Americans are getting poorer, and it's going to get worse

The early impact of the worst recession since the 1930s pushed median incomes down, forced millions more people into poverty and left more Americans without health care in 2008, according to new annual survey data from the U.S. Census Bureau.

Poor people, working people, blacks, Hispanics and children bore a disproportionate share of the hardship. The new figures, however, likely understate the severity of the economic downturn because a large portion of nation's job losses and unemployment rate increases occurred after the Census survey data was collected in March as part of the annual Current Population Survey.

The poor performances of key economic and social indicators come as little surprise, since the recession officially began in December 2007 and continued to create economic carnage for 18 months before appearing to bottom out over the summer.

_ Along the way, the nation's real median income — the point at which half the nation earns less and half more — fell 3.6 percent from $52,163 in 2007 to $50,303 in 2008. That was the first such decline in three years and the worst in the first year of any recession since Census Bureau began collecting the data during World War II, said Lawrence F. Katz, an economics professor at Harvard University.

_ Men and women were both affected. Full-time working men saw their median incomes fall by 1 percent from $46,846 to $46,367, while female earnings declined by 1.9 percent, from $36,451 to $35,745.

_ The worst is yet to come. "This is just the beginning, or the tip of the iceberg because 2008 was not nearly as bad an economy as 2009," Katz said. The average unemployment rate in 2008 was 5.8 percent, up from 4.6 percent in 2007. That pales in comparison with the 9 percent average unemployment rate so far this year, and it's likely to increase. August unemployment was 9.7 percent, and it's expected to peak above 10 percent in the months to come.

_ Because real median household income is 4.2 percent lower than it was in 2000, Katz said, "We've basically seen a lost decade for the American family," with only the top earning families doing better now than they were in 2000.

The national poverty rate also hit its highest level since 1997, jumping to 13.2 percent in 2008 from 12.5 percent in 2007. The increase meant that 39.8 million people lived below the poverty line, the most since 1960. That's up from 37.3 million in 2007. For children, the poverty rate hit 19 percent, or 14.1 million youngsters in 2008. That means 35.3 percent of the nation's poor in 2008 were under age 18.

Heidi Shierholz, an economist with the liberal-leaning Economic Policy Institute, estimated that 25 percent of U.S. children would be in poverty next year and 26.6 percent in 2010. "This would represent an increase of 10.4 percentage points from 2000 to 2010 — truly a lost decade," Shierholz said.

Meanwhile, the number of people without health insurance increased from 45.7 million in 2007 to 46.3 million in 2008, even though the percentage of uninsured Americans didn't change, at 15.4 percent. About 46 percent of the nation's uninsured are non-Hispanic whites, but as a group, 11 percent of non-Hispanic whites lack coverage, compared with 19 percent of blacks and 31 percent of Hispanics. About 45 percent of noncitizens lack coverage.

Following President Barack Obama's Wednesday night speech to Congress in which he stressed the need for comprehensive health care legislation, many supporters used the new Census estimates to support Obama's call for change.

At the Yorkville Common Pantry, an emergency meal program in East Harlem, Joel Berg, the executive director of the New York City Coalition Against Hunger, said the troubling numbers underscore the need for health reform.

"Today's new numbers make it clearer than ever that lack of health insurance and inability to pay medical bills is one of the greatest contributing factors to poverty and hunger in America," Berg said. "People in poor health rarely earn significant wealth."

Henry E. Simmons, President of the National Coalition on Health Care, another group pushing for reform, said the Census data also shows that more than 600,000 adults who earn more than $75,000 a year also lost coverage in 2008.

"The problem of (the uninsured) is not confined to the less affluent. More middle-income Americans are losing their health insurance coverage," Simmons said.

As in previous economic downturns, public health coverage through government-run programs such as Medicaid, Medicare, and the State Children's Health Insurance Program helped cover many people otherwise would've gone without. Enrollment in Medicaid and SCHIP alone increased by 3 million in 2008.

This expanded coverage caused the number of uninsured children to fall from 8.1 million or 11 percent in 2007 to 7.3 million of 9.9 percent in 2008.

"This was the lowest number (and percentage) of children without health insurance since 1987," said David Johnson, who heads the Census Bureau's housing and household economics statistics division.

Many experts think the 2008 data substantially understates how many people lack health coverage today because the unemployment rate in 2008 ranged from 4.8 to 7.2 percent compared with 9.7 percent in August.

Ron Pollack, the executive director of the health care advocacy group, Families USA, said every percentage point increase in the unemployment rate adds about 1.1 million people to the uninsured rolls. He estimates that 50 million Americans now lack coverage.

