Does Employment-Based Insurance Make US Medical Care Unfair and Inefficient?

https://jamanetwork.com/journals/jama/fullarticle/2733520

by adolph • 7 years ago

203 220 7 years ago

zavi• 7 years ago

Yes it does.

danans2• 7 years ago

Aside from the health care system, it arguably makes the general job market less efficient, by tying people more strongly to jobs that provide good health insurance, especially for people with chronic health conditions, or people with families.

It makes those people less likely to switch jobs, or start new self-employed projects of their own.

inthewoods• 7 years ago

This. I'm amazed that no one the liberal side of single payer has made this argument: single payer would help create more small businesses.

bwanab2• 7 years ago

This argument has been made before e.g.: http://harvardpolitics.com/united-states/the-pro-business-ar...

whamlastxmas• 7 years ago

It's too easy to find facts and figures to support either side of the argument and I think the left finds a better argument in it simply being a human right and the moral thing to do, neither of which are easily refuted.

rossdavidh3• 7 years ago

1) it has been made, but.. 2) it doesn't naturally appeal to most people on the left, and everyone else knows it, so it comes off as unmotivating to the left and insincere to everyone else.

None of which means it isn't true (it is), or that it isn't important (it is), but that's why it doesn't get used as an argument very much.

scarejunba• 7 years ago

Democrat voters don't care about that.

Edit: it's true. If you are a democrat candidate and this is the angle you push, it's not going to work. But you already know that.

arcticbull8• 7 years ago

I've been working in my little corner of the world to re-frame the conversation. Socializing medicine isn't about restricting your freedom to choose your physician, it's the freedom from. Freedom from fear of losing your job, freedom from fear of having to change your doctor if you do, freedom to pick any doctor (they're all in-network), freedom from fear of starting a new business, freedom from fear of death and bankruptcy if anything goes wrong -- and it does, to all of us, eventually. Socialized medicine is freedom, and private medicine just isn't.

dorchadas• 7 years ago

I've personally been trying to push this for years. About how much freedom would be had if we weren't basically in slavery to our job-granted insurance. I've found the right-wing people in my family don't like to hear it...

downrightmike• 7 years ago

Which is what we need, because medium to large businesses are cutting head count and offshoring.

akhilcacharya• 7 years ago

They do, even Bernie says it.

http://fortune.com/2017/08/21/bernie-sanders-medicare-for-al...

luckydata• 7 years ago

The argument has been made countless times, the press just doesn't seem to want to talk about it.

SubiculumCode• 7 years ago

They are so focused on helping those without they forget the powerful argument that small business has to do part time shennanigans to avoid paying healthcare costs

beat7• 7 years ago

As a liberal, this sort of thing drives me nuts. It's like my side has completely ceded the ground of both economic liberty and economic opportunity to conservatives, because neoliberalism has made "capitalism" such a dirty word on the left. As liberals, we should own the conversation about small business. Sigh.

Being trapped as the vassal of a giant corporation just to not-die is in direct opposition to the very concept of liberty. Being able to quit your job and create your own business is an essential freedom. But liberal politicians are unwilling to market that way, and so the neoliberal political class gets to argue for the preservation of a system that benefits the wealthy and the corporate at the expense of the liberty (and wallets!) of ordinary people as the "free market". Feh.

gamblor9562• 7 years ago

I'm amazed that no one the liberal side of single payer has made this argument: single payer would help create more small businesses.

This argument has in fact been made by a great many liberals and moderates, many times, going back to Clinton's (failed) attempt to pass a single-payer health system.

jwbwater9• 7 years ago

How about someone on the conservative, rah rah free-markets will solve all our problems, side? Oh yeah, they're getting campaign contributions from big business.

bwanab2• 7 years ago

Not to mention that it makes it prohibitive to start a new business for anybody with dependents.

tdb7893• 7 years ago

Anecdotally I know people who were running a small business and moved to Canada partially because how much of their revenue was going towards insurance. I think they pay more in taxes now but it still is a lot less than they were paying in insurance.

Scoundreller• 7 years ago

It’s not as good as it used to be, but Canada lets business owners do a lot of income splitting with family members across different share classes.

Particularly if you have children >18.

And if they’re under 18, just make them directors and pay them $100 for attending each monthly board meeting.

theturtletalks• 7 years ago

And big corporations are getting a discount on health insurance due to the volume of employees. Tell me why I can't find 100 more relatively healthy people and have our own "insurance" where we pitch into a account and do payouts. Oh yeah, the high barrier of entry these insuracne companies created and we would have to pay the Obamacare penalty for "not having insurance."

taivare• 7 years ago

Canada has been taking Automotive sector jobs from U.S. workers. Detroit has seen a real cost savings by not covering health care for their Canadian workers.

sgt1012• 7 years ago

US employers also seem to have a strong preference for young single employees - my theory is that this is because older employees with families are much more expensive to employ due to insurance.

brycesbeard• 7 years ago

Plus you get people are less interested in “work life balance”, and generally don’t have as high of salary expectations.

I’ve been involved in hiring decisions where HR brought up the healthcare costs to complain, then stated clearly we can’t use that as a criteria for hiring.

