Obamacare and the 1%, Part Two

Obamacare and the 1%, Part Two 6/30/13

The absurdly named Affordable Care Act (ACA), a.k.a. Obamacare, does nothing to make medical care more affordable, just the opposite.  The shame is, and shame is an apt word, there are a number of things the Federal government could have done to improve medical care in America, including make it more affordable, and such things would have required only a few paragraphs, not thousands of pages.

Those few paragraphs, however, would have tread on the interests of at least three “one percenters” who benefit from the current medical system: doctors, unions, and lawyers.  Obamacare and the 1%, Part One, scratched the surface on the AMA’s monopoly of doctor education and accreditation.  The AMA supported the ACA. The ACA does nothing to expand the number of doctors or other care providers.

Unions also supported the ACA because employer provided health care is a tax free benefit for workers, and negotiating health care benefits is one of the most important thing unions do for their members.  The ACA does nothing to change this tax loophole, which is fundamentally unfair to the self-employed and to workers whose employers don’t offer health insurance.

Many years ago I worked for a company that provided terrific benefits including Cadillac health insurance for employees and their families.  The company sent each employee an annual summary of what all the company benefits cost, health insurance being the largest, cafeteria subsidies the smallest.  I figured the company buying my health insurance saved me over $500 a year. What a deal, right? Not quite.

It’s a well known fact that people spend their own money a helluva lot more carefully than other peoples’ money, and that includes buying health insurance. If the company had paid me what they spent on my family’s health insurance,  I would have bought a high deductible policy that didn’t offer some of the benefits my employer offered, e.g. pregnancy coverage, and I would have saved money, after tax. More importantly, I would have incurred lower medical bills because of the deductible, money out of my own pocket I watch very carefully!

The company, Wausau Insurance, didn’t offer that option and I wouldn’t have taken it anyway. They had a great health insurance plan and saw it as a both a recruiting tool and a way to keep employees happy, so happy that they wouldn’t do foolish things like leave for another job that didn’t offer such a deal.  That brings up another problem with employer provided health insurance, lack of portability.  If you leave the company or get fired, say goodbye to your health insurance, a huge problem for the fired or laid-off older worker.

It happened to me.  “Gosh Mr. Burrows, your blood pressure has gone up in the last twenty years. YOU’RE UNINSURABLE.”  (True story.)

How did employer provided health insurance become such a way of life in America? People don’t get their auto insurance, or their home insurance, through their employer — or for that matter, their groceries, electricity, clothes, etc. Why health insurance? Because of a very stupid decision by the Supreme Court during WW II, when it declared health benefits did not fall under the wage and price controls of the time, which was a separate stupidity.

Thus, for over 60 years we’ve lived with this dual tax treatment, which is both unfair and encourages over consumption of medical services. After all, somebody else is paying for it, right?  Numerous critics have recommended the tax code be changed to make heath insurance either taxable or tax deductible; one or the other, but not both as it is today.

Perhaps the best known critic is Harvard economist Martin Feldstein, who wrote in the Wall Street Journal a few years ago, “Like virtually every economist I know, I believe the right approach to limiting health spending is by reforming the tax rules.” (WSJ 8/18/09)

In a separate article, Feldstein noted that employer-provided health insurance received a “federal tax subsidy of more that $220 billion” per year.  Feldstein would tax health benefits and use that $220 billion to help pay for a voucher system to purchase a fully portable policy with a deductible of 15% of family income.  The deductible is a key part of the plan: It would get people to pay attention to their medical costs, plus it would inherently incorporate ability to pay, e.g. if you make $100,000 per year, your insurance starts after $15,000 of medical bills; if you make only $30,000, you pay only $4,500 before the insurance kicks in.

It was, and is, a great idea.  It would be much simpler and cheaper than Obamacre. Interested readers can Google, Feldstein  healthcare  for details. As far as I know, his plan was never considered.  Do you wonder why?

In the WSJ article above, Feldstein wrote, “The unions are particularly vehement in their opposition to any reduction in the tax subsidy for health insurance, since they regard their ability to negotiate comprehensive health insurance for their members as a major part of their raison d’etre.”

Which political party do the unions give over 90% of their support to?  Hint: It’s not the Libertarian Party.

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