A different idea about health care

As Republicans try one more time to pass a bill to strip millions of their health care, a huge policy crap-shoot without benefit of hearings, public debate, or input from experts, here’s another idea.

We keep hearing that middle class wages have flatlined over a long period. Actually, recent data shows a significant uptick. But anyway, such numbers are misleading because they normally reflect only salaries — and not fringe benefits — which comprise a growing part of total employee compensation. The big one is health insurance.

About 150 million Americans get health insurance through their employers, and its value (i.e., its cost) now averages about $18,000 annually. Combining this with salaries tells us that total earnings have not stagnated, but risen substantially.

This also means Americans effectively spend a growing part of their incomes on health care. It’s even more than that $18,000, what with rising deductibles, co-pays, etc. Of course, health care is something of value, improving quality of life, worth paying for. But paying for health insurance is not quite the same thing. Healthy people get little benefit. Indeed, the whole system is set up for them to subsidize the sick; and Obamacare expanded on that.

Overall, Americans spend a lot more on health care/insurance than other advanced countries, without being healthier. This is fundamentally because it’s not a competitive market. There’s really no shopping around for health services; the end-user isn’t usually the one who’s paying. Obamacare didn’t fix this.

Recently, during a medical appointment with one doctor, another stopped in to “consult,” for a few minutes. He neither examined nor treated me. He billed $405. Because he could. This is why health care costs are out of control.

A NY Times op-ed last November (by Professors Regina Herzlinger, Barak Richman, and Richard Boxer) proposed a simple reform that would have a big impact.

The main reason our system evolved the way it did is because employee health benefits aren’t taxed like regular wages are (which, by the way, makes them even more valuable to workers, enlarging the impact on the “wage stagnation” picture). But, as the Times writers point out, workers have little control over this enormous expenditure made on their behalf; they cannot try to economize or shop around for insurance. If they could, they’d opt for a wide variety of different plans.

So the writers propose that, without losing the nontaxableness, moneys earmarked for health insurance be given to employees, to purchase it themselves. If you spend the whole $18,000, fine; but if you spend less, you get to pocket the savings. (Even if you’re taxed on that part, it’s still a big benefit.) This would give insurance companies a strong incentive to develop a whole array of varied (and often cheaper) options, to compete for those consumer dollars — an incentive almost wholly lacking in the existing system.

It would also make the market for health care itself more like, well, a market. Competition among insurers would in turn exert pressure on providers to likewise innovate to offer more efficient, cost-conscious care. Meantime many more people would choose to use insurance as it was originally conceived, that is, to cover only big expenses, not routine ones. For the latter they would shop around, again mindful of costs. That would have a huge positive impact on the way health care is provided — and billed.

This reform seems like a no-brainer. And a huge vote winner too. Why has no politician latched onto this? Do the insurance companies (who wouldn’t like breaking open their comfy status quo) really have the whole system locked up?

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4 Responses to “A different idea about health care”

  1. djedi9 Says:

    Did you forget that a large portion of our congresspeople have their hands in the pockets of insurance and pharmaceutical companies? Who do you think pays for the incredible amounts of money needed to run for office today? There is no other explanation for the voting patterns of the House and Senate, shunning the best interests of their own constituents.

  2. Robb Smith Says:

    Our health insurance system puts most of the burden on employers, which is absurd. No small business can afford to pay $18,000 per employee! The system disadvantages all but the affluent working for large corporations. The US should do what every other industrialized nation does and provide basic quality health insurance for everyone with optional private insurance for those who want luxury policies.

  3. Hung Tran Says:

    Very interesting.

    Thoughts on those that would spend $0 of the $18,000 on health insurance but then need it and become a burden to those that did. Mandate some form of mandatory minimum coverage?

    Respectfully

  4. Bumba Says:

    Did you take into account the contribution to the insurance premium that employees now have to make? A decade or so ago employers usually paid the whole thing. To detach health insurance from employment would help. And when the whole medical system is for profit, you incentivize higher charges…

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