Sunday, October 19, 2008

Healthcare Should Not Be Linked To Employment

An end to employer-based health insurance is exactly what the American healthcare market needs. Far from being a calamity, it would represent a giant step toward ending the current system's worst distortions: skyrocketing premiums, lack of insurance portability, widespread ignorance of medical prices, and overconsumption of health services.

With more than 90% of private healthcare plans in the United States obtained through employers, it might seem unnatural to get health insurance any other way. But what's unnatural is the link between healthcare and employment. After all, we don't rely on employers for auto, homeowners, or life insurance. Those policies we buy in an open market, where numerous insurers and agents compete for our business. Health insurance is different only because of an idiosyncrasy in the tax code dating back 60 years - a good example, to quote Milton Friedman, of how one bad government policy leads to another.

De-linking medical insurance from employment is the key to reforming healthcare in the United States.

~From Jeff Jacoby's most recent Boston Globe column

20 Comments:

At 10/20/2008 12:58 AM, Blogger SBVOR said...

Absolutely!

I've been saying that for years!

 
At 10/20/2008 3:22 AM, Blogger juandos said...

Well being a union man for going on 33 years I don't know about that whole, "should not" part...

I mean I don't see that it should be mandatory for an employer to cover all or part of a health insurance package but it has been part and parcel of contract negotiations for decades...

Maybe someone can tell me different, tell me something factual but since Nixon was a President that imposed wage & price caps the health insurance was one loophole so to speak that an employer could use to attract new talent he/she needed to for business expansion...

 
At 10/20/2008 7:57 AM, Blogger Marcus said...

juandos,

Why don't unions provide health-care coverage for their members?

 
At 10/20/2008 8:02 AM, Anonymous Kevin said...

This column is incorrect. Many people obtain disability and life insurance through employers. The group purchasing power of a company is helpful.

 
At 10/20/2008 8:38 AM, Blogger Shakes The Clown said...

Kevin, some companies get life insurance on employees to compensate themselves for the cost of replacing the employee. Usually company life insurance would not be able to replace a family losing a bread winner.

Companies that I have worked for insured workers to the point of one year's salary. And that was payable to the company, who could pass that along if tragedy struck, but didn't have too.

One year's wages is less insurance than an individual needs if you want your kids to go to college and your wife to not struggle if you happened to pass away.

One thing I don't like about our current system is that some people are too costly to insure by a small business. Hiring them would break the bank. These people are pushed out of the labor force and productive society. The only reason this happens is that your job is tied to your health insurance. Severing that tie would help those people become productive citizens.

 
At 10/20/2008 9:51 AM, Anonymous qt said...

As the article states, the Obama plan is intent upon strengthening workplace based health insurance although the disadvantages for those who opt to buy personal coverage is not highlighted. Obama also does not support getting coverage across state lines which would also lower costs.

A large employer can certainly get better rates due to the size of the pool however, increasingly employees are changing employers and even careers several times during their working life. What is needed is insurance coverage that is mobile and moves with the worker.

Have to agree with Juandos that the phrase "should not" seems very short-sighted. Employer based coverage provides coverage for many Americans. It does not provide the best model for small business, self-employed individuals or employees who change jobs/careers.

 
At 10/20/2008 10:15 AM, Anonymous Potato Chef said...

As a potato I must obtain my own health insurance. The cost is unreasonable. And my bargaining power is zilch. Now I know what the butter must feel like when it is placed on my wound.

What really gets me about health care, insurance and medical cost in general is the pricing structure.

My wife recently had to have an operation. The bills started coming in, and to my suprise the doctor billed $2,000, the insuracne company said they would only allow $400 and the doctor agrees. What is going on here?

It seems more like a negotiation taking place on a used car lot.

Are the medical billers looking for the suckers? No wonder people say health care cost are out of control. They are if you pay what they are asking.

 
At 10/20/2008 10:16 AM, Blogger Beth said...

