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September 17, 2007
Benefits Conference Keynote Proposes Federal Health Plan
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is Ceplenski
Senior Editor

Jacob Hacker was up late Sunday night, discussing health care with Hillary Clinton's campaign team. Hacker, who presented a keynote address Monday morning at the 20th Annual Benefits Management Forum & Expo in Dallas, Texas, explained to his audience that he'd been up until the early hours of the morning consulting with the presidential candidate's handlers in regards to the health plan she planned to unveil later that same day.

A Professor of Political Science at Yale University, and the author of the book "The Great Risk Shift," Hacker has a vision for the future of health care of his own. Before he provided its basics to his audience, he delivered a heavy dose of sobering statistics regarding the current economic state of middle class America.

More and more members of the middle class are insecure about their economic future and prospects, Hacker explained, and it's due in part to the "risk shift"( referenced in his book title) in health care costs--from the "stronger" shoulders of government and corporations on to the "weaker" shoulders of individual Americans. A recent survey revealed that 65 percent of Americans felt that they had less economic security than they did 10 years ago.

As the risk shift to individual Americans has taken place, households are now much more likely to have two earners, Hacker notes. The United States has the most productive workforce in the world, but while the richest one percent of American households saw their after-tax income increase 176 percent between 1979 and 2004, the middle-fifth (middle class) of households saw only a 21 percent increase in the same period. And this relatively modest increase was due largely to the large number of women who have entered into the workforce during that period.

Despite the increase in households with two incomes, there are an estimated 47 million uninsured Americans, and the portion of workers who receive health care through employers dropped from 69 percent in 1979 to less than 55 percent in 2003. Moreover, someone files for bankruptcy in America once every 30 seconds due to medical costs. Hacker provided the example of an air conditioner repairman who made roughly $75,000 a year by working approximately 90 hours per week. His wife had to drop out of the workforce in order to take care of their son who suffered from an intestinal disorder. Inadequate health care coverage soon resulted in $35,000 of credit card debt incurred by medical costs and the family filed for bankruptcy. Hacker noted that the repairman "felt like he had failed" when he filed for bankruptcy, despite his best attempts at providing for his family by making good money and working hard for it.

Considering the above, it should come as no surprise that middle class workers are struggling mightily to save for retirement. For example, according to a recent study, the percentage of working-age Americans at risk of falling short of pre-retirement standard of living in retirement climbed from 31 percent in 1983 to 43 percent in 2004. Meanwhile, in the period between 1970 and 2003, the percentage of employers offering defined benefit pensions dropped from 45.4 percent to 19 percent, as employers have turned to defined contribution plans in increasing numbers. But this "switch" to 401(k)s has further increased risk for employees. "A lot of Americans feel like they just can't catch up," Hacker says. And this can at least partially explain why many employees aren't contributing to their 401(k)s nearly enough as they should.

In response to the current state of affairs, Hacker contends that its time that every American was provided with quality health care coverage. His plan is called the "Health Care for America Plan," and while time constraints at the conference prevented him from going too deep into the details, here are its three basic elements.

The first element is what Hacker calls "shared risk," which refers to having the federal government shoulder more of the "risk" by allowing any American without "good workplace coverage" to enroll in a public insurance pool (the Health Care for America Plan). The second element involves "shared responsibility," meaning that employers would either need to purchase coverage comparable to what's offered under the federal plan for all of their workers or provide a relatively modest payroll contribution (about 6 percent) to help pay for their employees' coverage under the plan. The third element regards "individual responsibility" by requiring that uninsured Americans take responsibility by either participating in the Health Care for America Plan or buying private health care coverage.

For a detailed look at Hacker's plan and how it would work, go to the Economic Policy Institute's Agenda for Shared Prosperity website (

Hacker says that one single bad step or misfortune--such as what befell the air conditioner salesman in the example above--should not mean the end of the American dream for members of the middle class. His proposal, he says, would help ensure that middle class workers would be less at risk of losing the money they've what earned. Other ideas, such as those for improving the amount of money employees save through retirement via their 401(k), can be found in his book.

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