Healthcare Business News

Medical inflation ate income gains, study finds

By Rich Daly
Posted: September 8, 2011 - 12:01 am ET

Nearly all income gains for average Americans from 1999 to 2009 were consumed by medical inflation, which also added substantially to the federal debt, according to a new RAND Corp. study.

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The study, published in the September issue of Health Affairs, found that the annual income of the average American family of four increased to $99,000 in 2009 from $76,000 in 1999. But nearly all that increased income was consumed by higher healthcare costs, according to the study.

The findings concluded that the average family's salary increases would have provided $545 more each month by 2009 if medical inflation had matched general inflation. But the monthly increase was reduced to $95 because of increases in health insurance premiums, out-of-pocket health spending and taxes for healthcare.

Even that relatively small increase in net income would not have occurred, the research concluded, if tax cuts were not enacted in that timeframe. However, those tax reductions exacerbated the need to use deficit spending to cover the cost of the federal government's healthcare programs, the research found.

The “fiscal burdens imposed on all payers by steadily rising healthcare costs can no longer be ignored,” David Auerbach and Arthur Kellermann, RAND researchers, wrote in the study.

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