Employer-provided insurance and rising medical costs
October 28th, 2008 | by Brian Schwartz |McCain wants to end the tax code’s bias for employer-provided insurance. Obama wants to preserve it.
I’ve described how the tax exemption for employer-sponsored insurance coddles insurance companies, who know you must change jobs to buy from a competitor. Boston Globe columnist Jeff Jacoby describes how it leads to rising medical costs:
a radical shift in the way Americans paid for medical care. With health benefits tax-free if they were employer-supplied, tens of millions of Americans were soon signing up for medical insurance through work. As tax rates rose, so did the incentive to keep expanding health benefits. No longer was medical insurance reserved for major expenditures like surgery or hospitalization. Americans who would never think of using auto insurance to cover tune-ups and oil changes grew accustomed to having their medical insurer pay for yearly physicals, prescriptions, and other routine expenses.
We thus ended up with a healthcare system in which the vast majority of bills are covered by a third party. With someone else picking up the tab, Americans got used to consuming medical care without regard to price or value. After all, if it was covered by insurance, why not go to the emergency room for a simple sore throat? Why not get the name-brand drug instead of a generic?
Unconstrained by consumer cost-consciousness, healthcare spending has soared, even as overall inflation has remained fairly low. Nevertheless, Americans know almost nothing about the costs of their medical care. (Quick quiz: What does your local hospital charge for an MRI scan? To deliver a baby? To set a broken arm?) When patients think someone else is paying most of their healthcare costs, they feel little pressure to learn what those costs actually are - and providers feel little pressure to compete on price. So prices keep rising, which makes insurance more expensive, which makes Americans ever-more worried about losing their insurance - and ever-more dependent on the benefits provided by their employer.
Keep in mind that we’d have the same problem so long as insurance is tax-subsidized and medical expenses are not, regardless of whether it’s employer-sponsored insurance.
(Via FIRM)
tags: employer-sponsored insurance, McCain, Obama Care
