Income Inequality and Healthcare Costs

Two of the most talked about topics today are the cost of healthcare and growing income inequality. An article in the McKinsey Quarterly reminds us that the two issues are tightly coupled.

“The top-income category (earning on average $210,100 annually) has enjoyed rising incomes and growing employer-paid health care benefits, which have made their out-of-pocket spending on health care a relatively small and affordable portion of total spending. The higher-middle-income category (earning an average of $84,800 annually) and the lower-middle-income group (earning on average $41,500), have also seen increasing benefits and incomes—but at a much slower rate, making the uncovered portion of their health care costs ever-more expensive. In the bottom-income category (earning an average of $14,800 a year), incomes have been stagnant, and their employers are less likely to pay for their health insurance. This group is finding any health care difficult, if not impossible, to afford.”

Most families continue to receive whatever medical coverage they have through an employer. Higher income groups are likely to be provided plans with more generous coverage than low income groups, but the dollar equivalent of the benefit provided is smaller in spread than the income difference. It is not unreasonable to assume that overall healthcare costs for comparable families would be similar regardless of income. This means that healthcare costs for a low income family are a much greater share of resources. This imbalance is exacerbated by the fact that few low income families have any employer provided coverage.

For the highest income families, the cost of routine medical care is an inconvenience, for the lowest income families it is an existential threat. State and federal funds are often available to assist the poorest families. The lower middle class is often at most risk because they have the combination of poor coverage, low income, and ineligibility for government aide.


Our absurd healthcare system puts enormous financial burdens on lower income families, effectively decreasing their income even further. In most discussions of income inequality this type of income decrement is not considered. It should be.