I have doubts that human brains can separate out that kind of statement from our actions.

speeder3905• 7 years ago

Yes under 30 white with great social skills also known as good fit. Come to the Boston area, everyone looks the same and self segregates based on race outside of the office

gowld5• 7 years ago

I think working longer hours with less distractions for less pay is more of a reason.

oldandboring• 7 years ago

This is true only if the company's health insurance is group-rated rather than community-rated. Large employers who self-insure (the employer is actually paying the claims; the insurance company is just providing administration and financing) have premiums set based on the cost of caring for their group of employees and will see their costs go up (and their employees' premiums likely go up too) if their employees are collectively sicker.

Under the ACA, small businesses all end up lumped together in the same state-wide risk pool, so if my small business hires old or sick people it's very unlikely to affect our premiums. In most places this risk pool is larger and somewhat less morbid than the individual market.

dahfizz• 7 years ago

I'm not sure how health insurance is different than any other benefit a job offers when analyzing market efficiency.

It's not hard to put a dollar amount on the value of employer provided health insurance, and then use that when calculating your total compensation at one job versus another. Functionally I don't see how it's any different than your employer paying you the amount you would need to buy insurance.

Could you expand on what makes health insurance special in this regard?

guelo• 7 years ago

If you get a chronic disease it is not possible to buy health insurance so you have to stay with your current health insurance.

danans2• 7 years ago

Under the current system, you can't get the same insurance costs vs benefits as an individual or small business, even through the Obamacare exchanges, that you can get from a large, stable employer that has leverage to negotiate with insurance companies and health providers. In turn, that is an incredible amount of leverage that big employers have over certain employees who need to be part of a shared insurance negotiating pool. This is obviously not as relevant when comparing jobs at Google, Apple, or Microsoft, who all have equivalent health benefits, but it definitely matters when considering jobs at startups, nonprofits, or for being self-employed.

everdev• 7 years ago

it arguably makes the general job market less efficient

I didn't understand this until I started my own business. I was desperately trying to find a job during the '08 crash to get health insurance for my family but was unable to find one.

As a last resort I started my own consultancy which turned out to be a fantastic opportunity.

Self paying for health care was a massive barrier to starting my own business.

Once I hired people health care benefits were frequently top of their list in interview questions.

jwbwater9• 7 years ago

Not arguably, it definitely makes the "free market" for labor less free when workers have to think about possible gaps in coverage before changing jobs. And prior to Obamacare the first year(s) of self-employment were a huge risk.

sailfast4• 7 years ago

Compared to what? Nationalized insurance? Nationalized insurance plus inclusion of private clinics?

I would argue the lack of transparency in the marketplace and the inability for anyone to make an informed choice of hospitals or what it will cost them (the linked article seems to indicate the consumer has a choice to go to a "nice" hospital or a "not so nice" hospital, but most times we don't have the choice when we need care - it's close to our home. The times we do have the choice (sometimes for birth, cancer treatment, etc) is where you see hospitals investing heavily to get high margin services from consumers.

Does Employer-provided care make medical care unfair? One could argue that employer-provided care with the tax incentive might lead to better resources for an employed person electing that care, but any time money is involved you will likely get better care. EDIT: More succinctly - There will always be some inequality / unfairness in care because there will always be inequality of wealth. I'm not sure explicitly here that employer-provided is the problem or that any subsidized care will create this kind of inequality.

I'm not sure you can argue effectively that granting the same medical care to all as a matter of law will fly because people will always find a way to get better care if they can afford it. Does employer-provided do this at a larger scale? Maybe?

The best way to ensure fairness and efficiency is to get the data out there and available, and make healthcare more like a market instead of a black box.

jon-wood• 7 years ago

I don't think you can argue effectively that granting the same medical care to all as a matter of law will fly. People will always find a way to get better care if they can afford it.

I’m not sure anyone is arguing that. In almost any country with single payer health care you’ll also find a thriving market in private health care, but they’re typically competing on things like providing private rooms and maybe a shorter waiting list rather than whether you get to live or die.

s_y_n_t_a_x4• 7 years ago

It's not live or die in America, in the worst possible scenario you may go into a deep debt, but they won't kick you to the curb if you're dying.

sailfast4• 7 years ago

Agreed. I guess my point, more succinctly is that this will always be the case, regardless of from whom folks obtain their insurance. A better question might be "does employment-based insurance make medical care MORE or VERY inefficient / unfair".

sgt1012• 7 years ago

The best way to ensure fairness and efficiency is to get the data out there and available, and make healthcare more like a market instead of a black box.

Markets without perfect information are neither efficient or fair; I think it's reasonable to say that no healthcare market can have anything approximately resembling perfect information.

Also the idea of efficiency in healthcare is problematic. Does efficient healthcare means refusing care to old people and to people who need heroic interventions and instead focusing care only on interventions that provide a high return of healthy productive years per $?

I would like a clear articulation of efficient and fair in this context.

sailfast4• 7 years ago

If I could choose which hospital to go to based on available data, pricing, luxury levels, outcomes, etc so that I understood the costs I would incur (at a high level) to get that care, and then get quotes from different places, I think that would go a long way to ensuring at a minimum that folks understood what they were getting, rather than being forced toward outcomes due to lack of information.

