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Health Care Cost Growth Is Hurting Middle-Class Families


January 3rd, 2013

In the September, 2011 issue of Health Affairs, we examined the impact of a decade of health care cost growth on the income of a typical, median-income family of four with employer-sponsored health insurance. To recap, between 1999 and 2009, the middle-class family’s nominal monthly income increased by $1,910. But after factoring in the rise of consumer prices and a near-doubling of health care spending (due to rising insurance premiums, growth in out-of-pocket health care spending, and taxes to support government spending on health care ), the family had little left over.

Their financial position would have been even worse if deficit spending, which did not exist in 1999, had not grown dramatically over the decade. If federal taxes had simply been increased enough to pay for growth of government spending on health care (ignoring all other deficit spending), the family would have ended 2009 with $290 less per month to spend than they had in 1999.

In the two years since we concluded this analysis, the situation has grown worse for the middle class. In 2010 and 2011, our median-income family’s out-of-pocket spending and tax burden devoted to health care didn’t grow much (due respectively to the effects of the recession and historically low growth in Medicare spending), but the cost of their employer-sponsored health insurance increased by almost 10 percent, from $13,770 in 2009 to $15,073 in 2011. (It grew another 4 percent in 2012.) So although their total monthly compensation grew modestly – about $170 per month – their employer held back an additional $57 per month to cover its share of the rising premium, and the family had to chip in another $51 per month to cover the rest. This left them with only $62 more per month, or roughly $14 per week, to address the rising costs of other goods and services.

Thus, two-thirds of our family’s modest income gain was consumed by rising health care costs. Little was left for anything

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