Wednesday, September 27, 2006


Wages still lag health care increases

Several bloggers and news organizations have already written about this, but in most cases we think they missed the long term point. We have some responsibility with developing health care policy, so you'll have to take our word that this is the kind of data that keeps planners, actuaries, and union leaders awake at night.

health care wage inflation comparison Kaiser Family Foundation

This is "good" news in the sense that a deckhand might have tried to cheer the rest of the Titanic's crew by proclaiming that the leak has slowed.

The bottom line is this: Each year that health care inflation is greater than wage inflation, the likelihood of a major collapse of the health care system increases, i.e., a major pension plan goes belly up. The last time wage increases beat out health care was during a sustained period in the Clinton administration.

There is also credible research that suggests that sectors of the health care industry appear to be very pre-emptive, that is they successfully anticipate shifts in political climate and effectively have that power to "restrain" themselves rather than submit to regulation. Perhaps that is what is going on now, but even a 1% or 2% differential between health and wage inflation will continue the death spiral.

Update: Sorry, we forgot to provide a link to the report and give credit to the good folks at the Kaiser Family Foundation.


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