Bipartisan fixes to cost burdens of middle class

One of the most persistent barriers to the American dream is the steady decline of our nation’s middle class. The crisis facing middle class families can be traced in large measure to the cumulative impact of a longstanding trend. The spiraling costs of three expenses in particular — health care, housing and higher education — have far outpaced inflation and middleclass wage growth. The problem is particularly severe in South Florida, with the nation’s third-lowest median wage among large metro regions.

While the discussion (and often partisan debate) on how to address middle class wage stagnation deserves continued attention, an intensified focus on containing soaring costs is also urgently needed.

The problem is clear:

Health care costs are more than eight times higher, after adjusting for inflation, than they were in 1961.

Housing costs have increased at four times the rate of household income since 1960 while rents have increased twice as fast as adjusted wages.

The average cost of attending a four-year college or university in the United States has grown nearly four times faster than the rate of inflation since 1980.

This is an unsustainable pace, and as Albert Einstein said in the face of another urgent challenge, “a new way of thinking is essential.”

Tens of millions of Americans endure the considerable stress and uncertainty of negotiating unaffordable health care bills, commuting longer distances (with greater transportation costs) to find more affordable housing, and struggling to pay (or borrow) for college tuition.

One reflection of this challenge is the growing difference in how cost of living is calculated. In Miami-Dade, for example, local governments define a living wage as ranging from $13 to $17 an hour, while the actual living wage is an estimated $35 an hour for a family with two children.

So why are middle-class health care, housing and higher education expenses soaring at such a high rate?

A look at some of the cost drivers cuts across partisan lines.

Hospital costs adjusted for inflation have increased by 400% since 1980, and at $1.27 trillion annually comprise nearly a third of total health care spending. The soaring profits of many — but not all — hospitals have been fueled in part by the industry trend toward hospital consolidations and rising market share.

Medical fraud adds an estimated $70 billion to $234 billion a year to the total cost of health care, an issue of particular concern in South Florida, known as the “health care fraud capital of the nation.”

Dysfunctions in the U.S. housing market, many of them anchored in unnecessary regulatory barriers, drive up costs dramatically.

Contributing to the soaring tuitions of four-year colleges and universities are rapidly escalating capital expenses and surging spending on administration (which has increased as a ratio to instructional spending by 40%). Adding to this challenge, many of the nation’s top private universities now face accusations of conspiring to limit financial aid for workingand middle-class families. Experts have referred to the declining number of middle-income students in elite universities as the “missing middle.”

The decades-long growth in these costs, far beyond inflation or wages, has undermined our nation’s longstanding “social compact” with the middle class. A compact rooted in the promise that if you work hard and play by the rules, you will be able to provide a decent standard of living for your families and achieve a better future for your children. This failure threatens the U.S.’s cherished tradition of upward social mobility, which is in decline.

The good news is that there are policy and common-sense solutions, many of which earn broad public support. To cite just a few examples:

In health care, equalize Medicare payments across different sites-of-care so that hospital outpatient departments receive the same rate for the same service as physicians’ offices or ambulatory surgical centers. Improved efficiencies in key categories of wasteful health care spending (care delivery and coordination, overtreatment/low-value care, pricing, fraud and abuse, administrative complexity) could save $191 billion to $286 billion annually. A distinctive capacity for innovation in the U.S. offers further promise for health care cost containment. But with an important caveat: if innovation is sufficiently aligned with the outcome of reducing costs and improving health outcomes.

To increase the supply of workforce housing closer to employment, facilitate and invest in land acquisition. And streamline city permitting and development processes, while still protecting the character of neighborhoods. Shortening the time or a project from concept to occupancy by a year can reduce costs by as much as 20%.

In higher education, use facilities more cost-efficiently and slow down the growth of non-faculty, administrative positions. And for universities fortunate to have large (and soaring) endowments, leverage more of those funds to reduce tuition for working-class and moderate income families.

Health care, housing and higher education costs that far exceed income growth are suffocating middle class aspirations. Addressing this crisis requires creativity, persistence and, in some cases, boldness. The solutions do not fit neatly into one political ideology, which may offer promise of success in an era of strident partisanship.

Shepard Nevel, born and raised in Miami-Dade County, is managing director of an environmental services company in Denver and was senior policy advisor for the campaign of U.S. Sen. John Hickenlooper.