Health insurance as an optional employment benefit seems reasonable. My understanding of the problem is that paying for health care is a way for employers to provide higher compensation to employees without either of them (employer or employee) suffering the tax consequences of simply paying higher wages. The solution would be either taxing health care benefits (a bad idea in my opinion) or a less punitive tax code. Allowing individuals to keep what they earn and pay for their own health care benefits seems to be the best system possible. Of course, to really bring down the cost of health care, it would be necessary to get the government out of the health care business altogether...there is no way for private providers to effectively "compete" against the blank check capabilities of the government.

Beth Haynes
http://wealthisnottheproblem.blogspot.com/

 
At 10/20/2008 10:30 AM, Anonymous Anonymous said...

What a surprise that neo-con Jeff Jacoby writes this ridiculous opinion piece.

Jacoby writes.....
"Unconstrained by consumer cost-consciousness, healthcare spending has soared, even as overall inflation has remained fairly low."

My "spending" has soared because the price of medical services has soared.

The vast majority of folks who go to an emergcy room for non-emergency treatment are those who have NO insurance. If someone has their Kaiser insurance plan they have to make an appointment because Kaiser won't pay for an emergency room vist when not needed.

Jacoby writes...
"De-linking medical insurance from employment is the key to reforming healthcare in the United States. McCain proposes to accomplish that by taking the tax deduction away from employers and giving it to employees. With a $5,000 refundable healthcare tax credit, Americans would have a strong inducement to buy their own, more affordable, insurance, rather than relying on their employer's plan. As millions of empowered consumers began focusing on price, price competition would flourish. And as employers' healthcare costs declined, most of the savings would return to employees as higher wages."

One person shopping for insurance can't compete with the price reductions given to a large company.

And Jacoby wants us to to beleive the "trickle down" theory of no insurance for employees?

 
At 10/20/2008 10:42 AM, Blogger Anuj said...

what does everyone's healthcare cost right now? anyone know?

 
At 10/20/2008 11:26 AM, Anonymous qt said...

A prime driver of health care costs is the cost of developing new prescription drugs which does not even appear in this article.

There is little evidence of a comprehensive and informed inquiry on this subject by political leaders seemingly more intent on finding opportunities for grandstanding.

 
At 10/20/2008 2:26 PM, Anonymous Anonymous said...

I am self employed and buy my own insurance so I do know exactly what health insurance costs, my Blue Cross with a $2,500 deductible = $360.00 month for my age bracket (45-52). And the authors story about us using emergency rooms for routine health care is absurd and wrong.

I have spoken to my doctor a General Practioner had he tells me about his sky-rocketing liability insurance costs. This is one reason for rising health care costs, I really have to read more about why health care costs and health insurance costs keep rising faster than inflation rates.

Luckily my automobile insurance rates have remained fairly constant over the last 10 years, while health insurance costs have increased 4x.

 
At 10/20/2008 2:29 PM, Anonymous qt said...

what does everyone's healthcare cost right now?

Excellent question.

It depends on what one considers as a cost. In Canada, we consider wait times, lack of access to diagnostic imaging equipment, lack of access to new drugs, inadequate rating information on hospitals and physicians, and shortages of primary care doctors, nurses and diagnostic imaging technicians. All of these elements have direct impact on access to care, quality of care, and patients outcomes in particular, wait times for illnesses like
cancer.

Since our system is funded by tax dollars, we also look at Tax Freedom day which falls on June 14 compared with April 23 in the U.S..

My husband is not able to lift his right arm above 90 degrees due to a rupture in his rotator cuff in the shoulder. Although he sought immediate attention, a condition that could have been surgically treated went inoperable due to the length of time he had to wait to get an MRI (8 months). That too is a cost.

 
At 10/20/2008 2:41 PM, Blogger The Daily Pander said...

To Anonymous:

Do you advocate employer-based auto insurance, or homeonwer's insurance, or umbrella policy insurance?

