Analysts: Health Care Costs to Keep Rising

Analysts: Democrats don't like Bush

where would we be without "analysts" and "experts"

 

Good article on the weirdness of having employers buy our health care:
http://www.sacbee.com/content/politics/columns/weintraub/story/14214335p-15040397c.html

The beginning:
"Imagine for a moment that your employer was required by law to buy a plan to manage your nutrition needs - rather than simply paying you a wage, out of which you buy the food you want to eat.

Or suppose the government required your employer to pay for a housing plan, rather than paying you and letting you decide where and how to live.

Finally, consider what it would be like if the company you work for was mandated to design and finance a transportation plan for you, with a list of options for how you could get to work and back home each day."

 

Read the article, it's in there. I think people should buy their own insurance. With personal choice and discipline I think it will help drive prices down.

For the poor the government should provide subsidies, just like with food and housing.

 

High deductable policies aren't as cheap as you might think. I'm self employed and have one of those high deductable family helath plans. Even with the $5000 deductible for each member of the family it's over $350 a month without any drug benefits. It's a tough check to write every month.

 

Yep:

Daniel Weintraub: Breaking free from employer-managed health care
By Daniel Weintraub -- Bee Columnist

Imagine for a moment that your employer was required by law to buy a plan to manage your nutrition needs - rather than simply paying you a wage, out of which you buy the food you want to eat.
Or suppose the government required your employer to pay for a housing plan, rather than paying you and letting you decide where and how to live.

Finally, consider what it would be like if the company you work for was mandated to design and finance a transportation plan for you, with a list of options for how you could get to work and back home each day.

Each of these scenarios brings a few things to mind.

First, you'd probably get paid a lot less than you do today, because your employer would be diverting much of your current wages to pay for these plans instead.

Second, you would have less choice than you do now, because your employer would have to standardize these food, housing and transportation plans to fit the needs of many workers.

Third, the service you would get from your local grocery store, landlord or automobile dealer would probably be worse, since your relationship with each of them would now be muddled through the entry of a third party, your employer. Your local grocer would have a greater incentive to try to satisfy his real customer - your boss, or worse, the food management company your boss chose - than to serve your needs.

Fourth, the costs of each of these goods would tend to rise over time - especially if you and your fellow employees were able to eat as much as you liked, or live in any size house or drive as far as you wanted within the choices provided. While large employers might be able to use their superior bargaining power to drive down costs a bit, their power in the marketplace would be outweighed by the increased cost of providing food, housing and transportation in quantities unlimited by the discipline that comes when a consumer pays for something out-of-pocket.

Finally, as the costs did start to rise, you would feel less secure about where your next meal was coming from, or whether you'd have a place to live tomorrow or a car to drive to work. With the management of these essential items in the hands of a third party, you'd feel vulnerable, worried about whether they might cut back on your choices or on the quality of the offerings in order to save money.

Sound like a good deal? Well, that's exactly the kind of health care system we have today. While individuals once managed their health insurance themselves, paying for it out of their wages, employers began doing that for them during World War II as a backdoor way to increase compensation in an era of government-imposed wage and price controls. The custom stuck, the government rewarded it with tax breaks and today more than 60 percent of us have our health care managed through work.

Not coincidentally, health care is the one essential in our lives that is most often described as being "in crisis." While some people have access to better food than others, nobody in America goes without food today, thanks largely to food stamps, which give people a chance to obtain essential nutrition without involving employers or the government (too much) in managing their choices.

Some of us certainly live in better housing than others. But that's no business of our employers. To the extent that the government has decided that some people need help paying for their housing, we have provided vouchers for rent, with minimal regulation on how those stipends can be spent. The housing the government provides directly, in contrast, is mostly in lousy neighborhoods, crime-ridden and poorly maintained.

Finally, while some of us drive nicer cars than others, our employers are not responsible for this, and neither does the government inject itself into the equation. The state does provide public transit and subsidizes it from tax revenue in part to enable the poor to have access to transportation.

Now comes a national movement to require employers, especially large ones, to spend a certain amount of money on health insurance for their workers or pay a tax to the state to cover their care. In California, a state senator says she plans to introduce a version of this bill.

