The case against health care
What do you suppose would happen if every time your employees visited the grocery store you were obligated to pay the bill? Who dines tonight on meat loaf when your menu includes prime rib and filet mignon? Who among them selects the can of tuna for that staple salad when fresh salmon, Alaskan king crab and New England lobster are on the carte du jour? Which of your staff members would confine themselves to generic store labels? Would their self-discipline dictate a single bag of chips? How about bologna at the deli counters — don’t greater enticements languish here as well?
Do you think some employees might take advantage of this company largesse? What financial incentive exists in this plot for them to do otherwise? Remember it isn’t their wallet. It’s yours.
In all seriousness, this isn’t fiction. Sadly, it is real. Employer funding outside of, and in addition to, a paycheck is exactly how our health-care system is funded. Why?
The analogy to grocery shopping for our health-care payment system is an excellent one. While all of us may not require continuing medical care to maintain our health, it is a necessity for each of us to eat. The need for the basic three – food, shelter and clothing – is undeniable.
Having subordinated health-care services to the right of a human being to basic sustenance, why do employers pay for health-care services directly and not for the groceries, the shelter and the clothing? It is not my intent to champion their initiation, but rather to question the appropriateness of the current situation for the purchase of medical care services. Without an incentive to control costs, who will?
No one designed our health-care payment system as it is. It is the result of Darwinism. Insurers, in an effort to reduce costs and avoid adverse selection, priced their product to encourage fewer group accounts rather than individual accounts. This practice minimized the paperwork. Purchasing through the employer was cost-effective. Over time, as a result of continuing wage negotiations/concessions and salary reviews, the employer gradually paid the entire tab.
Employees regard medical insurance as an entitlement.
Today the cost of medical insurance is very appreciable. Doctors suggest ambulance-chasing lawyers are the cause; lawyers point to medical negligence. Both direct concerted anger at insurers.
There are more dynamics involved. But the point is under the current system employees have no financial incentive to control costs. When it comes to health-care service consumption, employees behave very differently than when they buy groceries, cars, clothing, electronics, etc., on their own.
Don’t blame the employees. They didn’t create the system. They just respond to the financial incentives, or the lack thereof.
Over a decade ago, the Bill and Hillary team suggested a radical idea: to federalize our entire healthcare system, a complete government takeover of about one-seventh of our economy. The feds would collect all the premiums, pay all the claims and handle all the appeals. While there were numerous reasons cited by opponents to that option, the point here is this is still a third party payer system. How would this arrangement change the fact that the user of the service is not the purchaser? The dynamics of the situation remain the same.
The only resolution to an economic issue is to create economic incentives for the employee to exercise restraint in medical service utilization. Co-pays are a start, but obviously not sufficient on their own. Health/medical savings accounts are at this writing still untested on any statistically valid scale. A radical option would be for employers to terminate medical coverage as a defined benefit and change to a defined contribution, allowing employees to make their own choices.
If you believe the present health-care payment system is satisfactory and the best arrangement for our society, then by all means let’s extend it to the purchase of food as well. Your grocer can’t wait.
Arthur “Chip” Card of Manchester, a business advisor and mentor, is an accredited senior associate of the Institute for Independent Business International. He can be reached at: email@example.com.