As for "efficient" and "fair" I would also be interested in a better definition there, one the article didn't quite provide to my satisfaction based on its question.

jwbwater9• 7 years ago

No market has perfect information, but many still work pretty well. Just knowing what a healthcare service would cost before you get it would be a huge improvement in the US. And how about requiring providers to charge everyone the same price for the same service, instead of radically higher prices for the uninsured.

cyphar5• 7 years ago

The fact that the rest of the developed world has universal healthcare (in one form or another) and most have better health outcomes and overall public health than the US tells me that your theory is flawed.

It should be noted that the Bernie Sanders proposal actually does allow for supplemental private insurance (for elective surgeries, or shorter waiting times). Most countries with universal healthcare have a private insurance industry, it's just that you get a basic level of care from government-provided free insurance.

sailfast4• 7 years ago

My theory is that no matter what there will be things that are unfair or inequal in healthcare any time folks have more resources than others to apply to treatment. I agree with you that based on overall spending and outcomes something needs to change a great deal. I admit that even after reading the original article I don't really understand why employer-provided care is creating these asymmetries except to say that typically employer provided care is more reasonably priced to the employee than comparable coverages to a private citizen, because of course it is. It's an incentive.

PaulHoule3• 7 years ago

Look at Foucault's book "Birth of the Clinic" to see why the wealthy need less wealthy people to get health care to drive the volume that makes possible the services that the wealthy can afford.

For instance, if you were a billionaire maybe $1,000,000 for a coronary artery bypass operation would seem like a good deal.

Doing those operations in volume lowers the cost but it also makes it possible for doctors to get experience that makes the operations safe and effective. Studies have shown that the main factor for survival in CABG surgery is how many operations are done a year by the doctor and the clinic.

Similarly, you have to treat thousands of people to prove a drug is safe and effective. You just couldn't have advanced treatments for the ultra-rich without these treatments being developed and tested on a large volume of less wealthy people.

qntty4• 7 years ago

This is a really interesting perspective. Do you know if there's research on this?

zwkrt• 7 years ago

You mean like Foucault's book on the subject?

galaxyLogic6• 7 years ago

This is a good point. Healthcare needs practice and training it is a "project" common to whole of humanity

brandall10• 7 years ago

This has been put into practice for some time in India.

https://www.businessinsider.com/inside-indias-no-frills-hosp...

mc32• 7 years ago

There is a difference between employment-based insurance and employer-based insurance. One is guaranteed by being employed the other is tied to a given company.

pboutros• 7 years ago

Ah, the rare exception to Betteridge's Law (https://en.wikipedia.org/wiki/Betteridge%27s_law_of_headline...)!

olliej2• 7 years ago

Yes.

The bigger issue though is the impact on free market prices as the free market requires competition, but employer group plans force everyone into whoever their employer has chosen - and the employer cost selection is different from that of the employee.

It also drastically impacts the ability for people to create new businesses as getting the required standalone health insurance is exceedingly expensive - again because individual insurance purchasers are not the primary customers of health insurance companies.

At least Obamacare/ACA meant that insurance companies couldn't deny on the basis of pre-existing conditions.

I used to have a coworker that claimed all that was needed was to raise the maximum income for medicare and that would magically solved healthcare. Ignoring entirely that private health insurance companies could choose to deny coverage. My (now) wife literally was unable to get insurance - she was deny by literally every insurance company in CA because she had donated a kidney, and it turns out having a single kidney is a preexisting condition. This was despite her donating a kidney saving an insurance company money.

gowld5• 7 years ago

This was despite her donating a kidney saving an insurance company money.

Did she donate the kidney to someone covered by the same company?

olliej2• 7 years ago

No, but that company also declined to cover her.

maxxxxx3• 7 years ago

Yes. It disrupts market forces that may exist. As employee you have pretty much no choice and the incentives for employees and employees are totally different.

s_y_n_t_a_x4• 7 years ago

You do have a choice of the plan as an employee usually.

And the employer made the choice on the best provider they could get at the best wholesale price.

The employer is incentivized to get the best provider for the best price to attract employees.

Employers shop for insurance, employees shop for jobs with the perks they want (pay, insurance coverage, etc).

EDIT: you're usually given a packet before accepting a job that goes over their healthcare plans. At least in the two instances I have been in the job market, I was.

And it's good for the employer to pick a plan that has the best coverage for the best value because they want to attract employees to them over their competitor.

maxxxxx3• 7 years ago

“employer made the choice on the best provider they could get at the best wholesale price.”

Best for the employer, not for the employee. In addition when you start a job you can’t really evaluate health insurance choices.

paulddraper• 7 years ago

Was disappointed.

From the title was hoping to see employer-based insurance compared against better market-driven individual-based insurance.

Instead it's yet another privatized vs socialized insurance analysis. (Not that it's not interesting...was hoping for something new.)

SrslyJosh• 7 years ago

Yes. Next question.

seanmcdirmid3• 7 years ago

Yes.

