If the government paid for everybody’s health care, some argue that we’d save money by cutting out administrative costs. The logic is that we’ll save on all those bureaucratic duplications caused by multiple insurance providers. The empirical evidence is that in countries where government pays for health care, they spend less for health care than we do in America.
But as Arnold Kling points out, they spend less not because they’re more efficient but because they provide fewer services. Charlie Quidnunc makes an even deeper point in the comments on this earlier post:
If profits and administrative costs are so terrible, why stop at
eliminating them in the health industry? Why not get rid of those pesky
elements in other industries? How about creating a single provider
Information Technology industry? Think about how much better computers
would be without all that complex and expensive competition between
companies. Or single provider Automobile industry. Or single provider
food companies. Why not have the government decide what a wholesome and
nutritious meal should look like and eliminate all that expensive
experimentation in fancy restaurants?
Here is additional wisdom on the issue from Tyler (HT: Whatever).
Podcast RSS Feed
Full EconTalk Text
{ 50 comments }
Well I guess we could argue for a market driven system over a government run one but either way neither will happen properly. Those administrators and CEO's and boards of directors are not about to let change happen to affect their current system….their Golden egg laying goose will not be spared.
Just please don't pretend that the William W. McGuire's and the Billy Tauzin's of the world are any more interested in your market driven solutions then they are in my single payer system. Neither of the ideas has a chance against their monied interest and the controlled markets they prosper in.
Silly analogies. You are comparing product industries to administrative overhead. Private IT companies and the others you cite merge for many reasons, but one big benefit often is to cut their overhead by unifying their administrative offices and firing 1/2 of the employees.
Sure there can be some innovation in administrative processes by having multiple administrative organizations, but that is a far smaller and far more different issue that the difference in competitive IT companies.
Also, this is a transparently silly argument:
"The logic is that we'll save on all those bureaucratic duplications caused by multiple insurance providers. The empirical evidence is that in countries where government pays for health care, they spend less for health care than we do in America.
But as Arnold Kling points out, they spend less not because they're more efficient but because they provide fewer services."
Huh?? You say they spend less on overhead because they provide fewer services. You are talking about apples and oranges. What is the overhead as a percentage of services? That is the question. And the answer is bad for your argument so you ignore it.
As the New England Journal of Medicine demonstrated in 2003, the overhead cost in the Canada versus US was $307 versus $1059 per capita as of 1999.
Even more to the point, administrative costs were 16.7% versus 31% of the total expenditure. Are you going to seriously argue that administrative costs as a percentage of total expenditures goes UP as the total cost goes up? That is absurd and would only prove that our system is horribly inefficient. Overhead always goes down as a percentage of the total being overseen UNLESS the administrative back-end in ridiculously inefficient . . . .
http://content.nejm.org/cgi/content/abstract/349/8/768
Still more to rebut your argument.
You question why we would not want to see administrative overhead consolidated in other industries like those for restaurants etc. if combining health care administative services is such a good idea.
Guess what? The private sector already has done so.
https://www.adp.com/employer_services_overview.asp?iid=EFI0483
Instead of having restauranteurs try to compete by better performing administrative payroll, benefit and other services ADP and other employer support organizations offer to take over and consolidate those operations. The economy of scale achieved by the support organization and their specialized skill with these back office operations (as opposed to people who are good at making food for example) make them very popular.
This is little different than the cost savings that would be experienced from consolidating back-end costs in a single payor system.
"Just please don't pretend that the William W. McGuire's and the Billy Tauzin's of the world are any more interested in your market driven solutions then they are in my single payer system."
I am sure they have a preference, though I couldn't say specifically which one without searching for statements from them (and even then they might be lying). It will be whichever option brings them the highest profits or otherwise maximises their benefit.
"Silly analogies. You are comparing product industries to administrative overhead."
He compared healthcare to IT. Both healthcare and IT are often services e.g. surgery and server administration.
"As the New England Journal of Medicine demonstrated in 2003, the overhead cost in the Canada versus US was $307 versus $1059 per capita as of 1999.
Even more to the point, administrative costs were 16.7% versus 31% of the total expenditure."
That is cost per capita and as a percentage of total expenditure, not per service offered. American healthcare companies might easily offer double the choice of services but spend more on overheads in order to deliver that choice.
