Health Care Blog

"I'm Here Because of Natoma"

This afternoon the President was in Ohio as the year-long battle to finally reform America's health insurance system draws towards a close – and he took the opportunity to remind everybody why he has fought so hard for so long against such powerful interests.  He was introduced by Connie Anderson, the sister of Natoma Canfield – a woman whose awful but all-too-common struggles have served as a brutal symbol of what is wrong with our system for millions of others. 

It began with a letter – the type of letter millions of Americans have written to their presidents since the founding of this country.  But this letter, which she likely never expected anybody even close to the President to see, ended up in his hands.  It told of her story having battled off cancer sixteen years ago, and having battled with her insurance company ever since -- see the scanned images below or read the text of the letters here.

The President replied to her letter, but that was only the beginning:

When the President and HHS Secretary Sebelius met with insurance company executives recently asking them to justify their alarming rate increases across the country in recent months, he read her letter to them to make clear that this was not about politics, or lobbying, or grandstanding – this was about countless stories of working Americans being crushed under their health care costs, even when they play by the rules and pay their dues to insurance companies for what is supposed to be peace of mind.

Last week, though, Natoma collapsed.  She was taken to an emergency room, and has since been diagnosed with Leukemia.  Natoma and her family are struggling to determine how they will afford Natoma’s medical treatment now that she no longer has insurance, which she dropped in January 2010 because of rate hikes that simply made insurance unaffordable.

After being introduced by Natoma’s sister, the President recounted her story – and leaned into the microphone as he told the crowd what he has been trying to do for the past year:

THE PRESIDENT: So you want to know why I’m here, Ohio?  I’m here because of Natoma.  (Applause.)   I’m here because of the countless others who have been forced to face the most terrifying challenges in their lives with the added burden of medical bills they can’t pay.  I don't think that’s right.  (Applause.)   Neither do you.  That’s why we need health insurance right now.  Health insurance reform right now.  (Applause.)

AUDIENCE:  Obama!  Obama!  Obama!  Obama!

THE PRESIDENT:  I’m here because of my own mother’s story.  She died of cancer, and in the last six months of her life, she was on the phone in her hospital room arguing with insurance companies instead of focusing on getting well and spending time with her family.

I’m here because of the millions who are denied coverage because of preexisting conditions or dropped from coverage when they get sick.  (Applause.)

I’m here because of the small businesses who are forced to choose between health care and hiring.  (Applause.)

I’m here because of the seniors unable to afford the prescriptions that they need.  (Applause.)

I’m here because of the folks seeing their premiums go up 20 and 30 and 40 and 50 and 60 percent in a year.  (Applause.)
 
Ohio, I am here because that is not the America I believe in and that’s not the America that you believe in.

     AUDIENCE MEMBER:  What’s your plan?

     THE PRESIDENT:  So when you hear people say “start over” --

     AUDIENCE:  No!!

THE PRESIDENT:  -- I want you to think about Natoma.  When you hear people saying that this isn’t the “right time,” you think about what she’s going through.  When you hear people talk about, well, what does this mean for the Democrats?  What does this mean for the Republicans?  I don’t know how the polls are doing.  When you hear people more worried about the politics of it than what’s right and what’s wrong, I want you to think about Natoma and the millions of people all across this country who are looking for some help, and looking for some relief.  That’s why we need health insurance reform right now.  (Applause.) 

President Barack Obama is introduced by Connie Anderson, at the Walter F. Ehrnfelt Recreation and Senior Center in Strongsville, Ohio. Anderson is the sister of cancer patient Natoma Canfield, who wrote the President saying she gave up her health insurance after the premium rose to where she could no longer afford it March 15, 2010. (Official White House Photo by Pete Souza)

Exploring the Link between Rising Health Insurance Premiums and Stagnant Wages

The rapid growth in health care spending in the U.S. in recent years has placed an increasingly heavy financial burden on individuals and families, with a steadily growing share of workers' total compensation going to health care costs. Because firms choose to compensate their workers with either wages or with benefits such as employer-sponsored health insurance (ESI), increasing health care costs tend to “crowd out” increases in wages. Therefore, recent rapid increases in employer-sponsored health insurance premiums have resulted in much lower wage growth for workers.

Recent data from the Bureau of Labor Statistics' "Employer Costs for Employee Compensation" (ECEC) survey can shed light on this issue. According to the ECEC data, workers' inflation-adjusted average total compensation per hour increased by 1.3 percent per year from 2000 to 2009 (from $26.23 per hour to $29.39 per hour in 2009 dollars)¹  However, the annual growth rate of average wages and salaries during this period was much lower. More specifically, if one subtracts out the employee share of health insurance premiums², workers' average hourly wage and salary compensation increased by just 0.7 percent per year from 2000 to 2009. As shown in the following figure, the corresponding growth rate in ESI premiums (including both the employer and employee share) was much higher at 5.1 percent per year.

March 12, 2010.

As a result of these very different growth rates, the fraction of workers' total compensation going to employer-sponsored health insurance premiums increased from 7.4 percent in 2000 to 10.3 percent in 2009. If the growth rates in both workers' average total compensation and in employer-sponsored health insurance premiums remain at their recent rates, this share will increase to 15.0 percent by 2019 and will continue to increase thereafter. Thus in the absence of reform that slows the growth rate of costs, a steadily increasing share of workers' total compensation will be eaten up by health insurance premiums.

The increase from 2000 to 2009 in the average share of workers' total compensation going to ESI premiums is even more striking when one considers that a steadily declining share of workers and their dependents are covered by ESI. More specifically, according to the most recent data from the U.S. Census Bureau, the share of non-elderly adults and children covered by ESI fell from 68 percent in 2000 to 62 percent by 2008. This decline was to a large extent driven by a decline in the fraction of firms offering ESI to their workers, which fell from 69 percent in 2000 to 60 percent in 2009.³ Thus if one focused only on those firms that offered ESI during this period, the trends outlined above would be even more striking.

These trends, along with recent empirical research⁴ on this issue, make clear that increasing health care costs are reducing the wage growth of American workers below what it otherwise would be. The President's Proposal for health insurance reform would genuinely slow this growth in costs, allowing workers to enjoy more of the benefits of their productivity increases in the form of higher take-home wages.

Christina Romer is Chair of the Council of Economic Advisers
Mark Duggan is a Senior Economist at the Council of Economic Advisers who focuses on Health