It's odd that just when the informal system of having employers managing their workers' health care is in danger of collapsing from the weight of the problems it created, some politicians want to lock that system, with all its flaws, into place with a new law.

Shouldn't we instead be looking for alternatives? Maybe, instead of trapping us into having our health care managed by others, we should emulate the ways we have more successfully provided food, shelter and transportation to almost everyone who needs it.

Individual choice. Individual responsibility. Voluntary transactions. And targeted help for the few who cannot afford to buy what they need on the wages they earn, with the burden of financing that assistance falling on all of society, not just on a few.

 

Comparing it back to the prewar era where people financed their own costs is quaint, but using that analogy for today's healthcare costs is unworkable and irrelevant; such costs, for varying reasons, are many, many times higher in real life. Also, to talk about personal choice - in week 1 of any intro level economics class, you learn about elasticity - which is why personal choice is of limited value when it comes to health care consumption.

Sounds like another t-shirt libertarian who was once told that all markets are perfectly efficient always and naively believes it.

 

Sam, your University of Chicago colleagues would not be proud of you.

 

Texxx, the libpigertarians make their own slop pit and must lie in it.

 

this issue was the focus of yesterday's lead editorial in the WSJ:

http://online.wsj.com/article/SB114048829951778683.html

--
Big Health-Care Ideas
February 21, 2006; Page A18

Washington denizens who say the Bush Administration is out of domestic ideas haven't been paying attention. The more we look at the fine print in the health-care reforms President Bush is now stumping for, the more we see the potential for the most sweeping and beneficial changes in half a century.

One way to think about the Bush reforms is as HillaryCare in reverse. The former first lady sought to mandate employer-based coverage and then hold down costs by brute government force ("managed care"). Mr. Bush is instead attempting to revitalize the private market for individual health insurance, so employees are ultimately less dependent on their bosses' coverage and can ultimately buy the kind of insurance that makes better sense for them. Along the way, Americans would also become wiser consumers of health-care services.

The reason most Americans get their health insurance from their employers is an artifact of history and the tax code. Companies subject to wage and price controls during World War II used health insurance to attract workers, and Congress later made employer-provided insurance tax deductible. Employers also have another huge advantage if they are large enough to create their own risk pool (or "self-insure"), since they are then allowed to evade expensive state insurance regulations and abide instead by a more rational federal scheme known by the acronym Erisa.

These tax and regulatory advantages have worked well for those lucky enough to be inside the employer system, but they have also made it cheaper for employers to offer gold-plated health plans. That means consumers, in turn, have had little incentive to pay attention to prices, contributing to double-digit annual increases in health-care inflation. That burden is now starting to affect the bottom line of employers, who are passing along more of those costs to workers in the form of higher premiums, or less overtly in smaller wage increases.

For those who don't work for large employers, meanwhile, the current system is simply unfair. Individuals and small businesses wanting to buy insurance must comply with expensive state regulations. And individuals must do it with after-tax dollars. This is what Mr. Bush, to his credit, wants to correct.
* * *

The centerpiece of his strategy is the Health Savings Account, which combines an insurance policy with a deductible of $1,050 or more with a tax-free savings account to help people pay pre-deductible expenses. Critics say the relatively high deductible makes HSAs work only for the "healthy and wealthy."

But in fact HSAs are what health insurance would have looked like all along if the employer-insurance tax exemption never existed. That is, insurance for catastrophic illness to prevent destitution but not for routine care. (Think of it this way: What's the deductible on your car insurance?) And with more than three million HSA policies already in existence, there is plenty of data showing high customer satisfaction among policy holders of all ages and incomes.

Mr. Bush is proposing to supercharge HSAs in several important ways. He'd allow HSA premiums to be paid from the tax-free savings account, which have the potential to rise in value every year. And he'd give individual purchasers a credit for the 15% Social Security and Medicare payroll taxes that they and their employers have already paid on those dollars. That creative idea would fully equalize the tax treatment for all insurance purchases.

