No one ever said being ill is a walk in the park with a picnic.  Not feeling well, however, does not only apply to people, animals and plants- it applies to the economy also.  In the same token as having a sickness can affect every facet of a person’s life, we can use human sickness as an analogy for the American economy in that, fiscally and monetarily, economically speaking, a “sick” economy depletes resources that could otherwise be used for production and productivity.

One would be tempted to make some sort of understanding that any nation should devote preventative resources to treat those who may become ill.  In an odd and confusing situation, the United States has made it an overly frequent and run-of-the-mill practice of doing the opposite. This idea sheds a very certain sense of why our country operates its health care system and its corresponding delivery.

We have all been at the doctor’s office and seen that mysterious gentleman with a briefcase and bunch of brochures. So, who might these mysterious gentlemen be? Well, there are very good chances that they are pharmaceutical or healthcare professionals who make a living out of providing services to those who are sick. These mega-companies earn absolutely nothing from the healthy sector of individuals in the U.S. When one combines this unfortunate fact with the existing payment system that gives patients no incentive to seek less costly sickness remedy prices, it becomes scarily and blatantly clear why our nation spends far too much.  According to a recent WSJ news article, The U.S. spends more per capita on health care than any other developed nation. It is predicted that the US will soon spend close to 20% of its GDP on health—significantly more than the percentage spent by major Organization for Economic Cooperation and Development nations.So let’s start our deep dive!

Where’s the Money Going?

Generally speaking, most Americans are savvy spenders.  Somehow, however, the mechanics behind health care elude them; they simply “don’t get it.”  An instructive chart is provided below to demonstrates a comparison between health care spending here compared to other first world countries.   

Image: Financial Times

Focusing on the lower left portion of the charts illustrates an important point.  On the chart, if you are a country, that is the best place to be. Being in that quadrant of the graph signifies that a country scores the highest rates and the highest life expectancy for the expenses it devotes to health care.

Where is the United States located on this diagram?  The U.S. is positioned far much higher, and a more to the right, than other developed countries.  In a bizarre twist, the money spent by our country on health care appears to render a much smaller life expectancy.  Please note that the above chart does not include pharmaceuticals, hospitals and doctors- their income is basically never affected because of how our health care system is structured.  It’s taxpayers who absorb the exorbitant health care costs.

The Kaiser Family Foundation insert below is a snapshot of the cost of health care for a family compared to employee contributions to this benefit:

Source: Kaiser Family Foundation

The last time a poll similar to the above poll was conducted in 2017.  2017 witnessed the cost of insuring one family was around $19,616- this was the sum of employer of  $14,069 contributions and $5,547 of employee compensation. These numbers are deceiving though because, from an economic standpoint, workers are really paying the entire cost. This is because the company contribution is just derived from compensation which would have otherwise gone to the employee.

Sit down for this one though: health care costs 239% more today than it did a decade ago.  However, our country is certainly not 239% healthier. And those figures just represent premiums. Look at the chart below and see how exponentially quickly deductibles are rising, and how compensation has not been adjusted.

Source: Kaiser Family Foundation

Those who lack insurance that is not partially “subsidized” by employers or individuals who surpasses the cutoff for Medicaid and are forced into an Affordable Care Act (ACA) plan pay even steeper costs to buy an ACA plan because those premiums are off the chart.

More Problems!

The last census conducted by the US Census Bureau, median household income was in 2017.  In that survey, it was deemed that the median household income was $61,372.  After one adds in employer health care opportunities, this number is closer to it’s really $75,000.

Earlier in this post, it was noted that the average cost of employer health care contribution was $19,616. Do the math and realize that this is basically a quarter of the income that is made by the typical household. This is drastically higher than other first world countries.

No matter how you slice it: Medicaid, Medicare, ACA or employee subsidized plans someone/somewhere covers your health care. That someone/somewhere is the economy, and that fact is that health care is draining our monetary resources.  As it stands now, 18 percent of the U.S GDP is consumed by health care. Private employers are compensating for healthcare at an unhealthy level to cover employees, while the government is paying too little for health care to cover their workers, the elderly and less wealthy people.

A Dicey Predicament

In order to support a growing economy, productive employees are essential and critical resources. The impact of any type of sickness varies across the board: Some employees are able to sustain health conditions and continue working and thus producing. Some people simply cannot work at all.  Then there is a segment of the sick population that attempt to do their job responsibilities but are more absent than their peers and also less productive.

Another issue in the spotlight is the time people spend while they are sick.  Remember: Time is money, and a majority of a sick individual and his or her family and friends spend time looking for adequate insurance plans and doctors that are in-network, on top of picking your insurance plan, finding in-network providers and constantly offer up your information to different doctors, and so forth. Although those hours are not technically paid hours, they do affect productivity.  

Can this Mess be Fixed?

The answer to this question is yes. Let’s model our health care system after those countries with better outcomes at cheaper costs. The U.S. lacks the political know-with-all to create and implement major changes in the country.  Oddly enough, this conundrum is very similar to the automation dilemma. A lot of health care employees need to be eliminated, but legislators are very hesitant to leave people who are fired on their own.  We still pay 2-3x what every other country pays for the same drugs, devices, systems, etc.  Now take a look at generics – the price of the AVERAGE generic drug that capitalism says should be rock bottom, has risen by 10x over the last 15 years.  Something needs to change. 

Conclusion

Thomas Huckabee, CPA of San Diego, California recognizes that many options exist when it comes to health care. The right CPA is needed to guide your business and you through understanding and enrolling in a health care program, particularly in light of the Tax Cuts and JOb Acts (TCJA’s) ratification.  Operating a full-service accounting firm, Tom guides clients through the complicated process of healthcare, so your tax opportunities are optimized.