Mathematical proof
October 30th, 2007 at 07:11am Nate Legue
Ever hear of the Rule of 72? That’s the mathematical formula that determines how long it will take for a sum to double based on its annual percentage growth. You divide 72 by the percentage rate and find out the number, in years, it will take to double. So if your wages grow by 3 percent each year, then it will take you 24 years to double your salary (72 / 3 = 24). If your stock portfolio grows by 8 percent every year, it will take 9 years to double it (72 / 8 = 9). You get the idea.
A newsletter from the Economic Research Institute, a research firm that does salary surveys for human resources benchmarking, points out an obvious mathematical consequence of this axiom: If health care premiums continue to rise at 10 percent a year and wages rise at 3 percent, it’s only a matter of time before all the money that a company spends on employee compensation will be eaten up by paying for benefits.
Of course, it isn’t certain that employer-sponsored health care costs will rise at the same explosive rates we’ve seen since 2000, but it is certain that the current growth and its impact on employers will make paying for health care the biggest domestic issue in next year’s presidential election.
2 Comments Add your own
1. Gary Lundberg | November 5th, 2007 at 10:55 am
Nate. it’s the same concern for retirees who see all of the CPI directed annual increase for Social Security going to increases for Medicare supplemental insurance and co-pays.
Two major sources of increases in health insurance costs are poor lifestyle choices and growing numbers of elderly consumers of health services. There is an issue of moral hazard in these numbers because those who are healthy are clearly subsidizing very expensive health services of disputable benefit.
Maybe the government would get more bang for the buck spent if all health club or YMCA memberships were free?
2. Charles Worboys Jr. | November 19th, 2007 at 11:29 am
Nate,
The idea of making exercise facilities available to older, often underemployed, workers actually makes sense. They can’t afford to get sick-no insurance-and their employers can’t pay for their medical bills-no insurance. So, a couple laps around the gym is the perfect alternative to real health care reform.
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