For the first time, all but the smallest employers will be required to provide health insurance coverage to the workers, thanks to a bill passed in the House of Representatives (“House Democrats promise health-care victory as Republicans remain opposed to bill,” Washington Post, Nov. 8, 2009).
The requirement is new, but the bill perpetuates the status quo because it continues the preferential treatment for employer-sponsored health coverage.
The amount of employer health care is not income. If an employer pays for $5,000 of my health care and I treat that as income, I will only pay as much as 35 percent of that health care bill (assuming 35 percent is still the highest tax bracket). I continue to have a subsidy and the health care financing system continues to confer advantages for those who have employer-sponsored health care.
In their reform efforts, Congress is not proposing changes that make us consumers who have a chance to buy health care as individuals. Instead, the same segments that make up the health care industry will continue to negotiate with each other.
Should You Know the Price of Your Health Care?
One result of these peculiar negotiations is to eliminate price as part of health care transactions. Normally a price is something we know, or find out, before we buy.
In health care, there are only billed charges for lists of services, drugs and supplies; clients and patients don’t know the charges before services are billed to a health plan.
If employer health coverage has any patient charges, they are co-pays or deductibles, not prices. Consumers have little incentive to learn a price they will never pay, but few health care venders will quote prices anyway. Instead, it is common practice to wait to send a post service explanation of benefits that lists charges.
I have seen dozens of these forms for family members and others over a long period of time. For a hospital stay of a day or two and a routine surgical procedure, there can be pages of listings and charges, and the grand total will be something fantastic, like $67,362.34.
The True Price of Health Care Costs
The explanation is an amount no one pays. Our employer’s insurance carrier has negotiated something lower. The explanation appears designed to frighten us and make us think we are getting great savings we can’t get any other way.
Since gift coverage is so much better than any other choice we have, our lack of choices gives the health care industry the power to send us cost saving illusions.
The benefits reported to patients are not only different from the charges actually paid, but benefits and charges to one patient will be irrelevant for benefits and charges to other patients under other health plans, or for those uncovered by any health plan.
In effect, the health care industry has so much control they avoid using prices. Without prices, costs become charges and charges become costs and there is little or no incentive for any segment of the health care industry to control their cost.
Health care will need to have prices as a precursor to cost control. A system without prices where someone else buys us something and gives it to us as a gift has no resemblance to free enterprise or private markets, but I am hardly the first or only person to notice that.
Nor am I the first person to understand that incentives to control costs in free enterprise result from the decentralized decisions of many consumers who have choices.
How to Achieve Real Health Care Reform
Successful reforms in a free enterprise system will maximize our choices to be consumers who buy health care like we buy cars, clothes and cornflakes. That means ending the rules and arrangements that coerce everyone age 22 to 65 to get their health coverage from an employer.
Congress could convert our health care gift to a portable tax credit on our personal income taxes. That would be a start, but there are other debatable options, except that Congress ignores them all to wrangle over more rules and rigmarole to add to the old ones that have failed to control costs for 50 years.
According to the Washington Post article mentioned above, “? Republicans warned that the legislation would rob Americans of their right to make choices about their health care.” Dribble like that makes me think the health care debate is like the fable of the king without his clothes.
It looks like Congress will extend health coverage to almost all of us, but they are doing nothing to control costs. When they talk they look and sound sincere. They want to believe what they say, but they are really the king without his clothes.
About the author: Fred Siegmund covers America's jobs as part of work doing labor market analysis and projections for a client base of recruiters, trainers and counselors. Visit him at www.americanjobmarket.blogspot.com
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