Healthcare Reform 2, Electric Boogaloo

17 Jan

Last September, President Obama said the following during his address on health care to the Joint Session of Congress:

Then there’s the problem of rising cost. We spend one and a half times more per person on health care than any other country, but we aren’t any healthier for it. This is one of the reasons that insurance premiums have gone up three times faster than wages. It’s why so many employers — especially small businesses — are forcing their employees to pay more for insurance, or are dropping their coverage entirely. It’s why so many aspiring entrepreneurs cannot afford to open a business in the first place, and why American businesses that compete internationally — like our automakers — are at a huge disadvantage. And it’s why those of us with health insurance are also paying a hidden and growing tax for those without it — about $1,000 per year that pays for somebody else’s emergency room and charitable care.

When he uttered the underlined portion of the address, I hoped he would expand on it and make it a central pillar of the healthcare reform cause.  After all, making businesses more competitive while expanding coverage appeals to most interest groups.  However, this sentence was all we got in the speech and the debate became a race to the bottom with words like socialism, fascism and corporatism thrown about by the chattering class and the masses.

I’ve always thought that a very simple way to explain the need for comprehensive healthcare reform would be to explain that employers should not be responsible for bearing the burden of employee healthcare.  It’s an anachronism and we’re about to codify it in law for a very long time.

Once upon a time in America, employers needed to offer health insurance as an incentive for an employee to join his/her firm.  Over the years, unions demanded health care from their employers and non-union shops offered benefits to their employees as well.  Since health insurance wasn’t a large cost, it made sense for employers to keep their employees healthy (read: well enough to work) and offer an incentive to keep employee turnover to a minimum.  That’s the shortest version of why your employer provides healthcare that I can give without delving into a 10,000 word post on the matter.  Let’s just assume we’re all educated enough to see the big picture, agree on this general framework and move on.

In 2010, employer-provided healthcare has essentially been codified into our socioeconomic system by law and regulation.  As healthcare costs have risen dramatically over the past two decades, employers have shouldered a large burden of the cost.  Providing healthcare to employees can be viewed as a disincentive for companies to hire, grow and invest in their workforce.  It limits profit margins for US based companies which compete in the global marketplace as most other indutrialized nations offer some form of socialized care.  There is a reason that GM has expanded its factory footprint in Canada (with full union membership) while closing factories in the US.

Employer-provided healthcare also limits flexibility for employees.  Leaving one job for another or making professional career changes may result in the loss of health insurance.  It also limits available healthcare options for employees who may want more or less coverage than their employer offers.  Worst of all, it hides the true cost of healthcare from the consumer and provides poor value and diminishing returns to those in the system.

So, limited choice, rising costs, overconsumption of services and poor value are the legacies of this employer-centric model of health insurance.  What Obama and the Democrats have done with the current healthcare bill is essentially implement an individual mandate for insurance, thereby increasing the risk pool while also implementing some moderate reforms on the manner in which insurance companies must deliver the insurance (prohibiting recision, killing lifetime maximums, increasing preventive care).  They have eliminated adverse selection in the system, but have they done nothing to fundamentally alter the flawed employer-centered delivery mechanism or the cost centers for businesses.  Until the delivery system is changed, we are not only doing little to reduce costs, we are doing nothing to free employers from the burden of providing healthcare.

There are two ways to fix that problem, one is to standardize a universal, single-payer system and the other is to establish a market wherein individuals are mandated to buy coverage but must choose from an array of regulated offerings. I’m a standardized, universal man myself, but I’m also interested in the Swiss or German or Swedish models.

We have chosen to do neither in this “reform” process and the likelihood of a bill passing which appeals to anyone but the health insurance lobby grows smaller every day.  The irony of the process is that the right wing teabag movement decries “government takeover” and ‘islamofascosocialism” at every opportunity while overlooking the fact that the PhRMA, AHIP and the rest of the insurance lobby is quite happy with the outcome.  The left ignores much of the benefits contained in the new industry regulations which expand/protect access because the bill is too much of an industry giveaway.  No one is happy.  It’s not compromise if both parties walk away from the negotiating table feeling as if they were f’d in the a.

I can’t but help think that if the President had treated Americans like adults from the start and set the tone for the debate in a way that focused on the benefits of removing the responsibility for health insurance from our employers, that we would be in a much different position.

It seems the ever-so-progressive Council on Foreign Relations has come to a similar conclusion and released a background paper on this issue last week.