Employer based insurance masks the true cost of care, which ignites demand. Among the many problems with the way we finance health care in this country, the third party payer problem is ranks near the top. Just as there's a problem with allowing a party w/o an insurable interest to buy insurance on an asset (ala credit default swaps) there's a problem in requiring third parties to pay and/or subsidize someone else's insurable interest. The former encourages uncotrolled risk, the latter encourages excessive usage. Delinking employment from health insurance is one, but not the only, step towards rationalizing health insurance.

 
At 10/20/2008 6:10 PM, Blogger Mike said...

Employers should pay for automobile insurance, mortgages, and my utilities. If we're going socialism, let's dont half-ass it here!

 
At 10/20/2008 9:47 PM, Anonymous qt said...

Touchez, mike

 
At 10/21/2008 1:31 AM, Blogger OBloodyHell said...

> The group purchasing power of a company is helpful.

There are other ways to obtain this, however, if it were not for the employer presence constraining the market.

People would form and join co-ops to do the job, often tied to some medically related special interest of the individual or family.

Newly married couples seeking to have children would join co-ops which targetted pregnancy costs, seniors would join senior co-ops, parents of children with disabilities would join co-ops which targeted those problems.

This would, in fact, almost certainly do a better job of getting good deals, since it would segment the market much better than "works for company 'x'".

Said co-ops would also probably develop to function as self-help organizations, as well, sharing information about good-v-bad doctors, health information related to the group (which drugs to avoid, etc.), advice for new parents, and so on.

Such collectives would probably have been difficult 20 years ago, but with the internet, you wouldn't even necessarily need a great deal of proximity... people from all over a 500-mile radius could easily be a part of a co-op specializing in "left-handed twin tax accountants", perhaps not even subject to state boundaries (even if their specific deals were only valid within a set of boundaries, there's no reason such negotiations could not be resolved for all members, with independent contracts signed for each state to resolve localized legal limits.

 
At 10/21/2008 2:27 AM, Blogger OBloodyHell said...

> A prime driver of health care costs is the cost of developing new prescription drugs which does not even appear in this article.

qt, flat out on the surface of it, this claim is ludicrous. If it were true, then some bright boy somewhere would produce a contract which excluded pharma costs and handled them as a separate, highly visible payout which the user would be very aware of as a component. Are pharma costs relevant? Sure. Are the cost of NEW drugs central to the costs? Don't be absurd.

That sound you hear is someone's axe being ground.

 
At 10/22/2008 2:42 PM, Blogger notnidiot said...

OBloodyHell said...
> A prime driver of health care costs is the cost of developing new prescription drugs...

qt, flat out on the surface of it, this claim is ludicrous. If it were true, then some bright boy somewhere would produce a contract which excluded pharma costs and handled them as a separate, highly visible payout which the user would be very aware of as a component. Are pharma costs relevant? Sure. Are the cost of NEW drugs central to the costs? Don't be absurd.

I'd say, slightly more then relevant, slightly less than a primary driver...note the difference in deductibles for generics versus formularies... which is typically reflective of the cost reimbursed by the insurance companies.
(Yes, I am an fka, spent 5 years working for a major insurance company doing field underwriting on group insurance (life, health dental) and pension plans. I went back for my mba in finance when I figured out that I was better at numbers then the HQ underwriters).

Also:

"People would form and join co-ops to do the job, often tied to some medically related special interest of the individual or family."
So much for a pooling of risk.
This would be called 'selecting against'...from an economics standpoint, makes a lot of sense, but the high risk groups, (old females, joint or organ replacement patients, debilitating chronic or longterm sufferers) want to lose themselve in a group of young men for the best rates.
Can you say 'free riders'.

 
At 10/22/2008 5:16 PM, Blogger notnidiot said...

Beth said...

....The solution would be either taxing health care benefits (a bad idea in my opinion) or a less punitive tax code...
Beth Haynes
http://wealthisnottheproblem.blogspot.com/

If we must tax something can 'they' tax insurance PREMIUMS instead of insurance benefits. My son had open heart surgery last year. I would have to mortgage my house (again) to pay the taxes on the benefits. Taxing the premiums is a far more reasonable solution
(if tax must be paid!), and would yield similar revenue.

 

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