About Me

A blog wherein a literary agent will sometimes discuss his business, sometimes discuss the movies he sees, the tennis he watches, or the world around him. In which he will often wish he could say more, but will be obliged by business necessity and basic politeness and simple civility to hold his tongue. Rankings are done on a scale of one to five Slithy Toads, where a 0 is a complete waste of time, a 2 is a completely innocuous way to spend your time, and a 4 is intended as a geas compelling you to make the time.

Tuesday, August 4, 2009

Health Insurance

I'm utterly baffled by this belief in the salubrious effects of taxing employer provided health insurance benefits.

The more ardent free marketeers love to tout the benefits of treating health care as a consumer driven market like deciding whether to go to McD's or Subway for dinner. We've been told how if we can just get consumers more involved with their health care costs will come down as consumers make better decisions. I don't think higher co-pays, deductibles, etc. really do that, though, because too much health care is done when the need is urgent, which does not lend itself to comparison shopping. Too much health care, well it's your life that's at stake so if the doctor tells you to take Tests x/y/z and Drugs q/r/s there's a certain reluctance to challenge the experts.

The argument for taxing health insurance is, simply put, that since it isn't taxed it costs less than it would if it was taxed. And since it costs less, we therefore spend too much money on it vs. things that cost more. If it is taxed, business owners will get more serious about getting a better buy for their health care dollar, just becoming better consumers, thus spending less.

The first part of that argument I kind of agree with. Yes, at a certain level decisions are guided by tax policy. Houses certainly cost more because we can factor in the benefit of the mortgage interest deduction, and thus pay more for a house than if we did not have a mortgage interest deduction. Which is why that is unlikely to go away, because the transition issues are so mighty.

Yet, real estate is an actual functioning marketplace, and people might buy more house than they would otherwise but still shop very carefully for houses. They look at many many houses over a period of time and carefully weigh pros and cons and the market functions. But health care isn't like that. Imagine if every house were to be purchased only in circumstances of immediate dire need, like if human babies gestated in nine days instead of nine months and you had to have that extra bedroom right away, or if you only took a new house when the job was moving, or etc. etc. Then the housing market would be like the health care market.

Because you see, health care is an expense. Business owners do not spend money lightly. I would happily keep my health care costs down if I could. And how can I do that? Basically, the more I screw my employees with deductibles and co-pays and shittier benefits, the less money I can spend on health care. Does this sound like the way we should run our lives? Some people would say yes, but I do not.

The big macro-questions that drive up health care costs are totally beyond my individual control. New York State wants to mandate certain minimum coverage, that's not something I control. The administrative costs that drive up health care costs? Beyond my control. Allowing drug companies to advertise directly to consumers? Beyond my control. Conflicts of interest where doctors can build their own MRI machine and then use it? Beyond my control. Breakthrus in technology or drugs that provide better care at higher cost? Beyond my control.

All I can control is how much I want to screw over myself and my employees by offering us all shittier health insurance, and then after I've gone to the shittiest possible coverage my % increase will still be driven by the overall costs in the health care market and I'm back where I was.

This isn't a functioning market. Taxing health care benefits will either raise my expenses without good recourse, or force I and my employees to have shittier health insurance.


Cynthia Reese said...

Huzza, huzza! This is one topic I'm passionate about, and I so agree.

My husband became very ill and could not work right after we brought our adopted daughter home from China. Yes, the idea that his salary was missing was scary -- but even more terrifying was the fact that we now had no health insurance. Now he's well and back at work, but at a small business that doesn't offer health benefits because of the cost.

Thank you for speaking out as a small business owner who feels a moral responsibility toward those he works with. One of the reasons that I continue my day job even though I'm a pubbed author is that we couldn't afford health coverage for my family otherwise -- and I can't afford to go without it.

Erik Buchanan said...

It's posts like this that make me glad I live in Canada. We all pay for our health care through our taxes because sooner or later, we're all going to use it.

I work in communications, and I make decent money and pay a good amount of taxes. I do not begrudge one cent of it because I know the benefits I'm getting.

Hope someday the USA can adopt a similar system. It would save folks there a lot of hassle.

Leigh said...

I live in Canada also. We don't pay for medical premiums through taxation in my province. Our monthly health insurance premiums are based on our taxable income - the more a person makes, the more they pay, and the more they pay, the more services they're allowed. A person on welfare, for example, pays no taxes, their medical insurance is government funded, paid by taxpayers, and of very low quality.

Unlike Erik, I very much hope the US never adopts our style of health care. We have long wait lists, poor service, and no doctors. The list of ills in our system is too huge for a comment. Our government is now allowing more private clinics to take some of the load off the public system, and many Canadians hope for more.

Vincent Rupp said...

Well ranted, sir. If you discover why our nation's leaders don't seem to understand the situation as well as anyone who buys health insurance, please let me know.