I've been thinking a bit about health care of late. It seemed only appropriate since our president is apparently of the opinion that the near collapse of the economy is a problem secondary to our health care system's many flaws and failings. So I'm going to be putting together some posts outlining my few thoughts on the health care system's present state, the problems, the potential, the potential problems...
At any rate, here's the first one.
Thought 1: The fact that health insurance is almost entirely tied to employment in this country is beyond stupid.
Interestingly, this bizarre state of affairs is actually a result (as most bizarre states of affairs are...) of prior government intrusion in the economy. You see (he says, settling into his easy chair and grabbing his pipe...) back, oh, 60 or 70 years ago, there was no such thing as health insurance. If you were sick or otherwise needed a doctor you sought one out, got treated and paid him. All on your own.
Now, keep in mind that this is so long ago that medical science was pretty rudimentary compared with what we have today. Oh sure, they had the germ theory of disease and a few highly efficacious drugs (aspirin, penicillin) but not many. The nearly miraculous and extremely costly treatments that we take for granted today simply didn't exist. For lots of conditions the best the doctor could do was make you comfortable and hope you either got better fast or died quickly. This was not as effective, for the most part, as modern medical science but it was relatively cheap.
So. No health insurance. Then, low about 1941 or so, we got into a bit of trouble with Germans and Japanese and decided to dedicate pretty much our entire economy to destroying their war-making powers. You may have heard the period referred to as WWII. It was an interesting time not just for foreign relations, but economically as well in that the government exerted unprecedented control over the economy, as it might be expected to given that it was purchasing the majority of the output.
Among the controls put in place were wage controls.(fn1) Now, people being bright and enterprising, they wanted some way around the wage controls. They wanted to be able to compete on price for labor, that is to offer higher payments for better workers, just as they always do. But they were explicitly not allowed to offer higher wages. So what happened? That's right! The first large-scale creation of "benefits". You see, rather than paying more you could pay the government mandated wage but add in a benefit like, for example, having your medical expenses paid for by the company.
Bully. And, of course, once created the benefit became a standard expectation and never died even though it is beyond ridiculous to have health insurance tied to employment in the way we do.
And that, dear reader, is the story of why health insurance is tied to employment in the United States: it was an unintended side effect of the well-meaning effort to curb wage inflation during the tight labor markets of the war years.
So, I think we can all agree that having health insurance tied to employment is beyond stupid. But it's interesting to note that this stupid state of affairs is the result of government involvement in the economy; it makes one wonder whether further government involvement in the economy is really the solution...
One of the best ways to wean us all off of employer provided health care would be to stop giving the tax breaks for health insurance only to employers. This gives them the incentive to offer gold-plated health-insurance as a benefit as it's a tax-free way to increase compensation. But why should health insurance be tax-free if your employer picks your choices but after-tax if you buy it on your own?
I thought McCain's proposal on this was great and I was disappointed to see Obama demagogue the point throughout the campaign. Relatedly, I was somewhat heartened to see that Obama has recently changed his mind and floated the idea of removing the tax benefit of employer-provided health care. Sadly, he has missed the point of McCain's plan, which was to move the benefit from the employer to the employee (or, actually, everyone, since you would no longer have to have employer-provided health care to benefit from the tax-savings) and is simply using it as a revenue generating measure to pay for his attempt to nationalize health care.
Alas.
At any rate. Things to look forward to in future health care musings:
- Health care in the US is more expensive than in many countries with socialized systems yet has no better (and, in some measures, slightly worse) mass health outcomes. This is not suggestive of what you think it is.
- Enabling greater access to and utilization of preventative care may be a laudable goal but -- contrary to what many pro-government health care advocates say -- it is in no way a cost saving measure for the health care system as whole.
- And other wackily sensible thoughts on health care economics that I haven't even thought up yet!! What fun.
fn1: Which are always stupid in exactly the same way as price controls are because they are simply price controls on the price of labor. Anyhoo.
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5 comments:
You're starting with the conviction that government intervention is the problem with health care. Although it's largely a private system, blaming our free market approach doesn't suit your ideology, so you reach back into the past -- as far as you have to go -- in this case about 50 years -- to find some instance of government involvement that might have contributed to our current situation and blame all our problems on that, no matter out-of-date or indirect it is.
