I saw a surprising piece of data in a New York Sun article on rising health insurance costs recently http://www.nysun.com/article/63341. It seems the cost of health insurance in the city will be rising 8.7% this year, according to well known employee compensation firm Hewitt Associates, to $8,719 per employee. The national average is also rising 8.7%, to $8,676. That means that privately financed health insurance costs less than one percent more in New York City than the national average, despite the fact that health care is a labor-intensive industry and, as readers of my prior posts are aware, the average worker in Downstate New York (excluding the high-paid financial sector) earned one-third more than the national average. And, in fact, when I contacted Hewitt Associates years ago to get comparable information for this report http://urban.nyu.edu/research/littlefield/index.html, I found that in 1997 private health insurance in fact cost one-third more than the national average here, what I would have expected. And relying on the same wage data I use, federal Medicare also pays about one-third more in New York City than the national average (which is why by act of Congress for Medicare payment purposes Ulster County is now a part of New York City). So is private health insurance in New York City a bargain? Or are New Yorkers paying for it in some other way?
There are a few possibilities here.
First, New York City health care could be worse than the national average. That’s how the New York City public schools were so affordable in the 1990s, freeing up state and local taxes paid by New York City parents for luxury-class schools in the rest of the state, richer pensions for public employees cashing in and moving out, and the nation’s richest services for senior citizens. I’m not an expert here, but press reports show the quality of health care is very uneven in New York City, spectacular at the highest level but below average overall.
Second, New York City health care providers could be doing a good job despite being underpaid and understaffed relative to those elsewhere. Data I wrote about earlier this year, however, show nursing staffing and pay to be about what is expected, and while physicians are not getting the one-third extra in New York, this is more than offset by their greater numbers here.
Third, New York City’s health care sector could be 25% more productive than average. This, however, flies in the fact of the fact that many industries in that sector have far more employees relative to the city’s population than the national average. And as for non-labor productivity, I don’t think we are getting by with fewer MRI machines and prescriptions.
The final possibility is that we are paying for health care in some other way, and the battle over Medicaid in last year’s budget indicates that the way is raiding a program for the poor to subsidize care for the affluent. Businesses, it seems, while decrying New York State’s high taxes and demanding reductions in spending are in fact using that spending, back door, to subsidize what in other states would be a higher private health insurance cost for them.
That could explain why business publications such as Crain’s New York Business, while objecting to spending in general, really didn’t go after high Medicaid spending in past years. Such publications never complain about the off-the-charts level of school spending in the rest of the state (including the suburbs where their readers might send their own kids to school) either. They do complain about an increases in funding for the New York City schools, which are now (depending on how measured and when adjusted for the cost of living) somewhat above or below average, but have been far below average in the past. They also refer to excess pension and debt burdens from the past as “spending” and demand that city residents (but not those elsewhere) accept reduced services to offset them.
The non-profiteers at the Greater New York Hospital Association and Local 1199 have talked out of both sides of their mouth when it comes to whether they are raiding a program allegedly for the poor, Medicaid, to subsidize those who matter. On one hand, they say that any reduction in Medicaid reimbursements will hurt even affluent patients, not just Medicaid patients. On the other hand, when the Spitzer Administration insisted that Medicaid funding be used for Medicaid patients their mouthpiece said Spitzer didn’t know what he was talking about, since Medicaid money may only be used for Medicaid patients by federal statute. Really?
The reason we don’t have a universal health care finance system in this country is that too many people can game the current mess to profit at other people’s expense, hiding their own back door benefits while objecting to spending and taxes. We’ll never get one until we are prepared to tell those working the current system that sorry, they’ve taken too much and they’ll have to pay more or accept less. We’re either all in it together, or we are not. And as the health care debate shifts to the national level, beware of any plan that will allow the better off to complain about taxes while sticking taxpayers with a share of their health care costs.