Sunday, February 26, 2006

Why should healthcare be linked to employment?

This is an ancient debate (year 2000) on whether the US should adopt universal health care by Adam Gopnik and Malcolm Gladwell. Gladwell was opposed to universal healthcare then. Now he has changed his mind, partly because of the thoughts he published in This article.

Here is what Gladwell recently wrote on the subject:
the idea of employer-based health care is just plain stupid--and only our familiarity with it and sheer inertia prevent us from rising up in rebellion. I always try to think of a suitable analogy and fail. The closest I can come is to imagine if we had employer-based subways in New York. You could ride the subway if you had a job. But if you lost your job, you would either have to walk or pay a prohibitively expensive subway surcharge. Of course, if you lost your job you would need the subway more than ever, because you couldn't afford taxis and you would need to travel around looking for work. Right? In any case, what logical connection is there between employment and transporation [sic]? If you can answer that question, you can solve the riddle of the U.S. health care system.
That really is the question, isn't it?

How does tying healthcare to employment make the economy more efficient? Ask General Motors, Ford, and (Yes) Wal-Mart. If we want employers to hire the most effective and efficient employees, then the employers should focus on what value each of those employees can add to the products or services offered for sale. With healthcare for those employees added to the cost of hiring each employee, then we are requiring employers to screen out those potential employees who, with their families, might cost a lot in healthcare expenses. That means the employer must employ less efficient employees if the healthcare costs of the most effective employee is above average.

A universal healthcare system takes that cost of healthcare off the employer and allows him to hire the most effective and productive employees. It also removes to cost of screening for health problems from the employer.

A universal healthcare system also removes the cost of determining eligibility for various health benefits from the entire system of providing healthcare. This cost is estimated at about a quarter of all healthcare expenses. It does so by spreading the costs of healthcare for each individual across the entire group of all people and eliminating the requirement that small groups who are separately insured must eliminate the most likely to be ill from their group.

A universal healthcare system also allows for lower administrative costs by providing for a single administrative system. The reduction in training costs is significant.

There is nothing that individual health insurers can offer by screening for the most healthy beneficiaries that can possibly offset these savings.

[Source Kevin Drum.]


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