The Bush proposals would also make HSA policies fully portable and easier to buy. For individuals, this means breaking down the current barrier to purchasing insurance across state lines, an archaic system that makes no sense in an age where interstate banking is commonplace. And if the purchaser is an employer, Mr. Bush wants to change the current self-insurance rules to allow companies to buy portable policies that could follow employees much like their 401(k) retirement accounts.

The economic benefits could be profound. No longer would individuals have "job lock," meaning that they fear leaving a job they otherwise dislike because they're afraid to lose their insurance. Especially for someone with an illness in the family, this would be liberating and provide more health-care security. Genuine insurance portability would also help the overall economy, by freeing employees to move to jobs where they would both be happier and better utilized. Those who dismiss HSAs as another "tax shelter for the rich" are ignoring the benefits to moderately paid workers.

On HSAs, finally, Mr. Bush also wants to increase the allowable contribution limits. Thus contributions up to the out-of-pocket maximum (including all co-pays), not just the deductible, would be allowed for most people. This could be as much as $10,500 a year for families, half that for individuals. The White House proposals would also allow employers to make larger deposits to the HSA accounts of individuals with chronic conditions such as diabetes, in order to make the accounts attractive for them as well.
* * *

Another proposal goes by the name of Association Health Plans, which were originally proposed as a way of allowing small businesses to band together for greater purchasing power when they buy insurance. It's a good idea, and the President wants to make it better by allowing not just businesses but voluntary associations like churches to participate too. He's also still pushing to rein in outrageous malpractice insurance costs. And he wants to facilitate the consumer-driven system he's touting by encouraging doctors and insurers to be more transparent about prices.

We might quibble with some other details, especially the "refundable" tax credit. But all things considered, Mr. Bush has assembled an ambitious and mutually reinforcing set of health reforms. The key principles are equal tax treatment and portability. These ideas give Republicans in Congress a chance to pass reforms that address genuine problems and are consistent with their free-market principles. Let's hope they understand their historic opportunity.

 

Huh, please explain in more detail why health care consumption is different than other forms of consumption. Do that rather than just throwing out words like "quaint" and "elasticity." Elasticity- The proportional change in one variable is equal to the proportional change in another variable. Are you saying health care demand is inelastic? Do you have support for that?

And yes, health care is very expensive. Either way, we are paying for it. You don't think the employers are bearing the full cost do you? The result is lower salaries.

Separetely, I'm trying to figure out- what is the logic of having all people under a group employer plan? I can't see why this would make things cheaper. It seems like the article is right on in saying that limited choices and having the 3rd party in the middle makes things worse, at least from a logical standpoint.

 

This is stultifyingly simple. Anyway - when was the last time you wanted a heart transplant? How much would you be willing to pay for one? Have you reduced your consumption of heart transplants due to rising heart costs? Would you go for a cheaper substitute than a heart transplant peformed in an expensive hospital by an expensive doctor? Such as a 9 volt battery hooked up to a biciclye pump installed by a mechanic from your local Break Check?

Jeez loueez - Yes I'm saying many health care costs are ineleastic. In fact that is the example that they give on day 1 of many intro micro classes. You don't base your consumption decision on price - price is irrelevant to demand in a lot of cases. Basic, basic stuff.

 

Edit:

Trader_Sam, I think I get what you mean. I have read studies where there is some elasticity in health insurance. Not EVERY choice is about getting a heart transplant. There are plenty of choices we make every day, as far as eating healthy, exercising, and getting preventative care.

And even if it is inelastic, how does that justify employer- based plans? Having individual incentives would be only ONE of the benefits of switching the system to having people buy insurance individually. You also get better tailored plans and more control for the consumer, and then as a result you can get better health care. And the article mentioned a bit more.

 

Same place we are now - with leaders who make stupid decisions because they don't really consider long-term consequences. Not having analysts is no different than ignoring them except that if we ignore them, we're being willlfully stupid instead of having it forced upon us.

 

I'm not sure how this is relevant to what is going on here. Either way, people will be insured. I just don't have to want to go through my employer. I'd rather shop for the best plan for me.