Monday, September 14, 2009

Berry On Employer-Provided Health Care and Tax Law

Dr. Robert Berry touches on a critically important issue in his essay, "Rising health care costs and the tax preference for employer-based health insurance".

Bad tax laws have turned health insurance from genuine insurance to bad pre-paid health care. Patients are insulated from the true costs of their medical expenses and thus have an incentive to overconsume. Insurers ignore their patients' desires because their real customers are the employers, not the employees. The result is skyrocketing costs.

As Berry notes:
...This tax preference – enjoyed primarily by employees of large businesses and government at the expense of small businesses and the uninsured – promotes the purchase of low co-pay, low deductible health insurance so that most Americans do not feel the true cost of the decisions they make about their routine, outpatient care. This elicits a trickle of expensive individual responses that collectively swell into a cascade of costly decisions for the nation as a whole.

If this tax-favored majority had to pay full price for non-catastrophic and non-emergency care, they would become more economical in their decisions without any loss in quality. They would question health care professionals about the value and cost of tests and treatments and forego the ones they judge to be of marginal value. For example, if patients with back pain had to pay for their $1,000 MRI’s, more would make the effort to learn that this test rarely affects treatment and is usually unnecessary. Loud snorers who are sleepy during the day would use an inexpensive, in-home screening test or a trial of CPAP before undergoing expensive studies in a sleep lab. For heartburn, patients would try generic Zantac at $4 per month before buying Nexium or Prevacid for $120.

... It is obvious from this month's townhall meetings that most Americans do not want a government takeover. However, simply rejecting Obamacare will not solve our health care financing problem. We can check these soaring costs by changing the tax code so as to promote direct payment for non-catastrophic care. Or we can choose to pay federal bureaucrats to cut costs for us by rationing this care in a single payer system.

In other words, to avoid getting trampled by the rhinos we must first get rid of the elephant – the tax preference for employer-based health insurance.
(Read the full text of "Rising health care costs and the tax preference for employer-based health insurance".)