Tuesday, July 23, 2019

It's Time to Phase Out Employer Sponsored Health Insurance. Here's How.

A few month ago, I wrote a post explaining why employer sponsored health insurance (ESHI) has been called the original sin of the U.S. health care system. This post now turns to some ideas for escaping the ESHI trap.

Close to half of all Americans receive health insurance coverage through their jobs. In no other major country is health care coverage tied as closely to employment as in the United States. American-style ESHI has three major unintended consequences.

  • “Job lock” makes workers afraid to move to a more suitable job, to become self-employed, or to start one’s own business for fear of losing insurance coverage.
  • ESHI is severely inequitable. Health insurance benefits are tax-deductible, but the deduction is of greater value to people in higher tax brackets, and higher-paid workers are far more likely to get health benefits to begin with. Those in the top fifth of the wage distribution are estimated to get ESHI benefits that are nine times higher than those of the bottom fifth.
  • The existence of thousands of ESHI plans, some of them quite small, adds to the fragmentation of the U.S. health care system and contributes to high administrative costs.
Any worthwhile strategy for health care reform needs a strategy for escaping the ESHI trap.

The Non Sequitur in Sanders' Case for Medicare for All

During June’s Democratic debate, moderator Lester Holt asked Bernie Sanders a question about Medicare for All. Sanders replied:

Lester, I find it hard to believe that every other major country on Earth, including my neighbor 50 miles north of me, Canada, somehow has figured out a way to provide health care to every man, woman, and child, and in most cases, they’re spending 50 percent per capita what we are spending.

Taken at face value, the statement is close enough to pass for true by the standards of contemporary political discourse. But as a defense of Medicare for All, it is a non sequitur.

The reason: No other major country offers a plan that is anything like Medicare for All.

Here is a chart, based on data from the Commonwealth Fund, that compares the United States with 10 other major countries in terms of heath care spending and health care performance.

Yes, all countries shown have better health care outcomes than the United States, and all spend less (although more than half as much). But how closely do their health care systems resemble Medicare for All? How broad is their coverage? How centralized are they? What role do they assign to private insurance? What do they require by way of premiums and cost-sharing? Here are some answers, starting with the three top performers. (See here for the full health system profiles of each country.)