Who really pays for health care? (Compares Walmart to Safeway stores)

[Omaha Steve]

http://www.chicagotribune.com/news/opinion/chi-oped0327healthmar27,0,7251701.story

By Ezekiel J. Emanuel and Victor R. Fuchs
March 27, 2008

By Ezekiel J. Emanuel and Victor R. Fuchs

Who really pays for health care in the United States?

Americans believe employers pay the bulk of workers' premiums, government pays for Medicare, Medicaid and the State Children's Health Insurance Program and individuals pay some premiums as well as deductibles and co-pays. This is wrong. Business, government and individuals do not share the financial responsibility for health coverage. Individuals bear the full cost of health care through lower wages and taxes.

Employers like to say—and often believe—that they pay for health care. They complain that the huge increases in health-care costs are coming out of their bottom lines—as if costs come out of profits. Union leaders also like to have their members think that health benefits are a bonus on top of wages and that the leadership is negotiating hard to get them the free benefit.

Employers sponsor health insurance for the majority of Americans, but that is not the same as employers bearing the cost for workers' health insurance. Wages and fringe benefits, such as health insurance, are simply components of overall worker compensation. When employers provide health insurance to workers, they may define the benefits, select the health plan to manage the benefits and collect the funds to pay the health plan, but they do not bear the ultimate cost. What is labeled as employers' contribution to the health-insurance premium is really paid for by employees through lower wages and take-home pay.


Looking at the facts
This cost-wage trade-off is usually well hidden from employers and workers, but many studies show that it is a painful reality for average Americans. For instance, over the last 30 years, health-insurance premiums have increased by 300 percent after adjustment for inflation. During that time, after-tax corporate profits per employee have increased 200 percent, while workers' average hourly earnings, adjusted for inflation, decreased by 4 percent. Rather than coming out of corporate profits, the increasing cost of health care has resulted in relatively flat wages for 30 years.

To illustrate, consider Wal-Mart Stores Inc. and Safeway Inc. Wal-Mart, a non-unionized retail giant, is notorious for skimpy health benefits. From 2004 through 2006, its after-tax profits averaged 1.9 percent of sales. Safeway, a highly unionized supermarket chain, offers generous health benefits that cost more than 2 percent of sales. But in 2004 through 2006, its after-tax profits averaged 1.8 percent of sales, virtually the same as Wal-Mart. The difference between Wal-Mart and Safeway in the provision of health benefits is not found in the companies' profits.


FULL story at link.