The Employment-based Health Insurance System

Victor Fuchs is a health economist whose work I generally admire, but a recent article he wrote for the Journal of the American Medical Association seems very off-base.   (JAMA Viewpoint)   His basic complaint is that our system of medical care delivery has been overly influenced by the dominance of employer-sponsored health plans in providing coverage to our citizens.  Those plans, he says, tend to be designed to meet the needs of higher-income individuals, and therefore create a medical care system that caters more to their desires, like extensive choice of providers, self-referral to specialists and excess capacity to ensure limited wait times.  Because the system is expensive, according to him, it hurts lower-income people who might rather spend less on health care.  The author fails to discuss at all the extensive and ongoing consolidation of both providers and health plans, which probably is the single most significant cause of higher prices and spending for health care in the United States.  He also claims that having multiple payers raises administrative costs, which likely is true, and suggests that revamping the method of financing health care, probably by implementation of some kind of single-payer system supported by a household tax of some type.  He acknowledges uncertainty about who is actually paying for health care today, but the answer to that is fairly obvious.  The cost of Medicaid is borne by taxpayers, and in particular by higher-income taxpayers.  Much of the cost of Medicare is similarly borne by higher-income individuals, both through higher Part B premiums and general tax dollars.

Several things are worth noting about this article.  One is that it says that employer-based coverage is a primary driver of the health care model, but in reality government programs pay for over half of health care in the United States and Medicare’s rules and reimbursement methods are widely adopted by commercial insurers.  I don’t think it is accurate to say the health system is driven by employment-based plans.  Also note the implications stemming from the author’s complaints about the health system supposedly created by employer-sponsored plans.  He apparently thinks people should have less provider choice, there should be less capacity, which would create longer waiting times, there should be less access to specialists, which isn’t going to improve quality of care, and our facilities shouldn’t be so nice.  If any kind of single-payer model is ever adopted in this country, he will certainly get his wish.  And while everyone would probably like to spend less on health care, I don’t think lower-income people want to make the trade-offs proposed in the article.  And in fact, low-income people covered by Medicaid, and there are something like 60 million of them, have gold-plated coverage, they don’t pay anything.  If anyone is hurt by our system, it is middle income people.