The United States spent 16 percent of its GDP in 2008 on healthcare, higher than any other developed nation. The nonpartisan Congressional Budget Office (CBO) estimates that number will rise to 25 percent by 2025 without changes to federal law (PDF). Employer-funded coverage is the structural mainstay of the U.S. health insurance system. According to the U.S. Bureau of Labor Statistics, about 71 percent of private employees in the United States had access to employer-sponsored health plans in 2006. A November 2008 Kaiser Foundation report says access to employer-sponsored health insurance has been on the decline (PDF) among low-income workers, and health premiums for workers have risen 114 percent in the last decade (PDF). Small businesses are less likely than large employers to be able to provide health insurance as a benefit. At 12 percent, healthcare is the most expensive benefit paid by U.S. employers, according to the U.S. Chamber of Commerce.

Some economists say these ballooning dollar figures place a heavy burden on companies doing business in the United States and can put them at a substantial competitive disadvantage in the international marketplace. For large multinational corporations, footing healthcare costs presents an enormous expense. General Motors, for instance, covers more than 1.1 million employees and former employees, and the company says it spends roughly $5 billion on healthcare expenses annually. GM says healthcare costs add between $1,500 and $2,000 to the sticker price of every automobile it makes. Health benefits for unionized auto workers became a central issue derailing the 2008 congressional push to provide a financial bailout to GM and its ailing Detroit rival, Chrysler.

Is it too late to change the framework for this debate in order to center the discussion on the burdens we place on business?  If healthcare reform in its current incarnation were to fail, re-igniting the debate around this central pillar might be a way to begin the conversation anew and focus the debate on policy.  Think of what GM could do if they were relieved of that $5BN annual cost?  Would they be able to expand their workforce, raise compensation levels, invest in innovation, re-tool factories, expand to new markets?  Absolutely.

4 Responses to “Healthcare Reform 2, Electric Boogaloo”

  1. MikeInWNY January 17, 2010 at 11:10 am #

    De-coupling employment and insurance is necessary. Combine that with deregulation, the elimination of the third-party payer model, and open competition and watch the costs come down while the quality continues to rise. Third-party payers increase the demand because there is no cost accountability between providers and patients. That leads to wasteful uses of a limited resource. Government plans will just increase that effect and further degrade health care. Mandatory insurance is just plain wrong. Many people justifiably have more important uses for their money. A deregulated system with competition would allow people to purchase coverage that meets their needs and lead to many more people being insured.

  2. shim January 17, 2010 at 8:42 pm #

    Chris..while you make a passionate argument for your cause and you keep searching for specific quotes from speeches in search of a “defining moment”, the fact that President Obama’s and the Democrats Healthcare reform plan is going down in flames is very simple. Right from the very beginning the overwhelming majority of Americans were against it! After getting a $787 billion spending plan jammed down their throats early on many Americans actually started to LISTEN to what Obama was saying and said “enough is enough”. The results have been obvious…declining approval ratings, Democratic losses in key races around the country and liberal icons like Harry Reid and Chris Dodd in serious trouble or retiring. Their healthcare reform plans will receive another severe blow in a few days when the previously unthinkable happens…Republican Scott Brown wins Ted Kennedy’s seat in Massachusetts…How’s all that “hope and change” working out for everyone now?

  3. dcoffee January 18, 2010 at 1:11 pm #

    Chris, I could talk about this all day. I especially agree that the employer based system needs to go. And the Insurance middlemen, what value do they add to our system? They just skim off a third of our healthcare dollars to pay for their own profits, and their ridiculously high administration costs which they use to pay people to sit on the telephone and try to find ways to deny medical care. This is a huge issue for me since I run my own company and have been without health insurance for much of my adult life.

    I wish Obama would have came out strong in the beginning, he could have set up a bold, practical and moral frame for this debate, and perhaps we could have got more reform. But the Economy demanded his focus immediately after he took office, and he faced a Republican party that hates government, doesn’t care about governing, and is ONLY focused on their own power. I’m furious with the Republicans in congress who would rather spread lies and play political games than do their job.

    But as disappointed as I am with this whole process and the fact that we couldn’t achieve more fundamental reform, I’m not ready to ditch this bill. I think this bill will improve our system in a meaningful way, the new exchanges, eliminating preexisting conditions, and all the other changes are necessary. And honestly, after watching this debate and learning way too much about Senators around the country and their personalities, I think this is the best bill we could pass. If it doesn’t go far enough we’ll find out in a few years, and we’ll have to come back and try again. But these reforms are long overdue, and I support this bill.

  4. FearTheVoices January 18, 2010 at 7:12 pm #

    Ending employer provided health insurance is fine, but we also need to put an end to the increasing number of frivolous lawsuits. One state that already had done this is seeing an increase in the number of doctors in their state, and significantly reduced insurance premiums as a result.
    Putting the purchasing power back in the hands of the people and removing the restrictions on who can provide services in any given state, coupled with serious tort reform, will go the furthest in lowering the cost of health insurance.
    Bringing more government mismanagement into the equation will create nothing more than increasing cost, regulation, and waste. Anything worth doing, is worth doing right; putting the federal government into the equation is a recipe for for the opposite.

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