The Wall Street Journal recently reported a second round of inflation is coming, and it will. The first round was due to soaring energy costs and supply chain disruptions brought on by Democrats’ inept handling of the pandemic. This second round will happen because of skyrocketing healthcare costs.
Half of economists surveyed this summer said they expect high inflation to continue through the end of 2025.
What’s going on: Big hospital monopolies sensed an opportunity around COVID-19 to leverage their market size to get more money. Over the last year or two, hospitals have broken their contracts with insurers to renegotiate and get higher payments, saying they need more money due to COVID and a nursing shortage (Despite getting at least $315 billion in COVID relief funds and firing unvaccinated nurses).
A report this summer found hospital operating margins soared to an “all time high” leaving some to wonder if “hospitals may have received too much COVID relief.”
But insurers won’t just eat these additional costs. Due to the Affordable Care Act’s cap on profits for insurers, the increased costs will be passed along to their customers in the form of higher premiums. Who are their customers? Business owners and state and local government employers who pay for their employees’ health coverage.
• Employers expect to see their healthcare benefits costs per employee rise 5.4% in 2024, the biggest increase in more than a decade.
So, these employers then have to figure out how to make up for that loss. Either they can hire fewer workers, offer them less health benefits, and decrease wages, or they can increase the cost of their goods and services (and in the case of government employers, raise taxes). Since the labor market is tight, most employers are choosing to increase the cost of their goods and services.
• The leader of a trade group representing employers complained that “hospitals taking hostages to demand more of your paycheck.”
The next time you are at the gas pump, eating at your favorite restaurant, and filling out your property tax form, you'll be paying even more to cover the costs employers are shelling out to pay for coverage.
Bottom line: What happens in healthcare impacts the entire economy.
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