"This is little different than the cost savings that would be experienced from consolidating back-end costs in a single payor system."
It is different in that restaurant owners choose to do it becuase it saves money. Healthcare providers are not choosing to do it so either it doesn't save them money or they're lazy because they have monopoly powers granted by government.
Insurance vs. government single-payer health plans is a false choice. There is a third option: Non-insurance health care. Don't use insurance for anything except the expensive catastrophic illnesses and injuries, and let people pay out of pocket for everything else. Look up some of the articles by John Stossel. Doctors that do elective surgeries, like cosmetic surgery and vision correct, which aren't covered by insurance, are bringing costs down. There are doctors and clinics that refuse insurance, they at most give you a receipt so you can seek compensation from your insurance company. They are succeeding in providing affordable health care to the uninsured.
http://www.bizjournals.com/sanfrancisco/stories/2006/01/30/daily7.html
Get rid of BOTH bureaucracies.
SaulOhio,
How do you propose to eliminate medical insurance for routine health care? Are you suggesting that such insurance be outlawed?
The truth is, employees are perfectly happy with their employer-based medical insurance plans. All serious politicians realize that, and none will advocate eliminating employment-based medical insurance.
john dewey…they wouldn't have to eliminate it, we could start by allowing interstate competition of health insurance. Then, a new company would show up that has this catastrophic insurance, and some of us would opt into it…if we were either disallowed the option of deducting any insurance costs, or allowed to deduct any insurance we wanted (employer provided or not), we could opt out of the more expensive employer based coverage and get more money in our pockets (which I would prefer, as a healthy 29 year old).
[i]"This is little different than the cost savings that would be experienced from consolidating back-end costs in a single payor system."[/i]
No, it isn't. You're the one who is comparing apples and oranges.
In the restaurant analogy, a single payer system would pay for the meals the customers bought.
In the IT analogy, a single payer system would pay for the products and services consumers buy.
In such systems, where would the innovation come from? Who would invent the next iPod when the single payer won't pay for one?
This is one of the sources of the problem of why single payer systems pay for less services. There's less innovation. All the service providers have to turn their attention away from the consumer and to the single payer.
Sure, it's plausible that a single payer system may have less administrative costs than the convoluted third party payer system we have now. But I think Russ's point was that that by itself doesn't explain the difference in costs between our system and theirs.
Using your own numbers, Canada spent $307 in administrative costs to provide $1838 worth of services and in the U.S. we spent $1059 in administrative costs to provide $3416 worth of services.
Single payer could plausibly lower our administrative costs by $488 if we lowered those costs to the same percentage as the Canadian system and kept the same level of service we have. But that doesn't, by itself, explain the difference.
The bulk of the difference comes from Canada having less services. $1838 there vs. $3416 here. (again, using the numbers you gave us)
The government meddling in the health insurance business itself accounts for a large part of the cost problem.
The real action is at the state level, where the number of mandates has risen from seven in 1965 to 1,843 as of 2006, according to a March 2006 study by the Council for Affordable Health Insurance (CAHI), an insurance-carrier group that favors market solutions.
Health-care mandates are like requiring that everyone drive a fully loaded Lexus, while prohibiting anyone from purchasing a Ford, Chevy, or Honda. Even if someone wants medical insurance without the mandates, that option is not available, leading to some people not having any insurance.
These mandates raise the cost of insurance from 1 to 3%
An example of a few of the States mandates:
• Contraceptives, 30 states (1 percent to 3 percent added cost)
• In vitro fertilization, 14 states (3 percent to 5 percent added cost)
• Mental health general, 40 states (1 percent to 3 percent added cost)
• Mental-health parity, 42 states (5 percent to 10 percent added cost)
• Prescription drugs, 3 states (5 percent to 10 percent added cost)
• Well-child care, 31 states (1 percent to 3 percent added cost)
• Acupuncturists, 11 states (1 percent to 3 percent added cost)
• Chiropractors, 46 states (1 percent to 3 percent added cost)
• Dentists, 36 states (3 percent to 5 percent added cost)
• Handicapped dependents, 39 states (1 percent to 3 percent added cost)
• Newborns, 51 states (1 percent to 3 percent added cost)
What if you are a teetotaler who never touches a drop of booze, think chiropractors and acupuncturists are quacks, or take Thomas Szasz’s critical view of psychiatry? Shut up and pay anyway. Government knows better what should be included in your medical insurance.