Your like the people that seem determined to blame our financial crisis on Fannie Mae and Freddie Mac, not because they were a large part of the problem, but because it allows them to point the finger at Democrats Washington. The market can't be at fault they say, it must be big government!
And here is an example of the removal of government regulation leading to large, unhappy, unintended consequences...
WSJ: 'Big Bang' Pioneers Rethink Banking Overhaul
http://online.wsj.com/article/SB123844838879571027.html
It's a v. busy week for me so I prob. won't have time to respond for a bit but I did want to drop in quickly to let you know that I appreciate the comments and I do plan to respond to them when I have time. And it won't be months from now, prob. this weekend.
Thanks for reading!
Actually, in this post I was starting with the conviction that having health insurance tied to employment is stupid. Which conviction I would think is fairly self-evident.
So seeing a bizarre state of affairs, I asked myself how did we get here? In other words, why did the health care industry in the U.S. evolve so that health insurance is by-and-large only available through employment? The answer, so far as I can determine, is that it is unintended growth that had its roots in the labor-market policies of World War II, as I laid out.
I'm sorry that the fact that the roots of this particular piece of idiocy lie so far in the past seems to offend you but unless you have an alternate explanation for how we got here, I think the length of time since the beginnings is largely irrelevant.
It's somewhat as though I asked myself "why do computer keyboards have the layout they do?" And then told the story of the first typewriters from over a century ago and how one particular layout became the standard and has been maintained until today, even transferred to computers. You might come back and say "that's ridiculous, you can't blame the state of computer keyboards on the actions of folk from a century ago" but, in fact, you can!
And also, I was tracing the origins of this roughly. The fact of the matter is that obv. the government is not conciously trying to keep down a non-employment tied market in insurance, but they are interested in maintaining the system they've got (including the tax incentives that dramatically favor employment-tied insurance) and so things tend to perpetuate.
And it's not even just the government, health insurance companies have been built to function in this system and are just as dis-interested in a switch to a more sensible system. I could see strong arguments that health insurers would far rather have the current system where they must only market themselves to the decision makers in various human-resources departments than having to switch to a system in which they would actually have to attract customers from the general population, rather than a series of captive populations in each company.
If you have an alternate explanation as to why health insurance in the U.S. is so closely tied to employment, particularly one in which policy decisions that seem to favor one system or the other play no role, I would be v. interested in hearing it.
To your other point (I'm assuming that we're dealing with one anonymous commenter making two comments here and not two anonymous commenters):
The current financial collapse is a complicated beast with many interplaying issues. I think it is beyond ridiculous to say that government regulation had no hand in it, particularly since the collapse of a housing bubble is what set it off and the government has been openly and purposefully pushing greater home-owndership for decades.
Beyond that, though, I agree that the sudden withdrawal of the government's involvement can just as well have unintended effects. Indeed, every action, by anyone, has unintended effects. Your decision to buy or not buy a coke has the intended effects of getting you or not getting you a coke, but it has small ripples through the store you did or did not patronize, the coke company, the coke company's competitors, the general beverage market, etc., etc.
Now individuals actions tend to have small unintended effects that only amass if everyone is making the same decisions. The larger the player making decisions (say a corporation or trade-group) the larger the unintended consequences. The largest player, by far, is the government. For somewhat related reasons, it's also the one that finds it hardest to change tack once it's made a bad decision. In fact, many unintended side-effects of government action are actually beneficial to the government as they cause new problems that the government can set about trying to solve, nevermind the fact that these problems were caused by the government in the first place.
As a more general comment on the removal of Glass-Steagall or even just the general lack of financial regulation or enforcement during Bush's administration as the primary cause of the financial crisis (something I realize you are not saying in your post but that I have heard as a common meme recently), to make that argument effectively you would have to explain why other countries with very different regulatroy histories are running into similar problems at the same time.
If Glass Steagall was necessary to a stable banking sector, why did Europe never have such a regulation and yet have a stable banking system until now? If this was all Bush deregulation and having the monitors asleep at the switch, why did Europe, which few would describe as a deregulatory wonderland with lax oversight, run into the same problems?
Arnold Kling, a pretty smart economist who worked for Fannie Mae for a period, is of the opinion that the entire mortgage securitization market was created by side-consequences of various governmental actions, that a rational market without artificial incentives towards securitization would never have devloped it on its own. I'll try to put up a post soon linking to and explicating his views.
At any rate, thanks again for reading!
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