It is crazy that people who get their insurance from an employer get a tax break (indirectly), while those that purchase it on the individual market do not. Also, it messes up the risk pool: more affluent people who get their insurance from work are bound to be more healthier than the poor schlubs who are not affluent enough to get insurance from their job. As an insurance company, I could get away with charging group plans much less than individual plans.

Switzerland, which is basically where the heritage foundation copied what would become RomneyCare/ObamaCare from, does not allow for group plans. You simply don't get your insurance from work, everyone is shoved into the same individual plan market (with some weird probably overthought exceptions, like Post docs....). This very important aspect is missing from the ACA, but would be impossible to remove politically, full on universal healthcare is much more likely.

mieseratte2• 7 years ago

Something else I don't quite understand is why plans have drastically higher rates between tiny private-company and ACA bought. Lost my job at a small company, only three people with insurance, and wanted to purchase the same silver-level insurance through the ACA. I could've, for over 3x the total payment for the private plan. Even the lowest-level catastrophic was still $100 more than the total cost of the silver plan.

Then there was the dental. Same plan, same dental insurer... but hey guess who gets a 6-month waiting period on that filing?

gowld5• 7 years ago

Why is there a waiting period on a filling? Any dentist can do that.

gowld5• 7 years ago

Even if you pay premiums for your employer health insurance, you get a direct tax break that individuals don't get.

it messes up the risk pool

Only if you believe that it's "messed up" to pay for health care only for people who are economically productive...

lotsofpulp• 7 years ago

I interpret what seanmcdirmid wrote to mean it’s messed up that healthy (and usually economically productive) people can sequester themselves in groups that have lower health insurance premiums.

bargl2• 7 years ago

I don't fully understand. Are you saying that in Switzerland it is illegal to have a group plan?

This is something I felt would actually help the US move off of Employer based insurance for a while now.

If every person is charged the same amount for insurance regardless of being in a group then we can more easily break from employer based insurance. Especially when I can see X job offers me 100,000 but pays 500 a month for insurance. And Y job offers me 110,000 but pays 0 a month for insurance. I can do the math on which one is better if both plans are the same.

Anyway I'd love for the US to ban group plans completely. In the digital age it should be easy enough to administer a large plan with individuals instead of a group plan. I can see why after WW2 a group plan might have been better to administer, but I think at least most of those benefits no longer exist.

seanmcdirmid3• 7 years ago

Are you saying that in Switzerland it is illegal to have a group plan?

Yes, group plans are not allowed. All residents are in the same risk pool. Also, all health insurance premiums are paid post tax (unless you are poor and get a subsidy).

Employers themselves can only offer accident insurance.

anarazel• 7 years ago

Given the fact that Switzerland is second in ppp adjusted health care costs (after the US, of course), I'm not sure modeling a system after the Swiss one is necessarily the best approach.

The link is for 2016, but iirc the 2017 trends are similar. Haven't seen 2018 numbers yet.

https://data.worldbank.org/indicator/SH.XPD.CHEX.PP.CD?most_...

seanmcdirmid3• 7 years ago

Being the second most expensive still puts them way ahead of the USA. Also, Switzerland is a very rich country, they do get better results for the money they put into it (as measured by life expectancies).

User23• 7 years ago

The insurance industry is what makes medical care unfair and inefficient. So long as we allow health care to be a rentier cash cow nothing is going to fix this. Not the “free market” and not sticking government with the bill.

lordnacho3• 7 years ago

If you think about it, insurance is there to protect you when something unlikely nonetheless occurs. Having your house broken into, your car stops functioning, or as in this case, getting ill.

So for the user (as opposed to the insurance company), the value of the insurance is not to on average be covered. The point is to always be ok if you get ill.

Where I'm getting at is that employment is a thing that isn't always a given. You're going to be between jobs at some point in your life, and you don't want a potential huge bill to wipe you out financially. Even if it is just for a short period, it ought to worry you that you aren't covered.

I get the feeling most of the debate just glosses over this with the average case, which is that most people are going to be just fine not being covered for a few months.

HBKXNCUO4• 7 years ago

You're going to be between jobs at some point in your life, and you don't want a potential huge bill to wipe you out financially. Even if it is just for a short period, it ought to worry you that you aren't covered.

Anyone who loses health insurance coverage due to losing their job has the option to buy COBRA within 60 days of losing their health insurance. If they do buy COBRA, it is retroactive to the day they lost their health insurance. So you really do not need to be worried about being wiped out (unless the cost of COBRA would wipe you out) as long as you get a different job within 2 months.

ken4• 7 years ago

I've been in this situation and bought COBRA. It was a mistake. It's not nearly as good a deal as it sounds like. It's really expensive! It was double what I pay as an individual.

Sure, it probably had some additional benefits that my basic plan doesn't, because my employer got the extra super gold plus plan, but if you're only buying it for a few months to avoid being wiped out in case the worst happens, then you probably don't care about that.

My recommendation is to never buy COBRA, unless there is a specific element of the plan that you need, and you have a short timeline to getting a new full-time job with comparable coverage. Otherwise, it's just hundreds of dollars extra you're spending, for features you don't need, right at the time when money is tightest.

gowld5• 7 years ago

Get a different job or start paying for COBRA insurance.

