Reinforcing bad habits

Reinforcing bad habits

A major reason that health care costs are high and rising is that there are perverse incentives that cause higher spending. Health insurance is a tax free benefit, which has encouraged companies to spend money on comprehensive policies rather than paying the equivalent amount in wages. Increasing demand leads to increased costs. Just as employers have started to realize that this system is flawed and have started to change it, along comes the government with policies that add fuel to the fire.

Two current examples:

  • Rather than eliminating the deductibility of health insurance (an idea that had been floated a while back), the Bush Administration has proposed extending the deductibility to health care costs not paid for by employers
  • The so-called “Wal-Mart” laws in Maryland –and as proposed in California– mandate a minimum percentage of wages that big companies must spend on health care

I’d like to see an end to policies that mandate spending levels or that encourage increased spending by providing a tax shield.

February 24, 2006

One thought on “Reinforcing bad habits”

  1. Ever see tag-team wrestling, David?

    Imagine the Bush administration holding American Healthcare in a hammerlock on the mat. Now the AFL/CIO jumps on top of Healthcare from the ropes and starts pounding it with an elbow.

    That’s what the radio ads I heard yesterday sound like. I could not reproduce them accurately, but the upshot is that employee health benefits are a right that the unions fought for and will never sacrifice. So there!

    I so wish I knew how to get the toothpaste back in the tube.

    I had dinner last night with my father-in-law who knows a bit about healthcare and economics. He predicts we’ll be in single-payor before any of these incentive problems are solved.

    Will single payor make the incentive problem easier or harder to fix?

    best,

    Flea

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