So opines my better half. Her point is that everything happens for a reason, although that reason may not be immediately (or ever) apparent.
I bring this up because Bob Vineyard recently posted this comment: “My personal opinion is that employers should provide as many health benefits as possible . . . in lieu of higher wages. The tax breaks to the employer (and employee) are considerable.” The “coincidence" is that Dr Ford over at CA Medicine Man has posted his response to an article on this very subject in Internal Medicine News.
Let me take a moment to mention that Dr Ford’s blog is an extremely readable, informative, and interesting place. As a physician, he brings specific medical knowledge, but it’s never too technical, and never dry.
The article, by Dr. Warren Greenberg, posits that we should do away with the corporate tax-break for health insurance, which would lead to increased competition based on quality of care. Dr G is a Professor of Health Economics at George Washington University in Washington.
He is also ignorant of how heath insurance really works. Those who are familiar with the term may categorize the following as a fisking.
Dr Greenberg’s first premise is that health plans compete primarily on price. Actually, he gets this partially correct: price does, indeed, play a major role. But it is not the overarching criteria; if it were, then the lowest priced plan in a given market would ALWAYS dominate that market. Since that doesn’t happen, it follows that his premise is false.
He follows that up with the assertion that “there is relatively little competition among health plans based on quality of care.” For a Professor of Economics, that’s pretty sloppy. Where are the facts and figures to back that up? Where are the studies that either support or refute this claim? He continues, “if a particular health plan were known for its high-quality care, it would likely attract the sickest — and most costly — patients.” Again, this ignores the real-world fact that plans DO compete in quality: who knowingly buys the plan with the WORST care? And trust me on this: if a plan offered consistently poor quality care, the market would know this, and competitors would capitalize on it.
Since he hasn’t identified the real problem, he goes on to offer his solution: remove the tax-break for corporations. Yes, you read that correctly: the way to foster better care is to make insurance more expensive. If you agree with this conclusion, then you won’t like the rest of this post.
Dr G avers that if employer based health insurance was stripped of its tax advantages, it would become more popular. Really?! Again with the baseless assertions. On what facts is this conclusion based? Certainly not on any real world experience. The tax advantages of employer based coverage are, if anything, a minor issue. What makes group insurance attractive is the underwriting (guaranteed issue) and the benefit configuration (multiple options, maternity, etc).
The climax of the article, such as it is, is the assertion that absent employer-based coverage, plans would “be much more conducive to competition based on quality.” And why is this? Well, it’s because of “(h)igh workforce turnover.”
Hunh?!
What does plan competition have to do with workplace turnover? The answer is, not much. Yes, it’s true that because the plan is sponsored by a third party (the employer), the employee has little vested interest. But this fails to take into account the myriad of financial products now bundled with the medical ones (FSA, HRA, HSA, etc), and the now ubiquitous use of deductibles, co-pays and co-insurance. Surely the employee has ownership issues now.
More tomorrow…
A hit and a miss . . . kinda.
ReplyDeleteI am not really disagreeing, but maybe amplifying. Tax breaks are an issue, but maybe not as conscious as they should be (or even once were). The primary reason the tax break on benefits came into being can be traced back to the 40's (could be off by a few years but the principle is correct) when wage/price controls were imposed. The unions were looking for a way to get around the wage freeze and petitioned Congress to change the tax code. The result was "fringe benefits" (not French benefits as in the commercial) became a non-wage tax loophole. Corporations were able to provide benefits (such as group insurance), take a full deduction for premiums paid AND those premiums were not taxed as wages to the employee.
The employees whose wages were frozen by law were able to get a "raise" by virtue of an untaxed benefit.
The same holds true today as premiums escape not only income taxation (federal and state) but FICA, SUTA, FUTA and workers comp.
That being said, removing any tax incentives will not make coverage less expensive, just less available.
As the Prof has pointed out, one of the raison d'etre for group insurance is the "guaranteed" insurability feature. Sure, this does add to the cost of coverage (in some cases quite significantly) but it also addresses those who cry about the cold-hearted carrier who refuses to accept someone with a pre-existing condition.
I can't fault the Prof for his views and he does a handy job of refuting the claims by Dr. Greenberg.
Of course this post was just BEGGING for a comment . . .