Today’s national political landscape is dominated with the issues of health care, repairing Social Security, education and tax
cuts. One of these, health care, seems to be the hottest of the bunch. It seems an appropriate time to look beyond the
surface of the health care debacle and into the beast itself.
To a large extent, the problem with health care is really the problem with health insurance. Just as many Americans can’t
remember life without TV and credit cards, life before health insurance is unthinkable. However, there was indeed such a
time in our nation’s history.
Health insurance did not become widespread until World War II. In those days, the country was under wage and price
control and employers were searching for some way to increase employee compensation without violating the law. Providing
health insurance was the ticket to ride.
A principal value of employer-provided health insurance was then and is now the favorable income tax treatment accorded
to it. The cost of the insurance is tax deductible to the employer and nontaxable to the employee. Cheaper on all concerned
to pay an employee’s health insurance cost rather than pay a bonus to the employee and the employee then pay the health
insurance premium with after-tax dollars. Once health insurance became somewhat subsidized by the government through
the tax code, one would assume that it would be cheaper to the consumer. The magic of mass purchasing would keep the
cost low. That has not happened. The reason is pretty simple.
Since the employer pays the freight for health insurance, we abuse it. We want every little nickel-and-dime medical expense
covered by health insurance, and we want the best medical care performed in the most up-to-date facilities.
Compare this attitude with automobile insurance, which is pretty much paid by the car owner himself. Do we buy insurance
to cover the cost of changing oil in our cars? Of course not. We expect to pay routine maintenance costs ourselves and buy
insurance to handle the big stuff. But most people use health insurance to cover routine health care costs because they are
traveling on the employer’s dollar.
Let’s carry the comparison a bit further.
Imagine that your employer gave you a food insurance policy as a non-taxable perk. Would you buy steak or sardines?
Eventually, the food insurer would crack down and insist that you be more responsible and limit yourself to having steak on
special occasions and eat some baloney along the way. You would likely petition your congressman to require that you get
steak once or twice a week. And he, thinking of re-election, would sponsor legislation to place controls on the food
insurance industry. Likely, a new cabinet-level post would be created to manage the burgeoning food insurance business.
The bureaucracy would cause costs to spiral out of control and pretty soon you would be lucky to get a can of Alpo.
The health insurance market would work better if there were less insurance money paying for routine medical expenses.
Health care would ultimately be cheaper for everyone if insurance covered only major medical expenses.
The chance of this kind of logic producing any change in the attitude of American consumers toward the issue of health care
is not good. However, there may be value in explaining one of the reasons why the cost of health services is escalating faster
than any other sector of the economy.
The fault for high health care expenses does not lie solely, or even primarily, with the health care providers. Today, doctors
and hospitals are making less money than they did in the past. New medical advances are keeping us healthier longer and
those advances cost mega bucks. If we could somehow get health care back into the private sector and release it from the
talons of bureaucracy, we would all be better off.
Thought for the Moment
Bear with each other and forgive whatever grievances you may have against one another. Forgive as the Lord forgave you.
– Colossians 3:13
Joe D. Jones, CPA, is publisher of the Mississippi Business Journal. His e-mail address is firstname.lastname@example.org.