Friday, June 26, 2009

The Cost of Shackles

Does it really make sense to hold tenaciously to our current system of employer provided health care?

In the first segment of this series I introduced the concept of the company store and offered some explanation as to what was bad about it. In the second segment I explained how employer provided health insurance has become today’s version of the company store and I suggested that it would be good to explore whether its continuance was merited. In this segment, I will investigate this question.

We have lived in our current home for a number of years. During those years we have cut the lawn and cleared the snow many times. We have built a cedar fence, poured concrete pads and borders, finished our basement, added rooms onto the home, replaced shingles, replaced roof sheathing, replaced part of the driveway, fixed leaks, planted trees and ornamentals, had trees removed, done some rewiring, replaced floor coverings, repainted, had major renovations done to the exterior walls, installed new windows, built permanent shelving, and done numerous other maintenance and upgrade projects.

Shelter is one of life’s essentials. Why isn’t it possible for my employer to offer a tax free plan that would cover the costs of home repair and upkeep — in exchange for a lower taxable salary, of course? Just think how wonderful it would be if I could just make a $25 co-payment and have a preferred roofing provider come in and replace the shingles every 15 or 20 years? Wouldn’t that save potentially larger future costs, since I might be so remiss as to let the roof go completely to pot before doing something about it?

The faucet in my main shower has been giving me fits. Despite my attempts to fix it, the thing continues to leak. I’m going to have to call in a plumber. Wouldn’t it be great if I could just make a $25 co-payment and have a plan approved plumber come and fix my leaky shower? We haven’t had a professional tree trimming service in for a long time. Wouldn’t it be wonderful if that could be done with a $25 co-pay?

What kind of incentives would such a system engender? How would people respond to those incentives? How would the plan’s administrative bureaucracy turn a profit? Where would the money come from? What would your local Home Depot look like once it jumped through the hoops that allowed it to become a preferred provider of the various plans out there? Since it would then owe much of its existence to tax subsidies, it would be subject to all kinds of new regulations developed by ever inventive politicians and bureaucrats. What do you think your shopping experience would be like once two levels of bureaucrats are inserted between you and every handyman, contractor, and hardware store? What would happen to the cost of plumbers, roofers, tree trimmers, etc? Does this look like a good picture to you?

Even more essential to life than shelter is food. Maybe we should just go back to the days of the company store. We could authorize employers to provide tax free grocery buying plans. Your taxable wages would be reduced accordingly. But you could go to any store — any approved store, that is — and get whatever you want for a $25 co-pay, as long as the product is covered by the plan. Don’t expect the plan to cover that glitzy shampoo you use. Ice cream and snack chips are definitely out of the question. You’re going to have to hit the black market for stuff like that.

Now picture what the supermarket is going to look like under this plan. Which products will be on the shelf and which will be locked away and accessible only after pre-approval. Make sure you don’t try to buy food for a gathering with friends until you get the larger-than-usual expenditure pre-approved by a bureaucrat. What will the costs of the latest foods on the market be? Will you even be able to get them before they go generic? What would happen to the prices of groceries in general? Have you ever had a claim disputed by your health insurance? Perhaps you’d like that same experience when it comes to groceries?

It would seem obvious that the downsides of programs such as I have mentioned would outweigh the benefits. Any such system would serve to further bind you to your employer and limit your freedom. Besides, why would anyone think that some bureaucrat somewhere is better able to manage your home maintenance and food purchases than you? Who would assume that the layers of plan bureaucracy would come free of charge?

If this kind of plan is a bad idea for housing and food, as it proved to be during the era of the company store, what is different about health care that makes this a good system for dealing with your health issues? You can argue all you want that health care decisions are simply too complex for the average individual but I absolutely reject such ridiculous claims. We constantly make decisions about very complex matters. Health care is not in some magically special class, except for how we have come to treat it.

Am I arguing for higher taxes or for government run medicine? Well, that’s getting the cart ahead of the horse. This story isn’t done yet.

Next time: Mixed Costs

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