Perhaps you caught the recent two-page spread in the New York Times (August 13) in which health policy experts weighed in on what they thought should be part of the Democrats’ Medicare for All. Ignoring the fact that this speculation will only become relevant if the Democrats capture the presidency and a filibuster-proof majority in the Senate, (we can dream, can’t we?), what might you learn from reading this?
One thing you will not learn is what it will take for MFA to lower medical spending, which was not discussed at all. The primary driver of lower spending forecasts in these plans is to reduce prices paid for medical goods and services. Whether insurance administrative costs would be lowered (and insurance firm workers and hospital reimbursement specialists would be laid off) is up in the air in this discussion, since such savings depend on how many different insurance plans will be offered. Providing more choice of plans to buyers costs money, and the experts differed on whether they thought choice was good or bad for consumers.
Conspicuous by its absence was the observation that lowering spending on the currently well insured by enough to pay for expansion of coverage to those who lack such generosity will require lowering payments to hospitals, health systems, and drug companies. That, in turn, means lower wages or providing less employment for doctors, nurses, scientists, other health workers, and stockholders who made the mistake of buying medical stocks. Great if you are a consumer, but not so great if you have a medical person in your family or pharmaceutical stocks in your portfolio.
The experts apparently agreed with Senator Kamela Harris that “one disadvantage [of the job-based insurance 167 million of us currently have] is that it can cause some people to stay in jobs they don’t want.” One key assumption here is that the coverage you would get under Harris’ MFA would be as good as the coverage you get where you now work, something yet to be determined. Another economic assumption is that your money wages and the amount you pay explicitly for health insurance would be unaffected—which is almost surely not the case.
So what would be the social benefits and costs of wiping out current patterns of job based insurance coverage and money wages and moving to a new one? One effect might be that the current tax breaks received by workers with generous health plans could end. If workers in general were to receive back in money wages what employers contributed to the premiums, that income would be taxed. Bad news for the former beneficiaries of these tax breaks, but good news for health plans that control costs and those who will buy them because now those who choose them will capture the full savings in premiums.
The other possible social benefit would be to workers with impaired health who are looking for a less demanding job or retirement but who would currently have to sacrifice their good employment-based coverage for inferior coverage or lower wages or pensions. The cost of that would be borne by other worker-taxpayers.
However, the more fundamental question is the potential impacts on workers who currently have good job-based benefits. Who are the people in those jobs, and are many of them unhappy that they can’t switch? Any job involves tradeoffs. Compared to my current wage-benefit package, there is almost always some other hypothetical job I would want for its working conditions, locations, or fit with my plans. However, saying that I am trapped in my current job because it offers better benefits than alternatives is like saying I am trapped in my current job because it offers higher wages than alternatives—even if those alternatives had a compensation package that had better benefits but the lower wages that pay for them.
Employers choose benefit packages that they think will help them attract and retain high quality workers. The ideal outcome would be if all workers matched with their most preferred wage, working conditions, and health package, given the value of their labor. Research shows this matching to be reasonably good—the only systematic divergence is for unionized jobs which tend to be benefits rich and cash poor.
So, what do the experts think might be wrong with the current situation? They are probably imagining that ideal world in which each worker would be exactly matched with a job that is the best fit. One semi-solution is to disconnect health insurance from work, even though getting it at your job is the best way to lower administrative cost. But a better way is to find a job that matches all your other characteristics and offers you insurance you like. If you are in a large labor market, you could probably get what you want. If you have special insurance needs, you may not match perfectly, but better information on the true value of benefits at different firms would help. Still, it seems difficult to make the case that this feature of the Harris plan will be much, if any, improvement, or that it will solve a major problem of our health care system.
At the end of the Times article, when the experts were asked to play politics, many of them are willing to give up on perfection for feasibility, and avoid “sucking up all the political oxygen.” Picking on the subsidy to the rich provided by the tax treatment of employment-based health insurance would be worth the sacrifice of a little air, but severing the link between jobs and coverage is probably not the kind of change that can lead to beneficial transformation.