A Quick, Partially Biblical History of Employer- Based Health Insurance
Nathan Newman accuses me of making a mantra of "Little is more anti-worker than forcing them to depend on their employer for medical care." Well, gotta admit, it's catchier than "Om." But he's for the employer mandate in a serious way, which I find so baffling I need to keep reciting my mantra just to stay calm. So, herewith, a quick history of the foresight, vision, and planning that resulted in the glorious invention known as employer-based health care:
• In the beginning, there was a tax quirk, and the tax quirk was with employers, and the employers provided health care: Journey back with me, if you will, to a land before time, or at least digital clocks. World War II is raging, the Greatest Generation's menfolk are proving themselves freedom's ablest gladiators, and the women are riveting their pretty little hearts out. Do-gooder liberals, keen to protect against war profiteering, inflation, and labor unrest, institute wage and price controls, and heavy marginal tax rates on corporations. It is a great burden. But hark! There is a loophole in this here socialism: fringe benefits are not covered! Health care purchased by the employer is tax deductible! And with the GNP growing by 75 percent between 1939 and 1944, corporations vastly preferreth to plow their massive profits into benefits that help them attract workers, rather than taxes, which the Book of Burke have shown an abomination. And thus we had employer provided health care, and lo it was good.
• This tax quirk, this heavenly gift of deductability, was retained by our benevolent government for society's wide beneficence after the war. Then, the newly-formed National Labor Relations Board, in their infinite wisdom, ruled that any employer unwilling to bargain over health insurance was engaging in unfair labor practice, and were thus sinning before the eyes of the council, and could be punished by stoning* or fines. And so the unions joyously rushed forth, demanding health care for their members and their members only, and offering the merest sacrifices to the Truman and his dream of government provided health care. But lo, the sacrifices were poor, and they were not heeded by congressional Republicans, and so a darkness fell across the land. They would soon repent, but the spirits behind national insurance, once wronged, are not easily sated, and so despite many attempts at atonement, the unions have been forever stifled, and even now, are seeing their efforts strangled and twisted by the deterioration of the system they encouraged.
This is the story of employer-based health care, a wartime tax quirk that emerged the central organizing principle of our system. It was a bad quirk, and it is a bad system. And while some defend its merits, pointing to those like Germany, they similarly do not know that Bismarck, hallowed be his name, wanted socialized care, but was afraid of empowering political opponents within the state, and so decided to amass strength by offering health benefits to those in particularly influential professions, piecemeal and as necessary. Tying health care to employers is a mistake, an unintended consequence, but lo it keeps being repeated, and sadly, it keeps being defended.
*There are no recorded instances of stoning.
Amen.
April 7, 2006 8:17 AM | Reply | Permalink
In the abstract, this sounds sensible, but haven't a number of countries achieved universal health care as a direct consequence of having had an employer mandate? And don't those tend to be the better systems?
Not just Germany--what about France? Japan? Aren't their universal systems ultimately byproducts of the fact that at a certain point, employers were more or less mandated to provide insurance to all workers? And that the challenges created by this mandate led ultimately to the obligation being taken over by the state?
This stands in contrast to the alternative path taken by England and Canada, where the healthcare system was created in the opposite direction, by an expansion of the welfare state crowding out the employers. And I think we're in agreement that the English and Canadian systems aren't as good.
I start at the same point you do. I hate the idea of an employer-based system. Yep, it's a quirk of history, yep, it makes no sense, yep, it should end up being terribly unjust.
But the one thing I've found to be universally true in healthcare policy is, "Screw ideology. Screw economic theory. Forget what you think should happen. Look at what does happen." And it does seem that there are two main paths to universal healthcare systems--expanding the welfare state, or expanding employment based insurance followed by an inevitable government takeover--and that the better systems have an employer mandate at some point in their history. (Maybe the Swedish path is better than all of them, but I really think all doctors being employed directly by the state is a non-starter in the US, so I'm ruling it out.)
I'm willing to hear that the employer mandate might not be the underlying reason these systems work better--maybe there's a different thing (stronger labor movements, stronger sense of social justice, the qualitative differences between Anglo-Saxon countries and European/Japanese countries, whatever) that independently led to both the employer mandate and better health systems.
