Summary
Between 1999 and 2009, a median-income US family of four with employer-sponsored health insurance saw its gross nominal income rise 30% (from $76,000 to $99,000), but rising health care costs consumed virtually the entire real gain. After accounting for general price inflation, the family was left with only $95 more per month for non-health spending — and even that modest amount was inflated by federal deficit spending that underfunded Medicare and Medicaid. The paper decomposes total family health care costs into four channels (two visible, two hidden) and shows that under inflation-rate health cost growth the family would have had $545/month more.
Key Claims
- Monthly health care costs for the typical family rose from $805 to $1,420 (nominal) 1999–2009 — a 77% increase vs. 29% general inflation.
- Of the $1,910/month nominal income gain: 43% ($820) went to health care, $125 to non-health taxes, and $870 to non-health price inflation, leaving $95 net.
- Even the $95 gain was partially artificial: the federal budget ran a 40% deficit in 2009, meaning Medicare/Medicaid spending was underfunded by taxes. Full deficit-adjusted accounting puts the family $295/month in the red.
- Employer premium contributions rose 128% (from $490 to $1,115 full monthly premium); out-of-pocket costs rose 74% (from $135 to $235/month); family preferred provider organization (PPO) deductibles exceeded $1,000 for more than half of families by 2009 (vs. ≈$250 in 1999).
- Counterfactual 1: health spending at gross domestic product (GDP) +1% → $335/month gain (or $35 after deficit adjustment). Counterfactual 2: health spending at Consumer Price Index (CPI) → $545/month gain ($5,400/year more than actual), or $355 after deficit adjustment.
- US adult life expectancy grew ≈1 year 1999–2009 vs. Organisation for Economic Co-operation and Development (OECD) average of 2.2 years. US amenable mortality fell only 5% from 1998–2003 vs. 10–25% in peer countries; the US ranked last of 19 high-income countries in 2003.
- Health/social assistance employment grew by 3.6 million 1998–2008 while manufacturing lost 4.1 million jobs; health care now surpasses manufacturing in total US employment.
Concepts Introduced or Extended
Entities Mentioned
Quotes
"Although these figures are sobering, they don't easily translate to real-world consequences for American families—because many health care costs are hidden from their view."
"As a result, we argue, the burdens imposed on all payers by steadily rising health care spending can no longer be ignored."
My Take
A descriptive accounting exercise, not a causal study. Its contribution is making hidden costs visible: employer premium pass-through (wages suppressed by ≈ employer contribution) and tax-financed program spending (Medicare, Medicaid) are real costs borne by workers that standard cash-income surveys miss. The deficit complication is handled carefully with a parallel scenario. Limitations: the "typical family" is actually ≈70th income percentile (employer-insured families earn ≈20% more than median), so the headline figures likely overstate the burden for median households. The counterfactual scenarios are illustrative, not causal. The amenable mortality comparison provides suggestive evidence of poor value but does not isolate the causal return to marginal health spending. The paper predates Affordable Care Act (ACA) implementation (2010 passage, phased 2010–2014) and cannot assess whether the law bent the cost curve.