The Healthcare Gecko (originally posted 11/19/09 - perhaps Mr Buffet read it?)
Here’s a question for you: Why is there no healthcare Gecko? (Of course, Warren Buffet owns GEICO...) Wouldn’t it be great if 15 minutes could save you 15 percent or more on health insurance? For that matter, where is the Progressive girl with the red lipstick selling health policies? Is it possible that this is the real problem? Is it possible that the reason this is a crisis is that there is no such thing as a true individual market for healthcare? The fact is, only about 5 percent of the insured buy their own health insurance. The other roughly 95 percent get their insurance from the government or their employer. For car insurance the numbers are reversed, and there is no similar crisis in that market!
First, how is it that we ended up almost entirely removed from our healthcare purchases? The original sin dates back to FDR and WWII when wages were frozen and companies found a loophole by deducting benefits. Like many loopholes, this one grew into the monster it is today, and along the way it carved in stone the expectation that healthcare is someone else’s responsibility. That expectation has led us down a path towards distorted markets, rigid employer-paid insurance, ever increasing government involvement, and skyrocketing costs. Meanwhile, the car insurance market keeps innovating and improving.
Comparisons of car insurance and health insurance are not always appropriate. President Obama is fond of comparing mandatory car insurance with a mandate for health insurance. I suspect Mr. Obama knows the difference between mandated liability coverage, and a mandate to cover one’s self. These are not comparable. I’m not aware of any state that mandates insuring your car. State mandates only apply to the liabilities you may incur while harming others. There are no such liabilities involved in health insurance.
Some may say healthcare is way more expensive and complicated than car insurance and hence individuals can’t be expected to understand it or afford it. Did you ever try to read your auto policy cover to cover? And while car insurance itself is much cheaper than medical coverage, did you know that individual Americans spend on average four times more on transportation than they do on healthcare? Is your car really four times more important than your health?
Some may say that owning a car is a choice but healthcare is a right. Well if that’s the case, we should amend the constitution because that right is not currently there. Incidentally, It would be the first time since slavery that one person would have the explicit right to compel another to work for his benefit!
Short of turning doctors into slaves, here’s a way out of this mess led by the healthcare Gecko:
Step one: Eliminate the tax deduction for all employer paid health insurance.
Step two: Offset the tax consequences with a reduction in payroll taxes for both the employer and employee.
That’s all it would take to establish an individual market and begin the healing process.
Here’s how these two simple steps would restore an individual market: Employers, losing the deductibility of health insurance would be compelled to transfer the policies to their employees, and gross-up their wages accordingly. The result would be marginally higher taxes for both the employer and employee which would then be offset by a commensurate drop in payroll taxes on both sides. The aggregate change would be completely neutral.
TV commercials would begin running instantly showing piles of cash with googly eyes, cavemen, talking lizards, and girls with red lipstick. Employees would be able to control their own healthcare decisions and take full advantage of their positive lifestyle choices. Those currently without employer coverage would suddenly have a multitude of offers thrust at them from companies clamoring for their business. They’d also have money available to buy insurance due to lower payroll taxes.
To be sure, there are issues other than cost that an individual market cannot address. Suffice it to say that once voters are made the masters of their own healthcare destiny, other issues like long-term pre-existing conditions, tort reform, and portability will get addressed through subsidies and legislation, or politicians will pay at the polls. Currently, politicians are insulated from these issues; voters blame their employer or the insurance company they are stuck with, and this suits the politicians just fine. (I call this the "Healthcare Palestinian Tactic", after the arab countries tactic of keeping palestinians in refugee camps to keep them radicalized, rather than allowing them to assimilate into arab countries.)
Of course, we would still have a subsidized public option called Medicaid for those unable or unwilling to participate in the individual market. But, as competition lowers costs and increases choice, we would likely end up with a much smaller, effective, and sustainable Medicaid. Wasn’t that one of the original reasons we were told this was a crisis?
Recall how we got here: It was a mistake, a loophole, an unintended consequence of a WWII wage freeze. Knowing that, wouldn’t undoing that mistake be the best place to start? The polls show that the people instinctively know this. Unfortunately, politicians have a long history of being able to convince enough people that they can get something for free, and because of that, Obamacare is a fait accompli. (Remember, this was written before Obamacare became law.)