But you're not making that argument. You're saying employment-based insurance makes no sense and is bad because it should be bad. While I think it's a convincing argument in the abstract, I don't think the facts on the ground support your position. On the contrary, they strongly support a policy position that mandating employers provide insurance would lead to very good things in healthcare.
April 7, 2006 9:36 AM | Reply | Permalink
theorajones
i sort of see your point, but, even Germany doesn't really pool enrollees by place of business - they use the employers as the primary financing stream but then have state-level health funds do the insuring.
And, France has a payroll tax (along w/ income tax) that funds their insurance, but, i don't think it's an employer-mandate in the way we're all talking about.
i don't think any other advanced country ties itself into so many knots to avoid the health care financing streams going through government as the US.
joshb
April 7, 2006 11:08 AM | Reply | Permalink
France and Germany's funds are state functions now, but they didn't start out that way. We keep forgetting that the US is 60-80 years behind the rest of the world when it comes to financing health care.
The first question is, how do we get on the path to universality? Do we do what France and Germany did, which is to expand the employer sector, or do we do what England and Canda did, which is to expand the welfare system? I'd rather follow the French/German model, because for some reason, it seems to end in a better healthcare system.
The issue of "government" vs. "non-government" is really secondary, because it seems inevitable that once the butcher's bill gets high enough and employers don't have the option of shifting the burden to their workers, they start screaming to shift the burden to the government, which takes over and starts getting massive efficiencies of scale. And clearly, we can expect this pattern will repeat itself in th eUS--John Kerry already ran for President on a healthcare plan that was, essentially, the first steps of that.
April 7, 2006 3:03 PM | Reply | Permalink
I'd argue that what the Democratic party usually prefers is policy and programs that are fact-based and shown to have worked.
Employer-based health care for their employees has been satisfactory for those enrolled, especially with larger companies whose risk-pool is large enough to gain reasonable rates. It hasn't proved to be very workable for smaller businesses. In essentially all cases the current system has the major defects of not providing adequately for portability between employers (COBRA hasn't solved this problem), and the multiplicity of insurers that the current system supports leads to very high administrative costs (compared to the Medicare system, for instance).
Of course the biggest defect is that we are getting farther and farther away from universal coverage in the employer-based system, as companies retreat from this area - even though their costs are tax-deductible and therefore are being supported by the general revenue of the government provided by income taxes.
Is a mandate for employer-based coverage a way to get to universal coverage? Yes, if it were feasible politically - but it hasn't been in the past and is unlikely to be in the future. Employers don't want to be in the health insurance business anymore, for various reasons related to cost and competitiveness with other countries.
In the Medicare Part D bill, employers were basically bribed by subsidies to continue drug coverage in their health insurance plans. Is that the way to the future of universal coverage? Only if some kind of mandate is enacted - and that seems to be the problem.
What would employers prefer and support as an alternative that moves much closer to universal coverage? That isn't clear to me at the moment at the federal level, but at least in MA the employers supported a mandate - but only if their penalties were trivial. Time will tell how many choose the penalties overage providing coverage, but MA already had an abnormally high level of workers covered by insurance compared to other states.
How would AL or MS or SC choose to move? I doubt that employer mandates at the state level will get us closer to universal coverage because too many states will choose not to join in.
So, in my mind, the question really becomes are we to have a national program with uniform rules (via either employer mandates or single payer in some form), or will this be left to state discretion, with the result of increasing the complexity of the system (businesses providing different programs in different states)?
I think Ezra is right that the employer-based system is on life-support and the employers are ready to pull the plub. Why try and fix something that fails at controlling administrative costs and complexity when a simple, effective model of dealing with payment uniformity, coverage uniformity, administrative cost-control and general understandability is in front of us - Medicare.
Letting employees and employers elect to join Medicare seems simple enough, with the employer and employee sharing the cost equally via payroll taxes as Medicare currently does - this system is already in place in every business. Convert Medicaid to Medicare and remove the states as funders of Medicaid, arriving at a uniform national health insurance program. Make this program mandatory instead of elective when performance, costs and results are established.
Once that the payment solution is established, then the country may be ready to take on the issues of cost control and availability that are posed by private actors providing the services.
April 9, 2006 10:39 AM | Reply | Permalink