One obvious way out of this problem is for states stop mandates, begin repealing as many mandates as possible and let the consumer deicide what benefits they wish pay for.
John C. Goodman, president of the Dallas-based National Center for Policy Analysis, a free-market think tank provided some other ideas:
• Create huge exceptions to some or all mandates for groups such as small businesses, individuals, or people on Medicare.
• Allow people to buy insurance policies just like those carried by State employees, often including legislators themselves, which frequently are exempted from state mandates.
***Not allowing regular citizens the same choices as legislators themselves is sheer hypocrisy.
• Don’t increase federal involvement in medicine. Goodman warned that more federal meddling means “there will be lots more federal mandates.”
• Allow citizens of one state to purchase any insurance policy from a carrier in any other state. It’s silly that such purchases are banned. People buy goods and services from out of state all the time, often over the Internet. Why not health insurance?
Correction, the numbers I gave for services should have been $1531 in Canada vs. $2357 here using Ed's numbers.
That does even things out a little bit assuming his numbers are actually useful for such a comparison. Still, the reduction in services is almost double the reduction in administration costs.
Regardless, I don't think you'll find many defenders of the current system here. As John points out above, the government has so completely distorted the health care market it's hard to imagine anyone would offer more government as the solution.
Correction, the numbers I gave for services should have been $1531 in Canada vs. $2357 here using Ed's numbers.
That does even things out a little bit assuming his numbers are actually useful for such a comparison. Still, the reduction in services is almost double the reduction in administration costs.
Regardless, I don't think you'll find many defenders of the current system here. As John points out above, the government has so completely distorted the health care market it's hard to imagine anyone would offer more government as the solution.
shawn: "they wouldn't have to eliminate it, we could start by allowing interstate competition of health insurance."
Oh, I definitely agree we should get the government out of the way. IMO, though, that would lead to more employer-based health insurance, not less. Insurance prices would drop for everyone. But prices would still be much lower for employers who have the negotiating power that individuals do not.
shawn: "…if we were either disallowed the option of deducting any insurance costs, or allowed to deduct any insurance we wanted (employer provided or not), we could opt out of the more expensive employer based coverage and get more money in our pockets (which I would prefer, as a healthy 29 year old)."
I currently purchase individual health insurance policies for a few young employees. I do not believe an individual can beat the purchasing power of a large employer, even as a healthy 29 year old.
I also do not believe a large employer is going to inc rease your wages by much if nearly everyone else in your company is opting for group health insurance.
Research I have linked to in previous Cafe Hayek posts showed overwhelming support by employees for their group insurance. The bottom line is this:
- most employees believe their group insurance to be a good deal and do not want it changed;
- those with minority views are not going to drive the behavior of large corporations.
There is a giant misconception floating about that billing Medicare and Medicaid is somehow much cheaper and earier than billing private insurers.
This misconception is then used to "prove" that administrative costs would be cheaper in a single-payer government system.
This would only work if we abandoned the CPT/ICD billing systems and went to piece work or something I can't concieve of.
As the New England Journal of Medicine demonstrated in 2003, the overhead cost in the Canada versus US was $307 versus $1059 per capita as of 1999.
Even more to the point, administrative costs were 16.7% versus 31% of the total expenditure.
Posted by: Ed
Ed,
Good post. These numbers are what Arnold Kling, author of a book on health care, refers to rounding errors while he thrashes doctors for not using Bayesian analysis when treating their patients.
Posted by: lowcountryjoe | Sep 14, 2007 7:54:37 AM
Well, I never did a reply from muirgeo and never a direct reply (so it was evident that my post was being addressed) from any of the other usual suspects. Will hings be different this time around or will I get more quack (ducking) from the Quack?
If today’s bleeding-heart advocates do not swallow this pill, then they are effectively deluding themselves into believing that incentives do not matter. – LCJ
Joe, yesterday's bleeding hearts deluded themselves in this way, why would you expect anything different from today's? This makes them unreasonable. Unfortunately, one of the mistakes reasonable people make is believing they can reason with the unreasonable.
