Rising Cost of Healthcare and the Effects on the Middle Class Term Paper

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Healthcare: The Effects of Rising Costs on the Middle Class

The rising cost of healthcare and the effects on the middle class


Effects of Rising Costs on Middle Class

The purpose of this paper is to define the income and social levels of the middle class in the United States and to examine and determine the effects that the rising costs of healthcare have had on the middle class. Further this work will examine the hospital closures in the State of California in relation to the trending which appears to be lessening the availability of the individual in attaining care while at the same time increasing the costs and access to healthcare effectively barring many in the United States Middle Class from receiving proper care for their health.


Healthcare costs have inflated to the point that no longer can every individual feel that healthcare is available for them and their family because indeed it is most likely not unless they are one of the fortunate middle-class whose employer has either not laid them off, shut the branch where they were employed, or the company for which they work folded altogether. This is the case for many individuals who have been 'displaced' occupationally and for the first time in their life, a life that has been spent in working and paying bills and taxes. There is little compassion today in the world and indeed even within the United States for those who no longer have insurance. Hospitals and Clinics are gouging patients who are without the benefits of insurance charging up to double the amount that an insured's carrier would be charged for the same services. More and more business are finding it a strain if not a hurdle that cannot be cleared in providing insurance to the bare minimum skeletal staff of employers. Not only is the insurance hard for the companies themselves to afford but the out-of-pocket expenses are rising higher while the coverage provided by the insurance is sinking lower. When figuring premiums plus out-of-pocket expenses, it is likely that those with insurance are still struggling in an effort to hang on to the insurance in case they have a major catastrophe health-wise.

The number of working-age individuals has declined from 70% in 1987 to 60.4%

. In view of the rising costs in healthcare the fact that insurance coverage is decreasing for so many and at such a rapid rate questions come to mind as to what the administration of the United States is focused toward in view of agendas and outcomes for the American people.

A study performed by John Hopkins Listening Point project found that 1/3 of non-profit employers have "reduced employees' pay raises or bonuses and about 22% have initiated the elimination of positions recently filled by staff or have put a freeze on hiring. Furthermore the percentage of annual household incomes that is towards health care is now in excess of the amount that is currently applied toward federal taxes and double the amount of gasoline expenditures. American families are "spending more than one-fourth of their earning on healthcare which rose by 23% since the year 2000 from 11.6 million to 14.3 million.

Insurance premiums rose as well to the tune of 35.9% in comparison to earnings increases of only 12.4% and finally the number of individuals without insurance coverage rose from 1.4 million to the astronomical sum of 45 million individuals in the United States who do not have the benefit of insurance coverage.

I. The Middle-Class: Bearing the Brunt of the Healthcare crisis:

The healthcare crisis as well as the unbelievable costs associated maintaining a health insurance policy has resulted in 43.6 million individuals that were covered by insurance in 2001 losing or forfeiting their coverage due to the inability of either the individual or the individual's employer to pay for the healthcare insurance.

The national middle class household income is stated to be $42,049 while the average family healthcare insurance premium is the approximate amount of $9,066 a year. Households with incomes between $25,000 to %50,000 a year are among the 43 million individuals who are presently without insurance. Results, according to Viki Fox, project manager for the survey states that: "Being uninsured is becoming more of a middle-class problem. It's not just a problem for people who are poor or not working." Appleby-USA Today (2004) Future projections are that the average family will pay more than $14,000 for health insurance premiums by the year 2006.

Stated within a recent report on healthcare in the United States the following was stated:

'In 2002, health insurance premiums rose at a rate eight times faster than general inflation; experiencing the largest one-year surge in premiums in more than a decade. In the absence of comprehensive reform, the average annual premium for employer-sponsored family health insurance could reach $14,545. Many experts agree that our health care system is riddled with inefficiencies, excessive expenses, inflated prices, poor management, inappropriate care, waste and fraud. These problems significantly increase the cost of medical care and the cost of health insurance for employers and consumers"

II. Other Factors Impacting the Middle Class:

Not since 1994 have unemployment rates been this low as evidence by the fact that during the first half of 2004 employment grew by less than a mere 1%.

Job growth was at 112,000 approximately 1/3 short of what is needed in keeping up with the rate of the growth in population. As stated in a report the administration under Clinton witnessed the economy averaging 239,000 new jobs each month. Furthermore, the new jobs are of lesser quality that those 'millions lost.'

Inflation is certainly a factor when considering the rise in prices of milk, gasoline and other necessary items and all this combined with the trifling 2% increase in income sheds a long shadow upon the future of economic stability for household in the United States. The increase in gasoline prices was approximately by '20% while tuition at four-year colleges increased by 30%.'

(National Coalition on Health Care 2004) Accordingly there is no questioning the Economic Policy Institute Research's briefing that states that the: "economic well-being of middle-income families has changed significantly over the last few years largely as a result of three important dynamics." Which according to the report are as follows:

The Recession that started in March 2001 followed by 2 1/2 years of job losses with the pre-tax incomes falling for three years consecutively as well as income drops in 2003 to an amount below incomes of 2000 or a 3.4% drop blamed on lost work among family members and lost hours of those still working.

The Tax cuts may have benefited some of the better off individuals in the United States but there was no break for the middle-class who paid more taxes than since 2000.

The third factor is the higher costs of insurance co-pays, deductibles and premiums.

Information as to changes in income, wages, and taxes for middle-income families between the years 2000 and 2003 are illustrated in Chart 1.0 (adapted from the Economic Policy Institute Report [Online] at http://www.epinet.org/content.cfm/bp154.

Chart 1.0

*Based on Information at Economic Policy institute Webpage

As the information in the chart illustrates for a married couple with children pre-tax income in the year 2000 was 3.1% higher than was pre-tax income in 2003 with after tax income lower by 0.2% in 2003 than in 2000 however after tax and health expenditures showed income being 1.3% less for married couple with children in 2003 than the amount left after taxes and health insurance expenditures in 2000. The effects on the elderly are well worth noting as well.

III. Hospitals Closing Down in California:

Due to financial problems 23 California hospitals have closed down between 1995 and 2000 as stated in a UC Berkeley School of Public Health Report and cited by The Daily California online. The report found "A theme of financial hardship present at each hospital? Of the hospitals that closed in California the study found that nearly half, 48% of them were for-profit facilities and the reaming 51% were non-profit organizations. Another fact worth noting is that most of the hospital closings were in urban Southern California areas and over one-half of those which closed had less than 100 beds. The report further stated that:

"Ten of the hospitals studied had changed ownership at least one time in the three-year period prior to closure and in two cases, closures removed all hospital care within a 15-mile radius

In seven cases, the study found:

"Public reaction or objection to the closure, which included concerns about reduction or elimination of reproductive health services, longer travel time to reach another hospital and short notice of the closure."

In a more recent report released September 23, 2004 stated was that two more hospitals have closed in September of this year with a third having announced plans to do the same. 51% of California hospitals are operating in the red according to the…

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