dispel the myth of "shared responsibility" in health care financing.

What does this mean, exactly? Simple: "the common claim that employers, government, and households all pay for health care is false. Employers do not share fiscal responsibility and employers do not pay for health care." In fact, the "money [for health care] comes from [our] own pockets."

As simple as this assertion may seem, it's actually a ground-breaking statement. As Emanuel and Fuchs point out, most of the political rhetoric surrounding health care reform implies that everyone -- individuals, employers, households, and governments -- struggle with health care costs equally. Implicit in this formulation is a sad tale of businesses getting crunched: Because employers provide health coverage to most Americans who are insured, employers are often singled out as victims. It often seems like the health care crisis is their burden.

Indeed, "burden" is quite the buzzword here. Barack Obama says it's a tragedy "when businesses have to lay off one employee because they can't afford the health care for another." Hillary Clinton notes that "large American companies compete in a global economy against companies in countries that impose far lower health care burdens on employers." Congress celebrates reforms that supposedly "takes [the health care] burden off employers." It certainly sounds like businesses have it bad.

Not so fast, say Emanuel and Fuchs. We need to consider the "health care cost-wage trade-off." A large body of economic research shows that, when you crunch the numbers, employers don't lose the money they spend on health care, but rather take the costs out of their employees' paychecks. In fact, a 2004 study from the International Journal of Health Care Finance and Economics found that "the amount of earnings a worker must give up for gaining health insurance is roughly equal to the amount an employer must pay for such coverage."

This unsettling trade-off has been going on for the past 30 years.

Consider the fact that over this period "premiums have increased by about 300 percent after adjustment for inflation" while inflation-adjusted corporate profits have "flourished ... with ... increases ... of 200 percent after taxes." A two-fold increase in profits hardly seems an indication of hard times.

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