Employers in the United States are compelled to provide insurance. Not only that, but tax breaks are given for health insurance but not for out of pocket health payments. Thus, government action has contrived to make insurance more attractive than would otherwise be the case compared to non-insurance based healthcare systems.
Whoops, that post was in response to this:
"The truth is, employees are perfectly happy with their employer-based medical insurance plans. All serious politicians realize that, and none will advocate eliminating employment-based medical insurance."
By John Dewey.
"SaulOhio,
How do you propose to eliminate medical insurance for routine health care? Are you suggesting that such insurance be outlawed?"
No, outlawing that would also be unwanted government regulation. Let people have it if they can afford it. Such a plan would be more expensive, and those who want it can have it if they can pay for it. Someone made the comparison betwen Lexus health care and Ford or Chevy health care.
On so-called morality grounds, if healthcare ought to be an entitlement, then why not housing and food as well?
lowcountryjoe
That's easy, because no one ever gets hit with an unexpected $100,000 grocery bill.
Now LCJ, do you think bankers and lending institutions should get $80,000,000,000 dollars of taxpayor funded Fed bailouts? Do you agree with having a Fed and with their recent bailouts?
It is also absolutely essential that private insurance options be allowed to compete against the state provided solution. If today’s bleeding-heart advocates do not swallow this pill, then they are effectively deluding themselves into believing that incentives do not matter.LCJ
I agree that private plans should be allowed to compete with a government plan. But I would argue that they all compete with some similiar basic rules. One rule would have to be that you can NOT discriminate. Certain minimal levels of coverage would have to be defined as well.
simon clark: "Employers in the United States are compelled to provide insurance."
Is that true? I'm an employer in Tennessee and I am not compelled to provide health insurance. I thought Massachusetts was the only state that attempted to force employers to provide health insurance.
That's easy, because no one ever gets hit with an unexpected $100,000 grocery bill.
The purpose of insurance isn't to protect your health, it's to protect your finances. Before the government so distorted the system we have people we perfectly able to protect themselves from such unexpected expenses.
Now LCJ, do you think bankers and lending institutions should get $80,000,000,000 dollars of taxpayor funded Fed bailouts? Do you agree with having a Fed and with their recent bailouts?
Of course not. Speaking for myself, not LCJ.
The right people to take Citigroup's loses is Citigroup's investors. Last I heard, neither the feds nor the treasury were offering a bailout. The proposed super-siv was voluntary and composed of private investors.
Still, I fail to see its purpose either. On one hand were told that to dump these assets on the market would be devastating on the market yet tying up $80 billion dollars of perfectly good investment capital isn't? That just doesn't add up.
muirgeo:
Why can't a private policy discriminate? And I do mean discriminate in every meaningful way.
There are high-deductible health care plans out there that are not suitable for the modest wage earner. Some of these plans permit as much as $10,000 per year in total out-of-pocket expenses. Who are you to say that these plans are "unacceptable"?
Why do you get to say what kinds of coverage I want in my plan? If you presume you can make better choices for me than I can, we're going to have a fight. I agree that you *may* make better choices for you than someone else might, but no one is entitled to make those choices for me.
Why can't I have a health plan that excludes dental, vision, mental health, in-vitro fertilization, well-baby, pregnancy and hangnail surgery? My wife cannot have children (nor do we want to) so why should I pay for a policy that covers that particular illness? (And yes, I do consider pregnancy a preventable illness)
What are these "certain minimal levels of coverage" that you prattle about? If I want a plan that ONLY covers me for catastrophic expenses (say above $25,000 per year) who has the expertise to tell me I'm wrong? Certainly no one in this forum.
The assertion that you, or anyone else, has "the answer" to what people want or need in an insurance policy is beyond absurd. It borders on mental illness. (Certainly Hillary-care fits that description).
Furthermore, the assertion that employer-based policies are somehow the panacea for all that ails us is equally as silly. There are many of us who participate in private groups to buy policies at group rates, completely outside the scope of our employment. These market-based products are not controlled by anyone except the consumer – and that's (to me) the ideal solution.
When government and do-gooders get involved, not one damn thing good EVER comes of it. Unless you count waste, error, wait-times, inefficiency, ignorance and hubris as positive outcomes.