COBRA coverage is 18-36 months, depending on circumstances. Only long-term unemployment (or having no savings, which is of course a bug deal) prevents health insurance coverage after employment.

standardUser• 7 years ago

The 2-month loophole you describe is the only useful thing about Cobra for most people.

For many people, having no income means they cannot afford the $500+/month it will cost to continue their coverage.

galaxyLogic6• 7 years ago

Makes sense to me. You got to have a job else it is too risky not having health-insurance. This means you are willing to accept a lower salary.

But this affects everyone except the rich. Therefore government should step in and insure everyone even those without work.

Government should support people taking reasonable business risks such as starting their own business.

lordnacho3• 7 years ago

Or if that's too hard to pass in congress, how about just insuring people who are out of work?

ken4• 7 years ago

Agreed -- with the proviso that unemployment of various sorts isn't always a short-term condition. I've been working a lot recently, but I still don't have a regular "job" (which would provide me with health insurance benefits). Paying for my own insurance is really expensive.

The premiums are also increasing much faster than cost-of-living or inflation, too, even though the benefits are unchanged. It's like the insurance companies are trying to price individuals out of self-employment.

This is another instance of a common case: it's really expensive to be poor! Tying insurance to employment is a "hit 'em while they're down" situation.

throwayEngineer2• 7 years ago

Insurance is annoying, but Physicians and healthcare workers have a legal license that drives up costs.

Do we need a 200k/yr gatekeeper to basic antibiotics? Or would an experienced nurse be able to figure out the difference between bacterial and viral?

Do we need a nurse cleaning patients? Or is that a job for unskilled labor?

Government licencing has gone too far, and has created artificially low supplies of health insurance workers. This was driven by incumbent healthcare workers.

speeder3905• 7 years ago

Sure charge $300 for a basic office visit with a $50 appointment setting fee if you are a cash paying patient and make sure the front desk person is as snarky and rude as possible toward people without commercial insurance

noelsusman2• 7 years ago

Experienced nurses already prescribe drugs for people. Walk into a random retail clinic and you will most likely be seeing a nurse, not a doctor. My PCP is not an MD. She has the legal authority to prescribe me any drug she wants, including highly controlled substances.

throwayEngineer2• 7 years ago

It's not experience, it's a different government license.

Nurse practitioners are a 6 figure/yr job.

mywittyname• 7 years ago

Or would an experienced nurse be able to figure out the difference between bacterial and viral?

Pfft. Doctors will give out antibiotics to treat viral infections just to shut people up. E.g. somebody goes to the doctor for the flu and demands antibiotics.

shados2• 7 years ago

I read somewhere once that showed that doctors generally can't tell one from the other, either. Im not a medical professional and I have no idea how easy or hard it is to tell, but they can't.

rb808• 7 years ago

I went to a Dermatologist who looks for weird spots then cuts them off to send to lab. I'm pretty certain they dont need 10 years of training. $300 for a 5 minute job.

speeder3905• 7 years ago

Yes it's a vicious circle. If you have any type of illness mental illness and have poor work history or worse currently unemployed then it is tough to impossible to find a full time job with insurance. I am 43 essentially unemployable due to a poor work history, on mass health which is second class coverage. The newest and better anti depressants are not covered so I continue on Prozac, Lexapro which make me unmotivated and indifferent.

ltbarcly3• 7 years ago

Yes, anything that hides costs makes a market less efficient. This is so close to a tautology in economics.

throwaway713• 7 years ago

I generally agree with the article’s point, but this:

the contribution made by employers to the premium is exempt from the employees’ taxable income. This exemption cost the US Treasury an estimated $300 billion in 2018.

is just very disingenuous. Does the lack of an air or sunshine tax also cost them money?

speeder3905• 7 years ago

There is a huge amount of age discrimination. If you are over 40 especially in most STEM fields, you may accounting especially. Most of the 'auditors' at the Big 4 look like they are just out of school (college). For a full time middle class white collar job that provides health insurance,Employers want people under 40, white and have no gaps in employment.

mieseratte2• 7 years ago

want people under 40, white

Multiple protected classes? Sounds like a lawsuit.

turk732• 7 years ago

Yup, am mid-40s and already tech employment is a crapshoot in a lot of ways. Not that the jobs are worth working at other than the pay being good. The expectations have gone through the roof.

"Oh, we pay you an inflation-adjusted equivalent of 1980s $50K a year so you should be absolutely devoted to us."

Yeah, whatever.

merpnderp• 7 years ago

In 1985, making $50k would make you one of the highest paid engineers in the country. Now it's a much more common pay range. Is your issue that pay hasn't outpaced inflation at a high enough rate?

joe_the_user6• 7 years ago

The thing about employer-funded healthcare after WWII is that for a few decades, that health care was restricted to the Blue Cross/Blueso Shield monopoly [1], which functioned as a semi-socialized monopolies in the sense that network members would take anyone and prices were somewhat controlled. This situation gradually broke down in the 1970s and 80s as other insurance companies entered the health care field and offered insurance to only the healthiest individuals. Eventually, Blue Cross' nonprofit status was revoked and insurance became a free-for-all (where those with existing conditions were effectively thrown under the bus).

