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Should Job-Based Insurance Retire?
October 5, 2011
Rising health-care costs in the United States are the result of many factors, including more expensive prescription drugs and climbing rates of chronic diseases such as Type 2 diabetes. But most experts and policymakers agree that the structure of the health insurance system plays a significant role in driving up costs, even if they disagree wildly about how to change the current system. Some have pointed to the high administrative costs and profits of private insurance and proposed replacing it with “Medicare for all.” Others have proposed tweaking the current system by covering the uninsured and requiring insurance plans to cover preventive health measures — an approach that prevailed when Congress passed the Affordable Care Act last year.
Still others, however, have proposed radically decentralizing the health-care system by encouraging people to buy health insurance on the individual market rather than receiving it through their jobs. One of these is Representative Paul Ryan of Wisconsin, chairman of the House Budget Committee. In a speech last week at Stanford University, Ryan proposed getting rid of the federal income tax exemption for employer-sponsored health insurance and replacing it with an individual tax credit that everyone could receive, whether or not their workplace offers health insurance. According to a Reuters article on the speech, eliminating the tax advantage of job-sponsored health care would encourage individuals to scrutinize health insurance plans for the one that offers them the best deal, “forc[ing] health care providers to compete for our business.” Faced with increased competition for consumers, Ryan maintains, health insurance companies would find ways to aggressively control costs by changing the way they reimburse for health care, thus lowering or limiting the growth of health-care costs.
As the article notes, most Americans — about 170 million — currently have employer-sponsored health insurance, so Ryan’s proposal would dramatically change the insurance market. Its effectiveness in controlling costs would depend, logically, on the ability of insurance companies to extract concessions from both health-care providers and consumers, who might be unwilling to accept restrictions on treatments, lower reimbursements for services, or higher co-pays and deductibles. Lowering costs for consumers would also depend on health insurance companies passing the savings they receive on to consumers. Since consumers buying individual plans would no longer be pooling risk with their coworkers, insurance companies might be more aggressive in screening applicants to the extent that is legally possible, leading to even higher administrative costs.
This proposal comes just as a survey, published last week in the Archives of Internal Medicine, shows that many doctors believe their patients get too much medical care — almost half, according to a Reuters article, compared with just 6% who thought their patients didn’t get enough care. Reasons doctors gave for providing too much care included fear of lawsuits, measures of performance that take results but not cost into account, and too little time to listen to patients. While only 3% admitted that financial considerations affected their medical decisions, it is easy to see how a different reimbursement system for doctors — to replace the current fee-for-service system — could encourage more judicious use of tests and procedures. Whether an individual insurance market would encourage such a change, however, is unclear.
What do you think — do you like the system of job-based insurance, or would you rather see the tax incentives for that system disappear? Do you believe an individual insurance market would lead to lower health-care costs? Do you believe you have been subjected to unnecessary tests, procedures, or drugs? Is there simply too much medical care — as some suggest — or are you more concerned with you and others getting the necessary care they need? Leave a comment below!
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