Why, I ask, should it be a requirement that a private policy be required to compete with a government policy under some arbitrary set of "similar basic rules"? As long as I don't have to pay for the government plan, then I don't care what it offers. Similarly, as long as YOU aren't paying for my plan then what business is it of yours what I choose to insure?
After all, when it comes to insurance, YOU don't get to say how much I insure my car for, how much liability coverage I carry (umbrella coverage), how much I insure my home for, what deductibles I carry or whether or not I have life insurance. Why is healthcare any different? (And PULEEZE don't trot out that hairy, hoary "healthcare is a right" crap – because I don't buy it for a minute)
SaulOhio: "Such a plan would be more expensive, and those who want it can have it if they can pay for it."
I assume you mean that employer-provided comprehensive health insurance would be more expensive than an individual catastophic health care policy. Is that correct?
IMO, few employees will reject an employer-provided comprehensive health insurance benefit. The marginal benefit to an employer for not covering a healthy, young employee is very low. So the amount of extra wages that an employee would receive for declining the employer's health insurance benefit will also be very low. It is unlikely the extra wages will cover even a minimal catastrophic medical insurance premium.
That's easy, because no one ever gets hit with an unexpected $100,000 grocery bill.
So, as a potential expense gets more costly, it becomes more pressing and justifiable to turn it into an entitlement at the expense of all taxpayers? Is that really what you're saying? Well, this at least explains why income is secured by the SSA when someone becomes disabled and why federal disaster relief is invoked when natural disasters break out and cause very costly property damage: we like it, we love it, we want more of it!
Now LCJ, do you think bankers and lending institutions should get $80,000,000,000 dollars of taxpayor funded Fed bailouts?
No, hell no! But if you could explain how this supposedly happened I'd love to hear you spin it into a reply post.
By the way, how do you feel about the mandatory federal spending — at the taxpayer's expense — that managed to fund the likes of Social Security, Medicare, and Medicaid/SCHIP to the tune of $1,495,000,000,000 in 2007. I bet that this kind of spending (1.5 trillion dollars) is fine with you, huh?
——————————————–
I agree that private plans should be allowed to compete with a government plan. But I would argue that they all compete with some similar basic rules. One rule would have to be that you can NOT discriminate. Certain minimal levels of coverage would have to be defined as well.
No discrimination? Everyone pays the same premium, too, regardless of their health status? Would this apply to the government plan only or would it have to be both the private plan and the government plan for you (and your ilk) to buy off on it?
John Dewey:"I assume you mean that employer-provided comprehensive health insurance would be more expensive than an individual catastophic health care policy. Is that correct?"
I said that comprehensive insurance would be more expensive than catastrophic. Adding employer provided to one and individual to the other makes it a completely different question. Thats a sneaky way to argue.
Of course employers have more leverage to negotiate a lower priced policy than an individual. Thats a given. So how would you compare the price of employer provided comprehensive to employer provided catastrophic? Or individual comprehensive to individual catastrophic. Lets compare apples to apples, shall we?
SaulOhio: "Adding employer provided to one and individual to the other makes it a completely different question. Thats a sneaky way to argue."
I certainly wasn't being sneaky, sir. Several posters, including SimonClark, shawn, and faultolerant, have made comments about employer provided health insurance. I wasn't sure what you meant when you said:
"Such a plan would be more expensive"
and that's why I asked for clarification. Nothing sneaky intended.
Still, the comparison between employer-provided comprehensive insurance and an individual catastrophic policy is relevant.
Employee workgroups will continue to demand comprehensive, employer-provided coverage. Comprehensive insurance will remain the predominant form.
My argument is that the most common (by far) form of comprehensive health insurance is less expensive, to the individual, than the most common form of catastrophic health insurnce. Comparing the two – which you regard as apples to oranges – explains why few employees will accept cash with which to purchase individual policies of any sort.
I go back to your original statement, SaulOhio:
"Don't use insurance for anything except the expensive catastrophic illnesses and injuries, and let people pay out of pocket for everything else."
It is still not clear to me what you are prescribing. Individual purchasers of health insurance already have that option in most states. So I could only assume you were referring to employer-provided health insurance.
Who are you to say that these plans are "unacceptable"?
