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Weekly Checkup

The Staying Power of Employer-Sponsored Insurance

The Congressional Budget Office (CBO) estimates that this year alone the federal government will spend $920 billion to subsidize health insurance coverage for roughly 240 million Americans under the age of 65. The bulk of that spending, $433 billion, will be spent on Medicaid, but the taxpayer will also spend $303 billion to subsidize employer-sponsored insurance (ESI). Economists—and many conservative policy wonks—have long been critical of the tax exclusion for ESI, but just last week the Republican members of the House Committee on Education and Labor sent a letter to Health and Human Services Secretary Xavier Becerra “regarding the critical importance” of ESI. What’s the story?

First, the ivory tower criticism of ESI is not without merit. There is no obvious reason why health insurance coverage should be tied to employment, and plenty of reasons why it shouldn’t. The entire COBRA system exists in part to address some of the problems that result from ESI, and one of the early arguments for the Affordable Care Act (ACA) was that it would help divorce insurance from employment. ESI is uniquely American and is largely a result of President Roosevelt’s decision in 1942 to freeze wages during World War II. Business, competing for increasingly scarce labor supply, began to offer other benefits such as health insurance. Concurrent with these developments, contributions to health insurance premiums were exempted from federal taxes. Eventually the wage freeze was lifted, but the tax code continued to incentivize compensation in the form of health insurance, and workers increasingly came to expect it. Labor unions in particular embraced ESI, negotiating especially generous, tax-free health benefits in lieu of higher, but taxable, wages.

Today, for all the time we spend talking about the ACA, CBO projects only about $60 billion in net spending on ACA-related insurance subsidies in 2021. In effect, ESI is the federal entitlement program we just don’t talk about. None of that is to say, however, that ESI doesn’t have its benefits. First and foremost, whatever economists think about it, ESI is popular. According to a March 2021 survey by America’s Health Insurance Plans, 67 percent of ESI enrollees are satisfied with their coverage, 76 percent are confident they’ll be protected in a medical emergency, 71 percent say their coverage is easy to use and understand, while 75 percent and 78 percent respectively say that it was a factor in their decision to accept their current job or to stay in their current job. Citing the Department of Labor, the Kaiser Family Foundation, and the Centers for Medicare and Medicaid Services, Ed & Labor Republicans argued that ESI plans have an average actuarial value of 85 percent, making them more generous than Silver and Gold Exchange plans, and that they have notably lower deductibles and lower out-of-pocket costs.

The popularity of ESI means that it will not be easily ended, and so it is worth examining in some detail to understand not only its flaws but also its benefits and the tradeoffs that ensue. The federal government certainly spends less through the exclusion to insure an individual than through Medicaid, the ACA, or Medicare, but the total average premium of ESI insurance is close to or even higher than federal spending on Medicare per person, so what’s efficient for the federal government may not be efficient for the broader economy. The value of ESI is also less well defined; more data are needed on outcomes for those in ESI versus other types of coverage.

The reality is that despite decades of health reform efforts, ESI remains the dominant source of health insurance for Americans, with roughly 156 million covered in 2021. Economists and policymakers may think they have better answers, but ESI has staying power, and it would behoove us to better understand the benefits of this system that make it so popular with Americans.

 

Chart Review: Physician-to-Patient Ratios

Jake Griffin, Health Care Policy Intern

The United States is predicted to face a shortage of between 37,800 to 124,000 physicians in the coming years, with shortages among both primary and specialty physicians. This shortage is likely to hit rural areas the hardest, as nearly a quarter of rural doctors are forecasted to retire by 2030. As the graph below shows, physician-to-patient ratios are lower in rural than urban areas for primary care and specialty physicians. One factor contributing to this trend is that physicians are more likely to practice where they are trained, and most medical schools and residency programs are located in major urban areas. Further, rural physicians’ salaries are typically lower, and with the average medical student owing $215,900 in student loan debt, doctors may prefer settling in areas where debts could be repaid at quicker rates. At the same time, Rural America’s population is aging and will require a greater amount of medical care. With evidence showing that physicians are more likely to practice in rural areas when trained in rural practices, medical institutions could play a key role in addressing this shortfall by promoting programs that offer rural-based medical training.

Physician-to-Patient Ratios

Source: Centers for Disease Control and Prevention

 

Tracking COVID-19 Cases and Vaccinations

Jake Griffin, Health Care Policy Intern

To track the progress in vaccinations, the Weekly Checkup will compile the most relevant statistics for the week, with the seven-day period ending on the Wednesday of each week.

Week Ending: New COVID-19 Cases:
7-day average
Newly Fully Vaccinated:
7-Day Average
Daily Deaths:
7-Day Average
4-Aug-21 89,976 157,596 377
28-Jul-21 67,273 201,875 279
21-Jul-21 43,850 221,079 232
14-Jul-21 28,852 242,981 219
7-Jul-21 16,236 240,644 182
30-Jun-21 13,446 320,469 229
23-Jun-21 11,805 405,999 259
16-Jun-21 12,398 625,887 300
9-Jun-21 15,579 729,761 358
2-Jun-21 28,053 523,511 390
26-May-21 22,368 821,819 459
19-May-21 28,053 1,064,311 527
12-May-21 34,923 1,276,317 566
5-May-21 45,516 1,473,039 597
28-Apr-21 52,339 1,507,790 627
21-Apr-21 61,264 1,528,989 638
14-Apr-21 68,714 1,781,526 644
7-Apr-21 64,260 1,607,851 625
31-Mar-21 64,036 1,393,025 733
24-Mar-21 56,946 979,883 733
17-Mar-21 53,419 1,035,773 876
10-Mar-21 54,267 967,717 1,149
3-Mar-21 61,251 926,466 1,406
24-Feb-21 64,636 853,415 1,782
17-Feb-21 74,204 751,962 1,946
10-Feb-21 100,578 710,020 2,379
3-Feb-21 129,794 489,233 2,730
27-Jan-21 160,164 339,234 3,175

Sources: Centers for Disease Control and Prevention Trends in COVID-19 Cases and Deaths in the US, and Trends in COVID-19 Vaccinations in the US.

Note: The U.S. population is 332,590,115

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