Healthcare shouldn't be linked to employment
By Jeff Jacoby / Boston Globe

Excerpt:

"...An end to employer-based health insurance is exactly what the American
healthcare market needs. Far from being a calamity, it would represent a giant
step toward ending the current system's worst distortions: skyrocketing
premiums, lack of insurance portability, widespread ignorance of medical prices,
and overconsumption of health services.

With more than 90 percent of private healthcare plans in the United States
obtained through employers, it might seem unnatural to get health insurance any
other way. But what's unnatural is the link between healthcare and employment.

After all, we don't rely on employers for auto, homeowners, or life insurance.
Those policies we buy in an open market, where numerous insurers and agents
compete for our business.

Health insurance is different only because of an idiosyncrasy in the tax code
dating back 60 years - a good example, to quote Milton Friedman, of how one bad
government policy leads to another.

During World War II, federal wage controls barred employers from raising their
workers' salaries, but said nothing about fringe benefits. So firms competing
for employees at government-restricted wages began offering medical insurance to
sweeten employment offers.

Even sweeter was that employers could deduct those benefits as business
expenses, yet employees didn't have to report them as taxable income. For a
while the IRS resisted that interpretation, but Congress eventually enshrined
the tax-exempt status of employer-based medical insurance in law.

Result: a radical shift in the way Americans paid for medical care. With health
benefits tax-free if they were employer-supplied, tens of millions of Americans
were soon signing up for medical insurance through work. As tax rates rose, so
did the incentive to keep expanding health benefits.

No longer was medical insurance reserved for major expenditures like surgery or
hospitalization. Americans who would never think of using auto insurance to
cover tune-ups and oil changes grew accustomed to having their medical insurer
pay for yearly physicals, prescriptions, and other routine expenses.

We thus ended up with a healthcare system in which the vast majority of bills
are covered by a third party. With someone else picking up the tab, Americans
got used to consuming medical care without regard to price or value.

After all, if it was covered by insurance, why not go to the emergency room for
a simple sore throat? Why not get the name-brand drug instead of a generic?

Unconstrained by consumer cost-consciousness, healthcare spending has soared,
even as overall inflation has remained fairly low. Nevertheless, Americans know
almost nothing about the costs of their medical care....

De-linking medical insurance from employment is the key to reforming healthcare
in the United States. ...

For 60-plus years, a misguided tax preference for employer-sponsored health
insurance has distorted America's healthcare market. The price of that
distortion has been paid in higher costs, fewer choices, and mounting anxiety.

The solution is to restore market forces by fixing the tax code, and liberating
Americans from an employer-based system that has made everything worse.

Full article:

http://www.boston.com/bostonglobe/editorial_opinion/oped/articles/2008/10/19/hea\
lthcare_shouldnt_be_linked_to_employment/