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Defining the Middle Class

There is no strict definition for the term Middle Class.

The Federal Government only sets upper income and asset limits on who can qualify as poor.  Other income brackets are determined in the political arena in the context of taxes.

We like the way the Contributing Editor of MSN Money defined Middle Class: “Having the resources to cover all your needs and some of your wants, plus the ability to save for the future.”

THE MIDDLE CLASS: WHO ARE THEY?

Our definition of ‘middle class’ will be between America’s lowest-earning 20% of households – everyone above $20K- and everyone below the highest-earning 20% of households- those earning $97K or less. 

There are the uninsured groups that do not surprise us: the unemployed, undocumented workers, the working poor. The surprising group is America’s middle class. In fact, the middle class is the fastest growing group in the ranks of the uninsured in this country. Families with incomes over $40,000 a year make up 17 million of the nearly 47 million Americans without health insurance.  As of 2006, 43% of the middle class went without health care coverage, and this number is expected to grow as the recession deepens.

How can this be happening?

1) Employer-based coverage is becoming more expensive:

  • Between 2007 and 2008, premiums increased by 5%, or twice the rate of inflation. The premiums for employer-sponsored health plans grew by 114% between 1999 and 2007.
  • While the percentage that employers expect their workers to contribute to premium costs hasn’t changed recently, because premiums are rising, employee co-pay amounts are rising too.

2) Employer-based coverage is also decreasing somewhat:

  • 63% of employers offer health benefits in 2008, although employees are more likely to have benefit options if they are employed in a large firm with higher income or union workers. For example, only 49% of firms with 3 to 9 workers offer coverage, compared with 90% of firms with 25 to 49 workers, and 99% of firms with at least some unionized workers.

3) Of the middle class without employer group insurance (including the self-employed and independent contractors), less than 25% purchase individual health insurance policies as it is becoming more expensive and harder to qualify for:

  • Those with pre-existing medical conditions are charged higher premiums or are denied insurance;
  • Less expensive insurance plans are being offered but they have high deductibles and coverage limitations, especially for maternity care or mental health services;
  • Out-of-pocket medical costs are almost double that of those with employer-based insurance;

4) Insurance companies and employers are increasingly shifting out-of-pocket costs to consumers: Between 2000 and 2008, average out-of-pocket costs for deductibles, co-payments for medications, and co-insurance for physician and hospital visits rose 115 percent.

An Update on SCHIP: As of April 2007, 29 states and Washington D.C. are in the process of adopting or already have adopted legislation that allows them to raise the income levels under which families could qualify for state-paid children’s health coverage (SCHIP), thus increasing the numbers of middle class families that receive government financial assistance for health care.

THE MIDDLE-CLASS: THE INSURED

Health insurance comes in many forms these days: PPO, HMO, HSA with HDHP, not to mention government offerings. No matter the coverage, for those in the middle class who have health insurance, rising costs and declining coverage are becoming a reality.

A.  MORE BILLS, MORE DEBT

The middle class is a broad group. It includes everyone from those making too much to qualify for government aid to those not making quite enough to qualify for government tax breaks. The middle class is shrinking as our nation increasingly becomes split into the Rich and the Poor.
Medical costs – even for the insured – are becoming an increasing factor in this phenomenon.

  • In 2003, among the larger middle class (families of 4 with an annual household income between $36,800 and $73,600) 23% spent more than 1/10 of their incomes on premiums and other health care expenses (up from 16% in 1996) with 6% spending more than 20% of their income on health care, figures that match those of the working poor.

The working poor are those who are working but have salaries that do not keep pace with the various and ever-increasing costs of living. An increasing number of the middle class can be said to be slipping into the ranks of the working poor, due to health care costs alone.

Increasingly, members of the middle class are forced to pay their medical bills with credit cards, leaving them at risk for debt. Again, those who purchase insurance in the non-group market are more at risk for financial hardship due to medical costs than are other insured people.

  • In 2005, half of America’s personal bankruptcies were caused by illness, medical bills and related job loss.
  • Witness this personal story:
    • Peggie has a family income of about $100,000, and accrued $40,000 of medical debt because of treatment for cancer. She said, “[The stress and tension] were worse than the cancer…. The cancer you could deal with, that you could go cut it out or zap it,…but knowing every day when you go to the mailbox, it’s like, ‘Oh my God…. What’s going to come in that mailbox today is going to throw us over or we’re going to lose the house.’ It’s an enormous stress.”

B.  MORE HEALTH PROBLEMS

Have we reached the peak of our health, as a nation?

What we have gained from technology and medical advances may be leveling off. More than 90 million Americans live with chronic disease, which accounts for 70% of all deaths in the United States. The top 3 chronic illness killers in the U.S. – heart disease, cancer, and lower respiratory disease – are also among the top 4 causes of death. Diabetes and Alzehimer’s are also in the top 10.

In 2006, a survey of households with cancer found that even though 95% reported having health insurance, 23% said they used up all or most of their savings as a result of the cost of dealing with cancer, and more than 10% were unable to pay for basic necessities like food, heat and housing.

  • The direct and indirect costs of diabetes are nearly $132 billion a year.
  • The cost of all cardiovascular diseases was approximately $300 billion in 2001.
  • The direct medical costs associated with physical inactivity were nearly $76.6 billion in 2000.
  • The estimated direct and indirect costs associated with smoking exceed $75 billion annually.

Certainly, some part of these diseases can be attributed to how well people take care of themselves – how they eat, whether they exercise, whether they smoke.

  • The healthiest food available is usually the most expensive.
  • And what of genetics and environment and the role they play?

People absolutely need to take responsibility for their health, but ultimately our genes and our environment catch up with us, and only so much blame can be assigned.

New information shows that the Baby Boomer generation may be the first generation to enter retirement in worse shape than their parents. Their health problems, which seem to be mostly related to living longer due to wellness behavior and advances in medicine, are costing more due to chronic disease. This has led one insurance company to conclude that Baby Boomers will drive up health care costs by 18% by 2050.

THE MIDDLE-CLASS: QUALITY OF CARE DECLINES

Perhaps all this wouldn’t be a problem if by and large we got what we pay for. But even those in the middle class with no current health problems and affordable coverage are facing another problem: shortages.

  1. American citizens are beginning to have to wait for appointments to see their doctors, and specialists.
  2. Geriatric Care: The U.S. has a shortage of geriatric care doctors, in part because salaries for this specialty are lower than average. Experts say the number of geriatricians in America would need to double to meet the demand of our seniors. This shortage will only worsen once baby boomers hit retirement age.
  3. Primary Care: The number of medical school students going into family medicine is declining. Read our blog post on this topic here.

THE MIDDLE-CLASS: HEALTH CARE CRISIS

All of what’s been described here is what people talk about when they say that America is facing a health care “crisis.” That crisis is here. The question now is, what steps can we take to reduce the cost of medical care, increase insurance coverage and improve the quality of care provided.

Note: This article was written by Georgia Berner and Emily Cleath.

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