Is employer based healthcare the reason for high healthcare prices? A princeton professor shares his point of view.

Is employer based healthcare the reason for high healthcare prices? A Princeton professor shares his point of view.

A few days ago an article on why healthcare costs are so high was presented on our blog (read it here). While there are differing opinions, the fact is that most developed countries have national healthcare that does not bankrupt their citizens while keeping costs in check. In the USA, we have a pseudo market system that raises costs by having someone else pay for it (an insurer) in the private sector. This failed system is the lynchpin of Obamacare. The problem as I see it as a practitioner is too many for profit entities battling it out in congress for their piece of the pie and the insurance company is also trying to hide the cash, while bonus infused CEO’s seem to be the norm now. Did someone forget the point that healthcare is about the patient, and finding sensible cures for what ails us vs. our current free for all system of procedures and fear which drives patients to making bad and expensive decisions which in the end often makes little difference to our survival in the long run.

Check out this article here.

The Culprit Behind High U.S. Health Care Prices

Elizabeth Rosenthal’s eye-opening article about health care costs in The New York Times on Sunday was a reminder of how much more Americans pay for given procedures than citizens in health systems abroad. What was probably more surprising to most readers was the huge price differentials for identical procedures — not only across the United States, but even within American cities, where prices for a given procedure can vary tenfold.

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These price differentials, it should be noted, have never been shown to be related either to the cost of producing health care procedures or to their quality.

The question, not addressed in the article, is who bears the blame for this chaotic, private-sector price system. The only fair answer is: American employers. Who else could it be?

I have been critical of employment-based health insurance in this country for more than two decades. In the early 1990s, for example, at the annual gathering of the Business Council, I bluntly told the top chief executives assembled there, “If you want to find the culprit behind the health care cost explosion in the U.S., go to the bathroom and look in the mirror.” After years of further study, I stand by that remark.

I can imagine that some would look instead to the usual suspects – Medicare, Medicaid and possibly even the Tricare program for the military – but that would be a stretch. The argument would be that the public programs shift costs to the private sector, causing the chaos there. Few economists buy that theory.

Most health-policy analysts I know regret that employers appointed themselves their employees’ agents in the markets for health insurance and health care, developing in the process the ephemeral insurance coverage that is lost to the family when its breadwinner loses his or her job.

Employers were able to capture that agency role during World War II when they successfully walked around the prevailing wage controls simply by having Congress exempt fringe benefits from the wage cap. Employers were able to retain their agency even after the wage controls ended by having Congress exempt employer-paid fringe benefits from the taxable income of employees, a tax preference not granted Americans who purchased health insurance on their own. Retaining their tax-preferred agency role has been of great help to employers in the labor market.

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