People don't realize that a lot of American industry in 1960s and 70s was "regulated monopolies" (Health care, airlines, trucking, telephone, etc). These provide a lot of the benefits that social democracy provides in Europe but was less obviously "socialized".

And similarly, the huge sea change that happened with Reagan breaking regulated industries wasn't and isn't noticed as the huge change that it was (and it is still reverberating through this society).

The thing is, health care is "natural monopoly", it's a situation where competition is meaningless at the point when a person shows up bleed at the emergency room. The process of "opening health care for competition" from the 1970s onward grew a hundred poisonous rent-seeks in every part of supply chain, from medical equipment operators to hospitals to insurance companies. Blaming just insurance companies is a bit misguided after all this. Certainly they play a part but the basic structure of private health care just naturally goes this way unless it either seriously regulated or nationalized.

[1] https://en.wikipedia.org/wiki/Blue_Cross_Blue_Shield_Associa...

krupan7• 7 years ago

"The thing is, health care is 'natural monopoly', it's a situation where competition is meaningless at the point when a person shows up bleed at the emergency room."

This is a bit of a false narrative. 99% of healthcare is not emergency room, imminent bleeding out. I believe we should have government provided true emergency care for everyone (just like we have fire and police, right?), but for non-emergency stuff (which is most of healthcare), people do have time to shop around and find the best deal for them. The best deal might involve joining a health club like Aetna or Kaiser (these are not insurance, by the way), or it might be saving your money in a bank and paying for stuff piece by piece by yourself, just like we do for just about everything else we need to survive in this world.

peteey• 7 years ago

The bleeding example makes costs seems like random accidents, but most spending is on genetic illness and the elderly.

A lifetime supply of insulin is much more expensive than setting a broken bone. We are not all equally likely to have cancer or respiratory disease.

joe_the_user6• 7 years ago

This is a bit of a false narrative. 99% of healthcare is not emergency room, imminent bleeding out.

Fine, it is a "dramatic illustration" but for even ordinary, ongoing medicine, the average consumer isn't in a position to evaluate the choices involved, there a natural advantage whatever health care provider is in the area, necessary regulation create severe barriers to entry and so-forth.

empath75• 7 years ago

Try getting a quote on the price of a baby delivery from a hospital before you go.

https://youtu.be/Tct38KwROdw

wuliwong2• 7 years ago

The thing is, health care is "natural monopoly", it's a situation where competition is meaningless at the point when a person shows up bleed at the emergency room

Your natural monopoly claim is incorrect. People have choices as to where they get their healthcare, at least in the US. You can always claim a monopoly if you make the criteria strict enough but obviously in the US today people have a great deal of choice as to which healthcare providers they use. Even in an emergency (at least in larger metro areas) ambulances actually have choices as to which hospital they take the patient.

The thing about employer-funded healthcare after WWII is that for a few decades, that health care was restricted to the Blue Cross/Blueso Shield monopoly [1]

You link to a wikipedia article which says > In the 1960s the U.S. government chose to partner with Blue Cross and Blue Shield companies to administer Medicare.[6]

What about the 20 years before that?

QuercusMax• 7 years ago

If somebody finds me unconscious on the sidewalk, bleeding from a head wound, they're going to rifle through my belongings to find my insurance card, and then magically know which ER to take me to?

gojomo• 7 years ago

Love some of the bracing analogies employed by this analysis:

* employer-based insurance being a 'Whole Foods'-like product best for the rich that's nonetheless been encouraged by the government, while the 'Wal Mart'-like alternative has been encumbered to the point of disappearing.

* how would we raise our $3.5T health costs if they were war reparations required of the US from a foreign conqueror?

PopeDotNinja• 7 years ago

Yes.

parasense• 7 years ago

This is like asking if employment base matching 401k retirement accounts make retirement unfair to those managing their own 401k. Of course it is unfair, because life is not fair in nature.

Let's be clear on one thing before starting, it's just a benefit for employees, just like any other kind of benefit offered, for example the aforementioned matching 401k retirement fund. Some employers have fabulous benefit packages, and that is fine. Another related topic here is how medical insurance used to be mostly about avoiding costly emergency room visits, which back in the old days would sometimes result in bankruptcy. And, that is fine, because bankruptcy has replaced debtors prison, and we maintain a civilized society, but I digress. Insurance used to be a safety net to avoid financial ruin in the event of an emergency, but somewhere along the way it morphed into an all-invasive pervasive part of medical maintenance care, I.E. yearly dental cleanings, or primary care physical exams, etc.. Consider this, Medical insurance used to be just like automotive liability insurance, it paid out when there was an expensive accident, but auto insurance does not pay for oil changes and windshield wiper fluid. Well that is kidna what happened to medical insurance, it's morphed into a pervasive maintenance plan, and at this point the maintenance aspect is what is most defining about medical insurance. Paying that small sum of money every month is super worth it when that ultra rare accident happens requiring an emergency room visit, but this same model does not apply well when it comes to maintenance, because then you get people with pre-existing conditions who are effectively uninsurable, because this is not a Hippocratic oath, it's insurance (I.E. business) for avoiding bankruptcy by way of emergency room visit.

