Monday, September 14, 2009

Kristof's "Body Count" Doesn't Add Up to Obamacare

Peripatetic columnist Nicholas Kristof has a typical human-interest angle on the healthcare debate: a tragic story of a young woman felled by lupus because she couldn't get insurance and so couldn't get timely care.

We note that such stories are exactly the kind that reformers of all stripes want to eliminate. The question is how.

Kristof reveals the key issue in a sentence: "And once she lost her job, she lost her health insurance."

The original sin of American health insurance is tying it to employment. We do this not because we planned it but because the practice arose during another attempt by the federal government to contain costs in a crisis, inarguably a much more severe crisis than anything existing at present. During World War II, FDR imposed wage and price controls. When defense-related businesses couldn't get the workers they needed at the wages and salaries allowed, they lobbied for permission to give non-wage, non-salary compensation to attract qualified workers. The result was employer-provided health insurance, which as non-income income was not taxed and so grew in size and scope over the years as a means of protecting a portion of income from the ever-growing income tax.

Kristof's tragic victim, whose story is no less tragic for this reason, was felled because of the perverse incentives of our insurance system in tying insurance to employment. Those incentives include not only the tax code which doesn't extend tax benefits to individually purchased policies but also the economic incentive for insurers to prefer large groups to small ones.

We could say more, but we've said it all before.

What we say now we've said before as well, but we'll say it again. It's illogical to move from the notion that such tragedies ought not occur to the conclusion that there is but one way to fix this thing. We say further, yet again, that the best way to avoid future tragedies is not to provide a public option and additional regulation but to decouple employment from tax preference for insurance, remove barriers to the functioning of the national free market for health insurance, and then requiring insurance for catastrophes but allowing discretion in whether individuals choose comprehensive health insurance or other plans like HSAs for ordinary healthcare expenses, backed up with subsidies for the poor.

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