Matt HealeyWednesday,25 September 2013

The Snap:

It is Wednesday. We are now a few days before the dreaded government shutdown caused by the evangelical christian party of god, which is demanding the defunding of the Affordable Care Act (ACA). As I wrote a few days ago, getting someone named “Obama” to repeal somethings commonly referred to as “Obamacare” is likely not going to happen.

The Download:

Personally I don’t like the ACA. Not for the reasons that are commonly referenced by people like Ted Cruz. Not because it is a government take over of the heath care system — it isn’t. Not because it will establish death panels — it won’t. Not because the bureaucrats in Washington will oversee my heath care — they aren’t. None of these common tea party objections are true. Not that you could convince them of that. I object because the law does nothing, in my opinion, to actually fix the heath care system. The reason for this is that one of the main problems with the current heath care system is the purchaser of insurance is not the one who decides what to buy. The individual has to select the company their employer chooses.

There are a lot of problems with any system where the consumer does not make the decision about what product they want or who the provider should be. I don’t have any choice in what health care plan I get. I choose a job and get what I am given. I may get to decide between individual and family, or some other minor choice, but in reality I have no choice at all. This leads to problems because the employer’s main responsibility is their shareholders, not the employees. So they are incentivized to provide enough benefits at the lowest cost  that will not cause good people to quit. This often is not the choice that the individual would make, if given a choice. It is the same problem I have with the telcos. You don’t have any real choice. In that case you get the provider who has the monopoly in the area where you live. For free markets to actually work, they need to be free. Health insurance and cable TV are not free markets, because the end user of the services is not the one who decides on the provider.

So back to te issue at hand, why I don’t like the ACA. I don’t think that it solves this problem. But it could have if the linkage between employment and health insurance were broken. So is it reasonable to ask why is health insurance and employment so tightly linked, and how can that linkage be broken? The linking of heath insurance and employment was a product of World War II. At that time — for political reasons — employer paid health insurance was given two favorable tax treatments. The first was that employers did not have to pay payroll tax on contributions to employees’ health insurance. So employers viewed this as a way to attract more workers and not have to increase their tax burden. Second, since the employer contribution was not “income,” then the employee did not have to pay income taxes on the benefit. So both parties benefited. The problem is that the world has changed between 1940 and today. The systems that made sense to people who didn’t have TV naturally don’t make sense to people who write Snap Download posts on a Samsung Tablet. If we want to fix the health care system, let’s make it a free market. If employers want to offer health insurance, then they should have to pay payroll taxes on it, and employees should have to pay income taxes on it. Alternatively, consumers could shop for health insurance just like they shop for car insurance or home owners insurance. Let them look at the competing plans and decide which are best for them.

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