Still, it was an interesting perspective on insurance as an employee benefit. Not sure about the foundations, but the analogies with grocery stores was amusing.

ThrustVectoring• 7 years ago

As far as 401k plans go, self-employed individual running their own 401k often have an advantage over employees who have to take whatever 401k plan is offered by their employer. The downside of not having any other members to share administrative overhead costs is more than dwarfed by the ability to ruthlessly optimize for favorable tax treatment on the combined "employee" and "employer" parts without regards to which entity gets what.

shados2• 7 years ago

it's just a benefit for employees,

And thats what doesn't really work. When your health is a "benefit for employees", you're in a bad spot.

codegeek• 7 years ago

I run a small business and it costs about $2000/Month group premium for a family of 4 and mind you this is the discounted group rate. If you buy similar insurance individually, you will pay over $2500/Month. So give or take, $25K per year per family/employee. Yes the employer gets a tax deduction but if you really think about it, i would rather offer the employee say $35K extra and take a hit in Payroll taxes while the employee gets so much more money for themselves. If only, health insurance was not a scam in this country.

ademup2• 7 years ago

The Walmart/Whole Foods analogy is so completely inappropriate to this topic that I would say it's "Not even wrong". The author placed it literally at the heart of their article (paragraph 5 of 10) and after positing it, concedes "Such a low-cost alternative does not exist for most of medical care." I wish I could say I "see what they were trying to do here" but honestly am too confused by it. Are they seriously trying to clarify basic economics? The prior paragraph was basically "People like having better options when they can afford them".

Don't get me started on them using the Mean(!!!) household GDP of $155,000. (just to clarify: using the mean here dramatically misrepresents the average American because the mean includes billionaires. the median for 2017 was $61,372)

nerdponx• 7 years ago

The one thing I don't understand about it is what would be the "Walmart of healthcare" in this example? The author says it doesn't currently exist, but what would it look like if it did?

It's also odd to me they stop short of saying it doesn't currently exist because of the regulation/subsidy scenario outlined. It makes me think the analogy is disingenuous in some way.

Maybe there are other objections to be had, but that's the one that jumped out at me immediately.

TheBeardKing2• 7 years ago

The author was using it to illustrate how broken the market currently is:

Of note, there are more than 10 Walmart stores for every Whole Foods store. The opposite is true for medical care as most physicians and hospitals strive for high standards and very few concentrate on lowering costs.

That puts things in perspective for a layperson - if 9/10 grocery stores were Whole Foods, the 1/10 Walmart would not be nearly enough to serve the poor population.

rayiner3• 7 years ago

This is an excellent article, and there are some really important observations here. Two that stood out to me:

Emphasis is on specialty and subspecialty care, expensive technology, extra capacity to facilitate access (US hospitals have an average occupancy rate of 65% compared with an average of 76% according to the Organisation for Economic Co-operation and Development), and more and better-quality amenities, including space and privacy in the hospital.

These sorts of cross-country comparisons are really important in helping to understand why U.S. healthcare costs are so much higher. During law school, I would study at Northwestern's Womans' hospital, which was next door. It was a beautiful facility, a brand new glass-and-stone mid-rise with spectacular views: https://www.nm.org/-/media/Northwestern/Images/locations/pre.... Non-profit facilities elsewhere in the world are often quite a bit more pedestrian. (You see similar differences in university and college facilities.)

Countries that have national health insurance come close to this solution by having a flat tax on retail sales or on value-added sales that is initially paid by business firms, but is eventually passed on to consumers.

This is an incredibly important point. In the U.S., the "health care debate" is actually two separate debates. One is about how to structure the health care system. The other is about income redistribution. While many in the U.S. want to see the U.S. have European-style medical care, there is almost no traction for proposals that would pay for it in the same way Europeans pay for their systems.

The leading proposal for universal healthcare in the U.S. right now seems to be "Medicare for All." Medicare is paid for by a 1.45% tax on income, with no cap on the taxable income base. Contrast Germany, where people are required to purchase public insurance at a cost of 15% of income (half paid by the employer), but those making above about $70,000 are exempt from the mandate and tax and permitted to buy private insurance. Or Spain, where health care is paid for out of the general fund, which in turn is heavily reliant on a 21% VAT. (If the U.S. had the same mix of income/corporate/sales taxes as Spain, income taxes would go down a trillion dollars, while sales taxes would go up two trillion dollars.)

In the U.S., replacing sales taxes with a 20% VAT--the OECD average--would raise a trillion dollars. Easily enough to pay for universal health care, and a very typical European way of paying for universal health care. Yet, there are zero serious proposals in the U.S. for such a measure.

harryh2• 7 years ago

If you're going to say that German insurance costs 15% of income, you need to also say that Medicare costs 2.9% of income (counting the employer half) to make an Apples-to-Apples comparison.

