Board of Economists: Business, Heal Thyself

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DARLING: As far as employers are concerned, we see no end in sight. In the prior five years, employers' share of health-care costs have been rising compared with consumers'. Employers will be increasing not only cost sharing in the premium paid each month but in every possible way, with either a co-payment or co-insurance.

ALTMAN: Every rock we looked under, we found problems for employers; more than 70% of them plan to ask their employees to pick up a greater share of the tab next year.

SHEARER: Yes, employers are paying the bills for health insurance, but about 90% of those costs are passed on to employees in the form of lower wages. We're concerned that employers are shifting those very obvious identifiable costs to their employees, but at the same time they're also shifting more of the direct premium costs to employees.

WILENSKY: This is the first time we've heard non-economists agree to the concept that in fact employees are really paying for employer-sponsored insurance.

TIME: Do you think the cuts in retiree health benefits are a recession measure?

DARLING: No, they're permanent. Basically, we have a group of people--you can think of it as World War II veterans--who are marching through retirement with these extraordinary benefits.

REINHARDT: I think the danger for those already in retirement or close to it is that employers will find legal ways to whittle away benefits if it's absolutely necessary. I think it's a sleeper issue: more of the share of the health-care costs of the elderly will have to be borne by them or by Medicare, because employers have the legal means to pull out.

DARLING: Anybody under, I would say, around 40 in this country, except for public employees, will not have retirement medical coverage, period. Zero.

REINHARDT: And I think that is a healthy development.

TIME: Because it will create pressure for better Medicare benefits?

REINHARDT: Because it's time for young people to start saving.

SHEARER: This group of people 55 to 64 tend to have a lot of health conditions, but they don't have a lot of options. There will have to be a public-policy response to make sure they have some options.

WILENSKY: We talk a lot about the baby boomers and the impact they're going to have on retirement spending, Medicare, Social Security, ad nauseam. What people don't always think about is that the baby boom was followed by the baby bust. So it's really a double whammy. Both of those are going to cause this continuing labor shortage and require employers to be unbelievably creative in keeping older workers.

ALTMAN: The day will come when almost 65% of all voters will be 50 or older. So that is going to fundamentally transform the politics of this issue. It also means we will focus more on issues like prescription drugs and less on equally or more compelling problems like the uninsured.

REINHARDT: Ten or 15 years ago, the ratio of health-care spending for 55-year-olds to 25-year-olds used to be about 2.3 to 1. Now it's closer to 3.5 or 4 to 1. An older person now costs more. It's the new technology.

DARLING: It's also drugs.