Why do you get to say what kinds of coverage I want in my plan? ….. I agree that you *may* make better choices for you than someone else might, but no one is entitled to make those choices for me."
faultolerant
Who are you to tell me I have to drive on the right side of the road? We live in a democracy (yeah yeah, representative republic…same thing) and the rules are made in that fashion. WE live in a WE society not a ME society. Remember WE THE PEOPLE…….?
We live in a democracy (yeah yeah, representative republic…same thing)
yeah, yeah…no, it's not.
Here’s a local story that caught my eye yesterday:
"Arizona Heart Hospital Reaches Settlement Regarding Clinical Research Matter –
CHARLOTTE, N.C., Nov. 5 /PRNewswire-FirstCall/ — MedCath Corporation
(Nasdaq: MDTH) announced today that Arizona Heart Hospital, one of the 11
hospitals in which MedCath owns an interest, has entered into a settlement
with the United States Department of Justice (the DOJ) and the United States
Attorneys' Office in Phoenix under the federal Civil False Claims Act.
The settlement concerns Medicare claims submitted between June 1998 and
October 2002 for physician services involving the implantation of certain
endoluminal graft devices (utilized to treat aneurysms) that had not received
final marketing approval from the Food and Drug Administration, and allegedly
were either implanted without an approved investigational device exception
(IDE) or were implanted outside of the approved IDE protocol. The DOJ's
allegations related solely to whether the procedures were properly
reimbursable by Medicare; quality of patient care was not at issue."
…
I’ll bet (a hypothetical) $100,000 that these procedures would not have occurred under a single-payor, government-run healthcare system. They almost didn’t occur under the current highly-regulated system.
You may indeed cut monetary and administrative costs in this case ($5.8 million fine); you would also increase mortality and other costs (seen & unseen).
It is beyond idiotic to attempt to argue that increased government involvement in any industry, much less the medical industry, will result in reduced costs and equal or increased benefits.
"WE live in a WE society not a ME society. Remember WE THE PEOPLE…….?
Posted by: muirgeo | Nov 6, 2007 4:19:26 PM"
Who was the "we" that got your momma preggers, eh? How many were present and what were their roles?
Who was the "we" that carried you through gestation, eh?
Who was the "we" that delivered you, eh?
Who is the "we" that gets up with you each morning and brushes your teeth, eh?
Who is the "we" that pays for your meals, clothes, and other expenses, eh?
You and who, muirduck, your momma and who?
OOOOOOOH, but wait, I know who the "we" is! That's who shows up when you create your wealth and he has his hand out wanting half; and, in the other hand he holds a gun! Yes, that is the "we", eh muirduck?
But you notice that the "we" did nothing meaningful in your life, nothing that would not have been done by private unregulated markets that honor the individual by recognizing his "unique" invisible hand.
And, gosh, the unregulated markets do not have to hold a gun in one hand in order to exist and thrive.
You didn't come from an indistinguishable egg from a hive queen, muirduck and neither did I. No one did.
Stand on your own two feet girl/boy/it and brave the world and all its risks as an individual. It is so wonderfully refreshing to be on your own.
Make your own deals, succeed or fail on your own, stop whining about everyone pooling energy and resources in order to help those who have been taught better but still want to behave in a stupid fashion.
The best damn thing you can do, muirduck, for the poor and downtrodden of this world is to simply not be one.
John Dewey, I was under the impression that large employers like WalMart were required to provide a certain percentage (per employee) of wage/salary payments in healthcare benefits.
"no one ever gets hit with an unexpected $100,000 grocery bill."
If that's your reasoning then you should be in favour of state healthcare only for those who can't afford it, which is the case now. If I can afford health insurance, but don't buy it, that's my own choice and accepted risk, like investing in a company. And if I already have private healthcare, there would be no need to force state healthcare on me as I am already covered.
It would also mean you support sate run and compulsory fire, theft, flood and life insurance for all, funded through taxes? Now, you do have state run emergency services, but hospitals are already required to provide emergency treatment so a further push to state health insurance would indeed be the same as state house, laptop, life insurance etc.
"do you think bankers and lending institutions should get $80,000,000,000 dollars of taxpayor funded Fed bailouts?"
No.
"Do you agree with having a Fed and with their recent bailouts?"
Definitely no to the second part, maybe to the first.