There's also the 0.9% surtax on income > 200k.

rayiner3• 7 years ago

Right, good point.

beat7• 7 years ago

"Employment-based insurance covers approximately 60% (180 million of the 310 million) of insured individuals, but enrollment is highly correlated with income. In high-income households (family income >400% of the federal poverty level), 84% are enrolled in employment-based insurance. In low- and middle-income households (family income from 100% to 250% of the federal poverty level), only 35% are enrolled in employment-based insurance."

That line from the beginning just melted my face. I knew it was bad, but I didn't know it was that bad. Filing this factoid away for later!

TheBeardKing2• 7 years ago

Yeah, it's really bad when insurance covers only 60% of even the insured!

beat7• 7 years ago

Those who fear "socialized medicine" often fail to recognize just how socialist our system already is.

TheCoelacanth2• 7 years ago

The other 40% of insured individuals are covered through non-employment based insurance, such as Medicare, Medicaid or an insurance plan that they purchased for themselves.

beat7• 7 years ago

Or they don't have insurance at all.

alkonaut• 7 years ago

I have single payer healthcare and a healthcare insurance as a perk from my employer. It cuts waiting time to see specialists for some conditions from some times many weeks to one or two days. It cuts waiting times for surgery from 90 days in the public system to 20 with my private insurance. That’s it.

I believe this is around $400/year of which around half will count as a taxable benefit. I think it’s unavoidable that there will be a market for this type of premium services, and I don’t mind. The public healthcare has to operate efficiently on cost so doctors and equipment needs to be fully utilized and patients thus need to queue. A doctor I can se within 24h doesn’t have a full schedule, so is likely an underused - and thereby a luxury - service.

Whether a healthcare system is “fair” isn’t a simple question, but whether it’s sane can be answered by a few test questions such as “can a contracting a serious medical condition eve be a financial disaster?”.

thrower123• 7 years ago

The inefficiencies of the health care system are only tangential to whether it is paid by employer-subsidized insurance, medicare, the VA, the NHS, or by manna from heaven. The biggest problem is the sheer bureaucracy of the thing.

Fortunately, some gains appear to be occurring to side-step the entrenched hospital provider networks. A huge number of urgent care centers have begun springing up, at least in this area, which are perfect for everyday healthcare needs. I can walk in with no appointment, pay the $25 co-pay, and see a doctor about bronchitis or poison ivy or get stitches for a minor wound or an x-ray without waiting an absurd amount of time in an overburdened emergency room, or waiting a week for my primary-care to have an open appointment. For the most part, if you tell them what is wrong, they will do what you ask.

It's more like going to get your car fixed, or taking your dog to the vet.

Then again, I'm not on a whole battery of prescription drugs, which seems to be increasingly unusual, so I don't have to deal with the hassle of going back regularly to get chronic prescriptions re-issued.

zaroth3• 7 years ago

Per the article, $3.5 trillion in US healthcare spending per year is an average of $28,000 per household.

US average household income is ~$75,000 so to pay for that as a flat tax, that would be a rate of 37%, just for health insurance.

But state/federal governments already pay for about 40% of all healthcare, and charge a good deal of taxes to pay for it. If they were paying for all healthcare it would mean adding a new 22% payroll tax to make up the difference.

usaar3336• 7 years ago

So $1400/month needs to be raised? That's less than what my COBRA premiums were; sign me up!

zaroth3• 7 years ago

$28,000 per household only if every household pays $28,000. But that is never going to happen. It’s going to be percent, and likely a progressively increasing percentage.

If you had a $1,400/mo employer plan you’d likely be paying a lot more than $1,400/mo under single payer.

iamaelephant• 7 years ago

Common sense doesn't need research and long form writing, it just needs to be implemented.

wpdev_63• 7 years ago

No but the regulation and the protectionism does. My father recently flew to los algodones, Mexico for dental work that included bone graphs, tooth pullings, bridges etc. throughout his whole mouth for around $2k. The estimate for the same job here costs at least $15k.

I am really surprised there aren't any online price arbitrage websites for healthcare. You could pay a few pennies to fly across the world to get competitive healthcare at a 1/10th of the cost it would be here.

krupan7• 7 years ago

Whenever this debate comes up I substitute basic medical care with basic food or shelter. We don't have insurance for those, but we do have insurance for rare and expensive things related to them, like house fires, and disability insurance so we can still buy food if we can't work. Certainly those types of insurance should be available, heck even government provided if we want, for rare and emergency medical care. But we don't buy Kaiser or Aetna food insurance. Employers (mostly) don't provide housing. Why does medical care have to work this way?

Similarly, we don't have socialized single-payer food or housing (though countries have tried that). Why do we think that is the only solution for better medical care in America?

cozzyd• 7 years ago

Because unlike houses burning down, it's not particularly rare to need medical services of one kind or another. And your food costs are quite predictable...

jwbwater9• 7 years ago

Healthcare is different. If you get diagnosed with a chronic illness you will have it, and high healthcare expenses, for the rest of your life. If your house burns down that does not mean your house is more likely to burn down for the rest of your life.

Does Employment-Based Insurance Make US Medical Care Unfair and Inefficient?

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