Friday, August 24, 2007

Getting Health Care Out of the Labor Market

Yesterday, Rick Esenberg took issue with a comment of mine regarding the rationale behind health care rationing in the US today.

Responding to my statement that "either your employer offers good coverage or it doesn't," Rick writes:
That's not quite right. Your employer does not offer good coverage or not based upon her astrological chart or whether she is a naughty or nice. She provides it if she needs to do so in order to attract the type of workers that she needs and can afford.
Of course, Rick's essentially correct that coverage is an employment benefit that's typically considered a facet of compensation, which is generally determined by the labor market.

But that's a rationale for the rationing of coverage, not care.

To be sure, there are a good number of people who would be able to utilize their position in the labor market to find new coverage if their current employer decided to drop their existing coverage. It'd surely be a hassle finding a new job, but it would be possible.

But, as health care becomes more and more expensive, there's an increasing number of people who can't easily find a new job to secure new coverage -- people who would be left without coverage, and subsequently without access to most care, if their current employer dropped their health benefits.

And that's how the rationing of care in this country is irrational. It's not determined by need or cost-effectiveness of the treatment, but instead by whether the patient can afford it (there is charity care available for some critical standalone treatments, though the cost of that care is just shifted onto those who do pay, which further contributes to the cycle).

What's more, the larger question remains, should health coverage really be dependent upon your position in the labor market?

One of the most intriguing features of reform plans like Healthy Wisconsin (HW) or the Wisconsin Health Plan (WHP) is that they would effectively sever the tie between health coverage and employment.

At the same time, however, this brings up an issue with the funding for plans like HW and the WHP. While they would separate coverage from employment, they wouldn't separate funding from employers. In fact, employers would be relied upon the most for funding under HW and the WHP.

This is a legitimate concern, and one that is largely borne out of the fact that health coverage has been largely paid for directly by employers in the US throughout the last century. Changing that in one swoop wouldn't be easy.

Of course, it's also true that employers wouldn't necessarily get stuck holding the bag entirely under HW or the WHP. Similar to the way that many employers are cutting benefits -- i.e., reducing compensation -- as health care costs go up in today's system, under HW or the WHP the compensation freeze or cut would just come from somewhere else (probably wages) if the employer assessment becomes too great.

But perhaps a better answer to this dilemma of how to separate health coverage from employment is the Healthy Americans Act (HAA) proposed by Dem Sen. Ron Wyden late last year and recently co-sponsored by GOP Sen. Bob Bennett. Importantly, the HAA also has the backing of some major employers, such as the CEO of Safeway, along with major labor unions, such as the Service Employees International Union.

The basic idea of the HAA is that employers would "cash out" their health coverage expenses in the form of increased wages for employees for at least two years. Individuals then would be required to purchase a private insurance policy or face tax penalties, which is similar to the individual mandate in Massachusetts.

This two-year "cash out" period is intended as a transition from coverage as an employer-based benefit to coverage as a personal responsibility.

After the two year period, employers would no longer need to pay the extra wages, and instead would pay an assessment based upon an equation involving the average regional premium rate, the number of FTE employees, and revenue per FTE employee. This assessment would make up only about 10 percent of the total funding for the system as a whole; so, while employers would still be contributing something directly, it would not nearly be as much as they would be contributing directly to a system like HW or the WHP.

Key to the HAA is the federal subsidies that would be given to individuals up to 400 percent of the poverty level to help pay for their coverage. These subsidies would be paid for by the employer assessment described above along with the elimination of the federal tax break for employer-sponsored health coverage and some savings to Medicaid that would come along with the plan.

It's unclear -- to me, anyway -- whether something like the HAA could be tailored to Wisconsin alone, though it seems worth a look, especially if getting health care out of the labor market is a goal, and it certainly should be.

More details on the HAA can be found here.

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3 Comments:

Blogger Jack Lohman said...

Mandated "insurance" of any type is a sell-out to the insurance industry. We don't need to guarantee insurance, we need to guarantee "care."

We should quit expending so much time trying to find ways to avoid doing it the right way, and simply fix the systemic problem. Let's eliminate the 31% of drain caused by the insurance bureaucracy and get Healthy Wisconsin installed. We can and will tweak it later, but let's quit stalling and move forward.

You can always tell whether the plan is good or bad by the opposition it draws, and HW has brought the worst of them out.

August 25, 2007  
Blogger Dad29 said...

Jack, you have an idee fixe problem.

As to "one State" or "all States," the answer is "all." There are far too many tax/reg disparities between States to allow onesy-twosey solutions.

Insofar as the plan you mention does not seem to limit coverage options, it might work.

Only problem is limiting the number (and cost) of 'free/highly subsidzed' recipients, which of course, is political, thus dependent on electing people with honor instead of whores.

August 25, 2007  
Blogger Seth Zlotocha said...

Jack,

Until care can come without coverage, you're not going to get more of the former without reforming the latter.

And the payer structure under the HAA is essentially the same as it is under HW; the biggest difference between the two is the funding structure.

Dad29,

A minimum set of benefits is required under the HAA to allow for community rating and avoid adverse selection.

And subsidizing coverage payments up to 400 percent of the FPL -- only those under 100 percent would be fully subsidized -- is plenty reasonable.

August 25, 2007  

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