FACT SHEET | February 12, 2008

Democrats are Committed to Helping Working Families Squeezed by Rising Health Care Costs

American families are struggling to find affordable health insurance coverage. Rising health care costs are straining family budgets as well as state budgets; forcing employers to drop or scale back health insurance coverage for their workers; increasing the number of uninsured Americans; and impeding access to needed health care services. Unfortunately, President Bush has allowed the problem to worsen on his watch and made covering the uninsured a low priority. In fact, the health care proposals proposed by President each year in his budget request, upon close examination, would do little or nothing to make health coverage more affordable and would actually leave many Americans worse off than they are today. Democrats are committed to containing health care costs and securing guaranteed affordable health coverage for all Americans. Last year, the Democratic-lead Congress overwhelmingly approved bi-partisan legislation that would invest $35 billion in the successful Children’s Health Insurance Program (“CHIP”), and extend coverage to millions of uninsured children whose parents work hard but cannot afford private coverage.

The cost of obtaining health coverage has increased substantially during the Bush Administration. The cost of family health insurance has skyrocketed 78 percent since 2001, compared to a 19 percent increase in wages and a 17 percent increase in overall inflation._[1] The average premium for a family of four topped $12,000 in 2007, with the average family contribution of over $3,200. From 2001 to 2007, the amount families pay out of pocket for their share of premiums has increased by approximately $1,500 dollars._[2]

Rising costs jeopardize employer-sponsored coverage.When the cost of premiums increases, employers have more difficulty providing health coverage, and their workers have more difficulty affording their share of the cost. With the increased cost of premiums during the Bush Administration, there has been an erosion of employment-based health benefits. The percentage of individuals with employment-based health benefits decreased from 68.4 percent in 2000 to 62.2 percent in 2006._[3]A significant cause of the increase in the number of uninsured Americans is this decline in the number of people receiving health coverage through their employer._[4]

And as health care costs escalate, families – even those with insurance – have to spend a greater portion of their income on health care. When premium growth outpaces increases in wages and inflation, workers typically have to spend a greater portion of their income each year in order to maintain coverage._[5]Nearly one out of four Americans under the age of 65 — 61.6 million people — is in a family that will spend more than 10 percent of its pre-tax income on health care costs in 2008._[6]The vast majority of these people (82.4 percent) have health insurance._[7]And 17.8 million Americans under the age of 65 — more than three-quarters of whom have health insurance —are in families that will spend more than 25 percent of their pre-tax income on health care costs this year._[8]

Rising costs have caused a dramatic increase in the number of uninsured and underinsured Americans. The number of uninsured Americans has increased every year since President Bush took office, from 39.8 million in 2000 to a record high of 47 million in 2006._[9]In 2006, the number of uninsured children grew by 710,000 to reach 9.4 million._[10]On top of the 47 million uninsured Americans, approximately 16 million are underinsured, which means their health coverage does not adequately protect them from catastrophic health care expenses._[11]

Rising health care costs are a problem for middle class, working families. Nearly half of the people in families that will spend more than 10 percent of their pre-tax income on health care costs this year, and nearly one-third of the people in families that will spend more than 25 percent of their pre-tax income on health care costs this year, are from middle-class families – those earning between $30,000 and $75,000 per year._[12]Moreover, the uninsured are overwhelmingly members of working families; over 63 percent of the uninsured are members of families with full-time, year-round workers._[13]

People without health insurance suffer serious consequences.People without health insurance receive inferior care that contributes to poor health and premature death. The uninsured are more likely: to forego needed care, to receive fewer preventive services, not to receive appropriate care to manage chronic diseases such as heart disease and diabetes, to obtain substandard care when admitted to a hospital, and not to receive necessary follow-up care after injuries or diagnoses of a disease._[14]Researchers at the Urban Institute have estimated that from 2000 through 2006, 137,000 people died because they lacked health insurance, including 22,000 people in 2006 alone._[15]Americans who are underinsured are almost as likely as the uninsured not to receive needed medical care and, thus, suffer the consequences._[16]

There are also significant economic costs of the uninsured. The economic costs of caring for the uninsured are ultimately shifted to the insured in the form of higher premiums._[17]When the uninsured can’t afford to pay their medical bills, providers seek to recover the lost revenue by raising their rates for services, resulting in insurers’ raising their premiums. In addition, the uninsured’s increased likelihood of poor health potentially reduces their capacity to work, negatively affecting workplace productivity and employers’ bottom line._[18]The Institute of Medicine estimated that the economic cost of the diminished health and shorter lifespan for the uninsured was between $65 to $130 billion in 2000_[19]($87 to $174 billion if indexed to 2007 dollars). Moreover, economists predict that worsening economic conditions will likely create more demand for enrollment in programs like Medicaid and CHIP over the next few years._[20]This increased demand combined with federal funding cuts proposed by President Bush in both of these programs could, in turn, create additional pressure on state budgets that are already strained by the weakening national economy. 

The Bush Administration has failed to respond effectively to rising health care costs and the increasing number of uninsured. Making health coverage more affordable has not been a priority for the Bush Administration. The Administration has also misdiagnosed the main reason for rising health costs – arguing that Americans are over-insured and pay too small a share of their health costs, making them frivolous users of the health care system and, as a result, driving up costs. And the proposals offered by President Bush to address this misdiagnosis, such as Association Health Plans and tax deductions for the high-deductible policies that accompany Health Savings Accounts, would actuallyincrease health costs for many people, especially those most in need of health coverage. Moreover, the large majority of the benefits would generally go to people who already have insurance. A recent analysis by Professor Jonathan Gruber of MIT of the health insurance tax proposals included in the Bush Administration’s 2006 budget found that 77 percent of the benefits would go to people who were already insured._[21]Tax subsidies generally operate to “buy out the base” of insured without providing much new coverage._[22]

Democrats will continue to work to cover our nation’s uninsured, starting with our children. Twice last year, Congress passed bipartisan CHIP reauthorization legislation that would invest $35 billion in new funding for CHIP, extending coverage to almost four million uninsured children at no cost to taxpayers. And twice, the President vetoed the legislation. Now, the President has proposed funding in this year’s budget far below the level for which Congress has demonstrated its bipartisan support, while simultaneously cutting funding for Medicaid. On top of years of all but ignoring the plight of millions of uninsured Americans, the President continues to undermine the will of Congress and deny the nation’s 9.4 million uninsured children access to doctors, life-saving prescription drugs, immunizations, preventive screenings and the basic medical care necessary to start life healthy. Despite President Bush’s obstruction on the issue, 69 Senators, 43 governors, hundreds of organizations, and the vast majority of the American people continue to support the bipartisan CHIP legislation – to give our nation’s uninsured children the doctors’ visits and medicines they need when they’re sick, and the checkups they need to stay well. 

DPC