"Who are you to tell me I have to drive on the right side of the road?"
The government owns the roads, so it can make rules like that. Since the government governs on the behalf of the people it is ultimately the people who decide the rules on the roads. The government does not own you or me, it can't tell us we have to have health insurance or that we have to buy it from them or that we have to pay them to provide healhcare for others.
"We live in a democracy (yeah yeah, representative republic…same thing)"
No, it's not.
Even if the government should have the power to provide healthcare, that doesn't mean it should excercise that power.
Simon Clark: "I was under the impression that large employers like WalMart were required to provide a certain percentage (per employee) of wage/salary payments in healthcare benefits."
It's hard to keep up with all the state laws, but I think today only Massachussetts requires employers to offer health insurance. Maryland passed a law with that requirement for only Walmart, but the federal courts overturned it.
I think almost all large companbies do offer health insurance. Once they do, they are then governed by many federal and state laws about who must be covered, what benefits must be provided, and what coverage must be offered to employees after they are no longer employed.
It makes sense for large employers to offer health insurance. The tax laws make this an especially attractive benefit for employees. The negotiating power of large employers also enables employees to realize the lowest health insurance costs.
Here's a link that explains a little more information:
Employer health insurance requirement
John Dewey,
What prevents consumers, particularly in this internet age, from pooling their resources and bargaining collectively without the aid of an employer? I'm sure you'll agree that there are problematic issues with employer-provided insurance, especially with how it effects job mobility. I don't see why, absent the laws which support them, employer-provided insurance would be chosen by free consumers.
Anyways, its not necissary to eliminate the laws which support employer provided health care in order to give people viable options. All you need to do is extend the tax cuts to all health care expenditures.
I was also under the impression that employer-provided insurance was mandatory, in some way or another, for large employers. I'd imagine the laws are pretty complex, though.
G: "What prevents consumers, particularly in this internet age, from pooling their resources and bargaining collectively without the aid of an employer?"
Nothing. So why haven't they done so already?
G: "I'm sure you'll agree that there are problematic issues with employer-provided insurance, especially with how it effects job mobility."
That may be a "problem" for a few employees, but not for any intelligent person for whom group health insurance is important. I've had four employers over the past 30 years, and I've never been without insurance coverage.
Actually, I do not really understand what the problem is for employees who wish to change jobs. Explain it to me.
G: "I was also under the impression that employer-provided insurance was mandatory, in some way or another, for large employers. "
Can you supply any links or references to support that impression? The link I provided at 9:43 this morning is to an insurance industry web site. It clearly states:
"There are no state or federal laws that require private U.S. employers to offer health insurance benefits to any employees at all."
Where are you guys getting this idea that employers must supply health insurance? That they are not required to do so is what made the Massachussetts experiment so newsworthy.
Probably because of the tax cuts gifted to employer-provided health care?
The Health Maintenance Organization Act of 1973.
http://en.wikipedia.org/wiki/Health_Maintenance_Organization_Act_of_1973
http://www4.law.cornell.edu/uscode/html/uscode42/usc_sec_42_00000300—e009-.html
I can't read legalese very well, and summaries of the bill seem to disagree over whether or not all employers of more than 25 people had to provide an HMO option, or if that only applied to employers who offered some sort of health care plan.
In any case, its a no-brainer for employers to offer health care plans. If an employer can pay employees with something that they value at $50 while only spending $35 on it themselves, they are going to do it. This is especially true for people in higher income tax brackets, who are more likely to be the "deciders" in a business. And I believe there are rules requiring employers to offer coverage to all full-time employees if it is offered to any, correct?
Thanks for the info John Dewey. I'm sceptical that company health insurance is necessarily the best option, mainly because nobody spends someone else's money as well as they spend their own. But if people want to choose to buy their health insurance that way, fine by me.
G,
I'm not sure why you will not accept the information I provided from the industry website. Employers are not required to offer health insurance. I'll give you two more links. If those don't convince you, I give up.
Kelly Montgomery, a lawyer and a health care policy expert, explains very simply in non-legalese:
"Employers are not required to offer health insurance coverage to their employees. Many of them choose to do so, but they are under no obligation to do so."
Employer does not offer health insurance?
