Published in the Journal News -- January 28, 2002
The United States has achieved a level of economic might
unsurpassed in the world. Yet, on any given day, almost 40 million Americans lack access to even basic health-care insurance.
This situation arises from the fact that third-party payers
dominate U.S. health care. Today, the U.S. government, insurers, and other third-party payers are responsible for an overwhelming majority of health spending each year. In spite of the fact that the United
States ranks at the top of the world in terms of per capita health spending -- currently spending substantially more than Britain, France, Germany, Italy or the Netherlands -- a sizable part of its population
lacks health coverage.
Under our current health-care system, patients are no longer
consumers. The interests of the payers take precedence over the concerns of patients. Budgets and health-care needs compete unneccessarily. In the end, the payers make the decisions that matter most, and
patients' interests are often relegated to afterthoughts.
The dominance of third-party payers began nearly 60 years ago.
During World War II, the huge number of men and women being mobilized for overseas combat created a serious labor shortage. With government wage-controls in place, employers could not offer wage hikes aimed to
attract new workers or retain existing ones. But the IRS then ruled that employer-sponsored health insurance could not be taxed as income to workers, and employers were able to offer this "perk" as an inducement
while receiving a tax deduction for its value.
What is ironic about this tax exclusion for employer-sponsored
health care is that many middle- and even lower-income Americans whose companies do not offer health insurance, and who can not afford to purchase insurance on their own, are subsidizing the cost of health
insurance for the insured. Presently, the value of the employer-health-care tax exclusion comes to more than $110 billion per year. As a result of this generous tax break, more than two-thirds of non-elderly
persons depend on employers for health coverage, despite two fundamental flaws.
First, companies need to be profitable in order to survive and
compete. Consequently, cost becomes a major consideration for companies purchasing health coverage for their employees. With health-care inflation spiraling upward during the late 1980s, employers sought
to curb insurance costs that were undercutting their profits. As a result, there was a rapid proliferation of managed-care plans, aimed at controlling costs, which imposed numerous conditions on patients and
doctors. Today almost all employees with health benefits are covered under such restrictive plans.
Second, employer-based health care ties coverage to a job. In
cases where workers change employers, they cannot retain their existing health plans because it is really the employer who "owns" the policy. Thus, employees sometimes find themselves locked into unsatisfying
jobs or blocked from potentially rewarding new job opportunities.
As a business owner for more than 50 years, my goal has always
been to attract the best workers by providing them with competitive wages and attractive fringe benefits. Although health insurance is both a major business expense and a major benefit to employees, many
employers find that the cost of health insurance is underestimated or ignored by employees, who do not realize that those large costs represent a significant part of their total remuneration.
Yet, if patients are to make informed choices, it is imperative
that they have the information necessary to make good health-care decisions. Although there are numerous health-care proposals that would change the current payment system, little meaningful reform is likely
until the real cost of health insurance is made apparent to employees.
As a step in the right direction, employers should make a point of
disclosing to employees the full cost of their health care. This would include the employer and employee portions, along with the value of the associated tax break. Once employees are made aware of how much
money is currently being spent on their behalf for health care, they will be in a better position to determine whether they are receiving meaningful value.
Some employees will conclude that their existing coverage is a
good deal, and that is fine. Many others will find the costs far too high for the value received. In any case, once the total cost is made evident to all, there will almost certainly be a change in public
opinion. Such new public awareness of the real costs of health care would be a first step toward genuine health-care reform.
Leonard M. Greene
The writer is president of the Institute for SocioEconomic
Studies and Safe Flight Instrument Corporation, both located in White Plains.
