Sensible Health-Care Reform (Part 6): Health-Care Costs Drivers, IV

This is the sixth of a series of commentaries, written from a free market, individual-centered perspective, examining the serious deficiencies of our current health-care system, the underlying root causes of those problems, the looming government fiscal catastrophe secondary to health-care entitlement spending, the failure of the recently passed health-care “reform” to address the grave problems facing our nation related to health-care delivery, the harm the recently passed health-care “reform” will cause to our seriously ill economy; and a proposal for a framework to truly, effectively, and sustainably reform our health-care delivery system. This report discusses the preferential Federal tax treatment of employer-provided health-care insurance compared to that of individual-purchased health-care insurance as an underlying cost driver of our health-care system.

The author feels obligated to disclose underlying bias: 1. this analysis reflects the author’s strong belief in the efficiencies and fairness of truly free markets as well in the individual’s right and responsibility of self-determination and of self-reliance. 2. I have 3 daughters, 3 nieces, and 9 nephews who deserve their opportunity to live the American Dream – a dream made possible by the protection of our unalienable rights endowed by our Creator.

Health-Care Costs Drivers – Federal Tax Policy

While government insurance industry regulation has unintentionally and indirectly led to higher insurance costs and lower customer service, Federal tax policy with regard to health-care insurance premiums has also unintentionally and indirectly exacerbated the health-care costs crisis and has increased the numbers of the uninsured. Because of the preferential Federal tax treatment for employer-provided insurance over that for individual-purchased insurance, employer-provided insurance costs less than individual-purchased insurance and results in most individuals obtaining health-care insurance through their employer. Though relatively less costly than individual-purchased plans, employer-provided health-care insurance still comes at the expense of higher wages. As previously discussed, as health-care costs have skyrocketed, an increasing share of compensation has been allotted to the health-care benefit and actual take-home wages have significantly decreased. To some degree, those employees then feel obligated and entitled to make the most of that benefit, which increases utilization and therefore costs.

The tax favored status of employer-provided insurance also, to a great extent, makes health-care insurance dependent on employment. Those persons who don’t receive health-care coverage as an employee benefit must purchase their own insurance without the equivalent tax advantage of employer-provided coverage. Further, those individuals do not have the ability to negotiate as part of a larger group (association health plans) to obtain lower rates. As a result of these 2 factors, individual purchased insurance costs significantly more than employer provided coverage. Not infrequently, many of those individuals cannot afford or decide not to buy health-care insurance. As a result, they too end up in the uninsured count.

For those with employer-provided insurance, loss of employment results in loss of health-care coverage and many of those persons subsequently, albeit often transiently, join the ranks of the uninsured. Although that loss can be delayed because of COBRA benefits, the cost of COBRA insurance often is prohibitively high. Further once COBRA has expired, purchasing insurance as an individual typically is even more expensive.

The next Dr Right installment will examine medical malpractice costs as a significant health-care cost driver.

Call to Action: Though passed by an appalling political process and with complete disregard of our Constitution, though containing ineffective and even harmful policy, though disregarding the inalienable rights given to us by our Creator, the passed health-care reform bill is not the end of the debate but rather a new beginning. It is an opportunity to contrast irresponsible policy with prudent policy, to contrast misconceived policy with thoughtful policy, and to contrast policy that places government in the center with policy that places the individual in the center. Get in the fight and stay in the fight. We have learned, the hard way, the consequences of leaving it up to the career politicians. Contact your legislators and demand they exercise the privilege the voters gave them to represent us to effectively address health-care delivery and the other problems facing our states and nation. Learn about the issues and talk to others about the issues. We must join and financially support conservative think tanks that promote traditional American economic principles, personal freedoms, and values; and that shine the light of accountability on irresponsible or faulty government action and policy. Those organizations include The Heritage Foundation, The State Policy Network, The Commonwealth Foundation and your state’s conservative think tank (see SPN for your state’s organization). We must join and support our local grass roots organizations like the York 9-12 Patriots, York County Action, York Campaign for Liberty, and others, so we can take back the political process that has become corrupt and ineffective. We must work to bring up, from the grass root level, candidates – principled persons (Republicans, Democrats, and Independents) who will actually solve problems, who will respect the Constitution of the United States, and who will honor the “consent of the governed” entrusted to them by the citizens of our counties, states, and country.

God Bless and God Bless America