America's Health Care Should No Longer
Be Tied To Jobs
The Financial Times, July 31, 2009
Keeping employers at the center of the welfare state imperils health reform
The bipartisan "gang of six" in the Senate wants to fine employers whose workers choose Medicaid, the US public healthcare system, rather than more costly insurance from their company. The House wants to impose an 8 percent payroll tax on all but the tiniest companies that do not offer healthcare. These damaging proposals show that both political parties remain deeply confused about the roles of government and corporations in a modern economy. Their premisethat companies have a duty to provide health benefitshas such perverse consequences that it may doom reform efforts altogether.
America's unique employer-based healthcare system may have made sense 50 years ago, when healthcare was cheap and business faced little global competition. But today's circumstances are radically different. Soaring health costs strangle business and absorb cash that could otherwise go to wages. The link between healthcare and employment explains why millions of Americans have lost coverage during this recession. Budding entrepreneurs with ill spouses or children stay in jobs they loathe for fear of losing the insurance they need. Keeping employers at the core of the welfare state is bad for business, bad for the economy and bad for families.
With flaws like these you would think a prime goal of health reform would be to give everyone access to group health coverage outside the employer setting. But you would be wrong. Amazingly, this goal was taken off the table at the start. President Barack Obama and Democrats in Congress feared that moving beyond the employer-based system would leave them assailed as "socialists". Business feared being slammed by unions for "shirking responsibilities". Unions feared that if health benefits were no longer shaped through collective bargaining, their standing would fall further. Everyone in Washington feared too much "change".
But ignoring the key structural flaw in US healthcare is precisely what has brought the question of how to finance expanded coverage to its current impasse. Having decided not to move beyond employer-based care, politicians now view the shift of Americans to any plan that requires public subsidy as a negative, because it adds to the cost of reform.
The most depressing examples of this thinking are the proposed rules to keep people in job-based care. Strict limits, for example, would govern who could use new insurance "exchanges" that would give access to competing plans, including a public insurance option. Those who already have coverage from an employer would be barred from seeking coverage there. But this is exactly the opposite of what sound policy should be doing. Worse, this lockdown obviously does not lower national health costs at allit just keeps the amount on the public ledger below some threshold deemed politically acceptable.
The better solution would be a "grand bargain", through which business shifts health costs off its payrolls and on to government, in exchange for business supporting the broader revenue needed for government to accommodate this shift. Contrary to conservative claims, it is perfectly possible to do so in market-friendly ways. As health systems in Switzerland and Holland show, the US could have universal coverage without taking the road of single-payer care.
Democratic Senator Ron Wyden has been the lonely voice arguing that America must move beyond job-based healthcare to boost business competitiveness while assuring family health security. Mr Wyden mustered a small bipartisan coalition around such a plan, but the weight of dead ideas in Washington has stifled the proposal.
In the long term there is reason for hope. As long as some form of insurance exchange is included in any final bill, some non-poor, non-elderly Americans will for the first time have a way to buy group coverage outside employment. This infrastructure can expand and become a safe way to move more people out of job-based coverage over time. Mr Wyden hopes to accelerate that process; he has proposed that workers be able to take the money employers spend on their benefits and use it to buy coverage at the exchanges if they prefer. If these innovations are launched in even modest form this year, America will be on a path to consigning employer-based coverage to the dustbin of history, where it now belongs.