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Family health costs outpace inflation and wage growth

The average cost of job-based family health insurance climbed 5 percent to $13,375 in 2009, making this the 10th straight year that health care premiums have increased faster than workers' wages and overall inflation have.

Insurance costs have increased 131 percent since 1999, when a year of family coverage cost about $5,791, according to the 2009 Employer Health Benefits Survey by the Kaiser Family Foundation and the Health Research & Educational Trust.

That supercharged growth rate far outpaces the 38 percent increase in wages and 28 percent growth of inflation over the same period.

The inability of consumers and employers to finance that growth in cost is helping to drive the heated debate over how to revamp the nation's heath care system.

At a time when employers are laying off workers, facing revenue declines and looking for ways to cut costs, health insurance is proving a substantial financial burden.

So they're passing the costs to employees, who're paying higher deductibles and out-of-pocket expenses while often receiving less comprehensive coverage for their money.

Twenty-one percent of firms with insurance coverage reduced benefits or increased employee cost-sharing due to the recession, the survey found. Fifteen percent increased their workers' shares of the monthly premium.

"When health care costs continue to rise so much faster than overall inflation in a bad recession, workers and employers really feel the pain," said Drew Altman, the president and chief executive of the Kaiser Family Foundation.

Employers typically pay about $9,860 of the standard $13,375 family policy, the survey found. Workers pick up the rest, about $3,515 or 27 percent. That's the same share as last year.

The cost of single coverage increased slightly this year, averaging about $4,824 compared to $4,704 last year. Employees pay about 17 percent of the cost, or $779 toward the coverage.

The rising costs mean that a year of family coverage, on average, now costs employers about $15,000, nearly as much as a year of labor from a full-time minimum wage worker, Altman said.

Consumers also pay more, on average, for family coverage than they'd pay to purchase a gas-sipping Chevrolet Aveo — about $12,000 — or to rent a two-bedroom apartment for the nationwide yearly average of $11,136.

"It just underscores why health insurance is increasingly unaffordable for working people and for employers, especially small employers," Altman said.

About 159 million people have employer-based coverage nationally, but the percentage of companies that provide it is declining, particularly among smaller ones. Only 59 percent of firms with fewer than 200 employees offer coverage in 2009, compared with 62 percent last year. The rate fell from 78 percent to 72 percent among companies with 10 to 24 employees.

Perry Goodwin, who runs the Gaines W. Harrison & Sons hydraulic repair shop in Columbia, S.C., saw his insurance costs increase 28 percent to 33 percent a year for five straight years. But when it cost him $16,000 a month to insure his 20 employees, Goodwin decided it was time for a change.

So he switched insurance carriers several years ago, and his premiums fell to about $10,000 a month. "But then they shot up another $3,000 (a month) over the period of one year," Goodwin said. "So then I went to another carrier, who got me down to about $11,000 a month."

Goodwin now pays about $10,000 a month, and to keep his costs down he increased his employees' deductible this year to $500 from $250 and cut his coverage for employee dependents in half.

"I could get it cheaper if I wanted it, but you get what you pay for," Goodwin said.

As the debate about health care goes on, Goodwin said he opposes what the Obama administration and Congress have proposed, particularly a government-run public option, which he fears businesses could be asked to subsidize.

"It ain't the government's business," Goodwin said. "They don't need to be running a car company, and they sure don't need to be running health care."

If there's a way to keep costs down without the government getting involved, however, Goodwin said he's all for it.

Dallas Salisbury, the president and chief executive of the Employee Benefits Research Institute, said Goodwin's comments are typical of surveys of business owners, who're mostly Republican or Libertarian and are likely to oppose most forms of government intervention.

Without state or local level regulation, however, Salisbury said insurance companies would withhold coverage from people with pre-existing conditions and try to "cherry pick," or insure only healthy people.

Resolving the cost, coverage and quality issues surrounding the health care debate will always be difficult as long as consumers want access to everything, "but they assume that everybody else is getting a lot of services that they really don't need. That has been, for at least 60 years, the dilemma of modern health care," Salisbury said.

Other key findings from the survey:

_ Twenty-two percent of workers now pay at least $1,000 out of their own pocket for single coverage before their insurance kicks in. That's up from 18 percent last year, according to the survey of more than 2,000 public and private employers.

_ The average annual deductible for single coverage in an HMO increased to $699 this year from $503 in 2008. For family coverage in an HMO, the average deductible jumped to $1,524 from $1,053.

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