Lower healthcare costs could mean more money for wages

Employees grumble every year when their employers make them pay more toward their health insurance costs and/or increase co-pays and deductibles. But most of the time employers absorb the bulk of the financial hit and only pass along a fraction of the overall increase. One result has been a stagnation in real wages, as a higher and higher percentage of employment costs come in the form of health care. This isn’t visible to the typical person, but the fact is the health care industry has sucked up essentially all the money available for raises.

What that means is that as health care costs are brought under control ’as I firmly believe they will be’ there’s an opportunity for middle class Americans to resume an upward trajectory in real wages. MIT economist Jonathan Gruber has picked up on this theme in a new study for the Blue Cross Blue Shield Foundation of Massachusetts.

I believe that Massachusetts is on the cusp of taming the health care cost beast, a situation made possible by RomneyCare’s near-universal coverage followed by innovative efforts of private health plans and providers, plus the threat of state government intervention. While out-of-state ideological critics caricature the Massachusetts approach, they may soon be treated to the specter of the state outshining others in real wage growth, in a way that doesn’t hurt the competitiveness of our employers.

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