The New Health Dialogue

For most of us, there's a moment on the first day of school when you fear you've forgotten everything you knew just a few months ago.

A similar dynamic is playing itself out in Congress, as lawmakers return to work next week weary from town halls and leery of the coming health reform debate.

Given the growing anxiety, confusion, and partisan bickering over health reform, we thought it would be helpful to put together sort of back to basics primer reminding us why we started this in the first place.

To begin, we need to understand there is no status quo. Not when health care costs are growing faster than productivity and income. This was true in 1993. It's true today, and it will even more true in the future.

These ever-growing costs are a burden on families -- where more than half of all bankruptcies are linked to medical expenses. They are a burden on businesses -- that end up spending more than double what their foreign trade partners do to provide health care to their workers. They are a burden on federal, state, and local governments, where deferring the hard choices of today will leave us with no choices tomorrow.

The chart below shows the percent of median family income required to purchase a family health insurance plan. This is the average plan offered through an employer and it's the way most working-age Americans receive coverage.

In 1987, the average family health insurance plan cost about 7 percent of a median family income (the income in the exact middle of the distribution -- half of American families make more; half make less.) In 2006, that figure jumped to 17 percent. Relative to a family's total compensation (wages and employer-paid benefits), the cost of a family health insurance plan will rise to 34 percent of compensation in 2016. But, looking only at a family's take-home pay, the share going to health insurance is even higher, at 45 percent of median family income in 2016. More simply, in 2016, half of American families will need to spend more than a third of their total compensation to obtain health insurance.

But these calculations look only at the cost of premiums. The Milliman Medical Index measures average annual medical spending for a typical American family of four. It includes premiums, as well as out-of-pocket expenditures. In 2009, it was $16,771 or 28 percent of the median income for a family of four (see chart below). If historical growth rates continue, in 10 years that share will be 56 percent. That is, in 10 years, half of all American families will have to spend more than half of their income on health care!

For some, it is difficult to imagine a world in which so much is spent on just health care, but that's the trajectory of the status quo. The longer we wait, the harder it will be to bring these costs to a sustainable level. Doing nothing, is the surest way to guarantee that the nightmare scenarios decried by opponents of health reform becomes a reality. Tomorrow, we'll take a closer look at which states have the most to lose if health reform fails.