The U.S. Department of Labor explains ERISA, the act which regulates employer retirement and health insurance plans:
"The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for retirement and health benefit plans in private industry. ERISA does not require any employer to establish a plan. It only requires that those who establish plans must meet certain minimum standards."
ERISA Compliance Assistance
As a small business owner with more than 25 employees, I was subject to the requirements of both ERISA and the HMO Act of 1973. I am positive that neither of those laws required me to offer health insurance.
John Dewey,
There are caveats to what you say.
Caveat number one: If you are a unionized plant or business then it is very likely that your union contract requires you to provide health insurance.
Caveat number two: If you are an independent business, nonunionized, and not incorporated, then it is likely that you are not required to provide health insurance.
To say flatly that all businesses are not required to contribute to the employees health insurance might be stretching it a bit.
John,
But then again maybe I did not read your posts thoroughly and missed any inference that nonunionized businesses probably aren't required to provide health insurance, if so……….my apologys.
Muirgeo was recently in a cornfield in Illinois, and stumbled upon the ACTUAL Constitution of the United States, the one with the preamble that reads:
We The People of The United States of America, in order to form a more perfect union, initiated The Great July Socialist Revolution, whereby the workers and peasants of America under the leadership of the Communist Party headed by The Divine Prophet Algore I, overthrew capitalist and landowner rule, broke the fetters of oppression, established the dictatorship of the proletariat, and created the Soviet state, a new type of state, where if fifty percent of the population plus one want the property of another citizen, then it is the duty of that citizen to willingly surrender his property.
As I said, it was just my impression that employer-provided insurance was mandatory. I don't really care if it is or not, although I'll take your word for it that it is not. But it still doesn't make any sense for the government to promote certain ways of spending money on health care over others.
vidyohs,
My comments referred to government requirements about health insurance benefits. All three of the links I included referred to government regulations. G also referred to government requirements.
Certainly if an employer agrees to provide health insurance in a contract – whether with a union or with non-union employees – that employer is obligated to provide the insurance. But that contract is an agreement the employer willingly signed. They were not required to sign such a contract. There is no law that forces an employer to provide health insurance to unionized employees.
G: "But it still doesn't make any sense for the government to promote certain ways of spending money on health care over others."
I agree with that argument, G.
The federal government has altered the laws somewhat to address this issue. Health insurance premiums for the self-employed are tax deductible. Health savings accounts also allow taxpayers to shield health care expenditures from taxes.
Earlier this year, President Bush proposed a standard $15,000 per family deduction for health insurance. Under his proposal, health insurance benefits provided by employers would become part of taxable income. Workers in most of the nation would initially pay less taxes. Workers with employer-provided insurance in high cost states – particularly California and New York – would pay more taxes if the cost of their insurance benefits exceeded $15,000 annually.
Democrats rejected the president's proposal.
Not only did they reject it, John, they mischaracterized it as a "tax increase."
Such is the honesty of the universal healthcare crowd.
John,
Not to nitpick but why are there unionized plants and businesses? I suggest it is because the "law" comes down on the side of the union when 'coming down" is called for.
So IMHO the law may not directly dictate employer provided health care, but indirectly through its support exclusively of unions in labor disputes the law becomes a party to the mandatory provision of health care.
The practical affect is that the business is compelled to provide health care to its employees if it is unionized.
vidyohs, as the son of a union leader and a former labor contract analyst, I know that it is unions and employers who determine whether and how much health insurance is provided by the employer. Beyond providing a tax benefit to workers, the government in all but a few states just does not get involved.
If through some twisted logic you want to believe that government somehow forces employers to provide health insurance, go ahead and believe that.
Dear John,
What you denigrate as "twisted logic" is actually applied logic and reason to objective observations of reality on the street.
Sometimes the law is very much involved by refusing to be involved.
If big union thugs call a strike and shut down a plant, and then use minor union thugs to physically terrorize, attack, and destroy the property of replacement workers hired by the plant, and "the law" refuses to get involved by investigating, arresting, and jailing the union thugs that commit the crimes…..then the law by not being involved is sending a strong signal to the plant owners to play the union's game. By acquiesence to the union's crimes the law is passively dictating the plant's compliance.
Does this happen, and has it happened? Most definitely, with a history going back into the 1920s and 1930s.
Now, let's see how well you read and how well you understand what you read.