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What's going on with inflation?
2 years ago
Wednesday, September 30, 2009
How the tax code fuels health cost escalation
Great article in NYT by David Leonhardt today on how the tax subsidy for employer-provided health care leads us to purchase more health care services than we would if we were spending our own money. Leonhardt explains the impact very well and cites solid empirical research that shows that we should expect the following if we removed some or all of the subsidy: (1) workers would choose less expensive plans (i.e., higher deductibles and copays); (2) companies would scale back the cost of the most generous plans; and (3) workers would have more take home pay.
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The empirical research would be valid if the playing field were not changing so dramatically in such a short period of time. The effect of the lean times is profound. The problem is many smaller companies cannot afford to insure their employees at all. They are dropping coverages, and in many places are becoming high deductible plans. The rectified NC State Health Plan is a good example. As a result, hospitals in the area are hurting as more patients shift from insured plans to uninsured plans. WakeMed in Raleigh shed 80 employees (most of whom were at a director level and above) as a result of the changes to the NC Medicaid and the growth of the uninsured. UNC Health Care's cost of uninsured care will hit $300M. We are dealing with problem that is less like a Rubik's Cube and more like a Buckminster Ball, where each facet is constantly changing.
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