Blogging the CEA Health Care Report: Why Workers Aren't Angrier About Health Care
Here's a counterintuitive thought: Health care reform is a pretty big issue in the United States. Arguably the biggest domestic issue there is. But it's a much smaller issue than it should be.
That's not meant as a normative statement. It's meant as an introduction to this graph from the Council of Economic Advisers' health care report. The top line -- the solid one going up and up and up -- is projected total worker compensation. The full amount employers pay for wages, benefits, and so forth. The second line -- the dashed line slumping down -- is compensation minus health care costs. That's pretty much what workers see in their paycheck.
The mechanism here is simple enough. As the report says, "Since health insurance premiums are growing more rapidly than total compensation in percentage terms, an increasing share of total compensation that a worker receives goes to cover health insurance premiums."
But workers don't see it that way. That slumping line isn't normally called wages-minus-health-premiums. It's called wages. And most workers think stagnant wages mean their employer is paying them less. They don't know that the main reason for stagnant wages is that their wage increases are going to pay for their health insurance premiums. If they did -- if they realized that compensation is pretty much a zero-sum endeavor and their employers don't so much buy them health insurance as garnish their wages to pay for their health insurance -- you'd probably see a lot more general anger at rising health care costs.
For read my summary post on the Council of Economic Advisers report, click here. For a more technical version of this argument, see this paper by Ezekiel Emanuel (who's now at the OMB) and Victor Fuchs.
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