Health Care

Kevin Drum (not unexpectedly) comes up with the moderate statist case for socialized medicine, and why businesses should support it. While I agree that businesses have a real incentive in the current regulatory/cost climate to shift this to the government, I believe that there is a much better solution.

First, a digression. It was in WWII that we started, as a nation, subsidizing health insurance. We did this by providing businesses with a tax credit for the money they spent on employee health care. The reason businesses asked for this was that it would allow them to compete better for the scarce worker pool, given that some 28 million young men and women (obviously, mostly men) were under arms, by offering better benefits in lieu of better pay. They were having a hard time offering better pay because the businesses mostly were government contractors and didn't want to raise the price of war goods to the government during wartime. Of course, the reality of this program was to give large subsidies to large companies, which allowed them to outcompete smaller companies, who didn't have a large enough worker pool to get preferred insurance rates, and thus could not compete on a level field with the large companies. (This was not a bug; it was the central point of the program.) Other large companies, of course, had large numbers of workers and thus were able to compete on level terms.

Of course, once such a program is enacted, it takes a national near-catastrophe to undo it, and so this method of paying for health insurance has persisted into the present day. Assuming that it is in the interest of the Federal government to ensure a healthy population (arguable, but I can accept it under some conditions, and certainly on utilitarian grounds), the current system is nearly the worst way to provide it. The only worse way I can think of is socializing the entire system.

Socializing the entire system would be a disaster, because the central point of government-controlled medicine is its scarcity. There is a reason why we get patients in droves from Canada, and in lesser numbers from all over the world: sufficient funding from private sources allows us to provide the best possible healthcare in extreme cases, exceptional healthcare across a broad spectrum of cases, and some health care even to the poorest. (Despite numerous horrifying anecdotes, promulgated third-hand every time the proponents of single-payer care try to impose it on the rest of us, I've yet to see a confirmed story of someone being turned away from at least emergency-room care when they are in need.) Adequate preventive care appears to be available in every population center of note, should people wish to take advantage of it. (Most cities, for example, run hospitals which are compelled to take patients regardless of ability to pay. Also, there are free clinics for many common problems among the poor. The countryside, of course, tends to have fewer such resources.) I personally don't want the government to bring the compassion of the DMV and the financial management of the Bureau of Indian Affairs to focus on giving me health care.

Having companies fund the health care for their workers makes more sense than socialized medicine, but has numerous and large flaws. For example, if you work for a large company, you generally have affordable benefits which work well for you. If you work for a small- to mid-sized company, you have expensive benefits with much less flexibility and coverage. In both cases, you have virtually no real choice in your health plans, as each provider meets basically the same coverage requirements at basically the same costs. If you are out of work, or work for a very small company, or work for a company with high turnover (such as fast food or retail stores), you likely don't get any health insurance coverage until you are a manager. In addition, the costs in meeting these needs for their employees and the costs of regulation imposed by the government and the costs of paperwork imposed on the employees to meet all of those regulatory burdens (and the fiscal burdens and audit requirements of the employer) conspire to make the entire system dreadfully inefficient and a pain in the ass to deal with.

No government involvement in health care, other than perhaps to run free hospitals and clinics for those who need them, might work - it has worked in the past for us - but I suspect that (with current medical care depending on expensive people, equipment, facilities and drugs) such a lack of involvement would result in a brittle system, with good care available to the rich, and virtually nothing available to anyone not in the middle class or higher. Also, this would almost certainly be politically impossible in a country which accepts the proposition that it's OK for government to be involved in virtually everything.

A better system would be to do away entirely with business tax credits for subsidizing employee health insurance, and the provision for allowing a deduction for large health expenses not covered by insurance (I think anything under 15% of your salary is not covered by the current individual deduction), and replace both of them with a direct credit to individuals for all health care costs. In other words, any money I spend on health insurance, medicines or whatever would be credited to me on my taxes. This would allow each employee to spend as much or as little as they choose in order to get coverage tailored to them, and would allow for a far more efficient system in general (for one thing, too much paperwork and I take my business elsewhere).

That system could be improved on in order to fix some of the flaws. The individual tax credit amount would not emphasize good insurance, or cost cutting by the individual, with a straight credit. After all, why not get the absolute best when you're not paying for it at all. This could be fixed by having smaller percentages credited as the costs increase, which would tend to make insurance a better bet for anything other than relatively small amounts (say, under a few thousand dollars), while making insurance affordable by not driving people to use insurance to pay for every single visit to the doctor's office for routine care. The problem of some people being unable to get insurance (because, for example, they have really bad health problems or because they are destitute) could be solved by retaining Medicare/Medicaid and applying them only to the uninsurable (which should, as a side benefit, reduce the costs of those programs).

There are other problems, of course, in any system so large an complex. However, if you accept the premise that the Federal government has an interest in ensuring a healthy population, then I believe that individual tax credits are a far better way to achieve that than corporate tax credits or socialized care.

Posted by Jeff at July 3, 2003 01:47 PM | Link Cosmos