The Right Prescription
The Employer Mandate and the Alternative
Government should be incentivizing freedom, not its disappearance.
On June 15, before the American Medical Association meeting in Chicago, President Obama proclaimed: "While I believe every business has a responsibility to provide health insurance for its workers, small businesses that can't afford it should receive an exemption." He had made a similar statement in a June 2 letter to Senators Kennedy and Baucus, chairmen of two Senate committees drafting healthcare legislation. He wrote that he was open to proposals that would "ask[] employers to share in the cost" while "small businesses…should be exempted." In neither instance did he use the term "employer mandate," but small business could not be "exempt" from anything other than an otherwise applicable mandate.
An "employer mandate" -- by which employers must pay for the health care (that is, health insurance) of their employees or pay a tax -- assumes that an employer has an obligation to care for the health of his or her employees. Upon what does such an expectation rest? To use a term President Obama would understand from his days teaching constitutional law, what is the "rational relationship" between being an employer and paying for the health care of an employee?
Let's cut to the chase. There is no rational relationship. Of course, an employer is obliged to provide a workplace that is safe, that is conducive to the employees' health. The "employer mandate" as being used in the current debate on healthcare legislation is not restricted, however, to providing a safe workplace but extends to the health generally of the employee. Furthermore, it is not restricted to employees, but also to their spouses and children.
The expectation, the relationship, rests on history. Employers started giving health insurance to their employees and dependents during World War II in an effort by employers to compete in the marketplace for employees when the government would not allow them to compete for employees based on wages (since there were wage and price controls). The federal government agreed not to count this as income to employees. After wage and price controls were lifted, employers continued -- to this day -- to compete for employees by offering health insurance. By now, the Kaiser Family Foundation reports, two-thirds of Americans under age 65 (158 million) have health care coverage through their employer.
Health insurance premiums have become ever larger. This is reflected in the taxes that would otherwise have been received by the U.S. Treasury from individuals -- $240 billion per year. (As Betsy McCaughey points out, however, the American people devote about the same share of their income for food, energy, housing and healthcare now as they did in 1960.)
For the past decade, as health insurance premiums have increased, there has been a downward trend in the scope of employer coverage. Instead of more and more employers offering better and better coverage, employers are decreasing their contributory share to the health insurance of their employees (thereby raising the share of the employees' contribution) and many have stopped offering health insurance as a benefit of employment. Without insurance, the employee is often (not always) left with buying individual policies without the cost advantage of belonging to a group. (President Obama, like so many others, refers to the number of uninsured as 46 million, a figure that includes, as Betsy McCaughey noted, the 14 million who are eligible for public aid and the 24 million who have sufficient funds to purchase insurance but choose not to do so.)
Asserting that health care is essential to every person, asserting that health insurance is important to every person, does not logically lead us to the assertion that employers must be required by law to pay for the health insurance of their employees and their dependents. By this reasoning, we could just as well assert that, since food, clothing, shelter and education are also essential, government should mandate employers to provide these.
Indeed, there are some employers who provide employees and their dependents with food, clothing (a uniform), shelter (company-owned and gated) and education (private schooling for minors). And 24/7 security. And transportation once or twice yearly to visit relatives. And rotational cycles of 30 days on, 30 days off. And a car allowance. And life and disability and vision and dental insurance. And a defined pension. And stock options. And a high salary. No, these perks are not limited to top management. In yesteryear some of these perks were granted to residents of company towns, such as the Pullman neighborhood of Chicago, and Hershey, Pennsylvania. Today, employers routinely give these benefits to "expats" (expatriates), that is, employees who work in countries other than their home countries.
Under what circumstances will our government mandate employers to provide the same perks expats receive to all of their employees regardless of where they work? It would seem there are two criteria: if the benefit is deemed essential and if the benefit costs a lot of money.
I think the rapacious Democrats are like Willie Sutton. When asked why he robbed banks, he reputedly answered, "Because that's where the money is." The rapacious Democrats will require employers to provide health care to employees because employers are regarded as having the money.
Jobs run the gamut from those with low pay, hard work, and no benefits to "good jobs" consisting of high pay, light work, and a plenitude of benefits. People aspire to obtain "a good job." If the government should intervene in the market and mandate that every employer provide health insurance to every employee (and their dependents), then all jobs will have health insurance, thereby restricting the ability of employers to compete for employees and reducing the incentive of people to compete for jobs.
You may respond that an employer mandate for health insurance is similar to the mandate of a 40-hour work week or an 8-hour day or maternity leave. But health insurance is not like these other mandates. These other mandates are related directly to work and the workplace. An employer mandate for health insurance is more like the government mandating employers to provide affordable housing to every employee or mandating a defined pension or a minimum contribution to employees' 401(k) accounts.
Oh, the President will consider exempting small business. Tell me, how will the government define "a small business"? Will the criteria change over time so that what is deemed small today will be deemed big tomorrow? (This was Joe "the Plumber" Wurzelbacher's critique during the 2008 presidential campaign, on CBS News, Oct. 15.) Why would a small business want to grow into a big business if, after it meets an IRS threshold, it will be required to provide health insurance for all of its employees? And why would an individual start a business knowing that, if he or she is successful, he or she will be required to pay for health insurance for every employee -- not because the market requires it to attract employees but because the government requires it?
Once we distinguish in principle between businesses that would be subject to a mandate and those that would not be, it allows us to consider distinctions other than big/small. What about businesses that create health hazards and those that do not? Let's focus on the President's language in his June 2 letter concerning "unmanaged chronic diseases" or the reference in his June 15 speech to "[f]ive of the costliest illnesses and conditions -- cancer, cardiovascular disease, diabetes, lung disease, and strokes." President Obama cited Safeway in his June 15 speech. As Steven A. Burd, the CEO of Safeway, reported in the June 12 issue of the Wall Street Journal, that company, a self-insured employer, has reduced employee contributions to health insurance for particular employees, as allowed by HIPAA (1996 Health Insurance Portability and Accountability Act) if they employee can show improvement in the following areas: tobacco usage, weight, blood pressure and cholesterol levels. Thus, instead of distinguishing between big and small businesses, the government could mandate that companies that exacerbate these, and other, health problems, pay for the health insurance of all of us. Among these would be junk food makers, tobacco companies, TV and video entertainment (think couch potato, with an exemption for Wii), manufacturers and dealers of less-safe cars, and gun manufacturers and dealers.
PERMIT ME TO MAKE another couple of points about the Democrats' plans. First, the government will necessarily have to dictate the minimum elements of the health insurance mandated of employers: maximum deductibles, maximum co-pays, drug coverage, minimum lifetime limits, abortion coverage, same-sex spouse coverage, polygamous spouse coverage, in vitro fertilization for unwed employees, and on and on.
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Robert Rosencrans| 6.22.09 @ 6:25AM
The proponents of nationalized health care will do what it takes to get it in writing. They will sacrifice on a small level to get the big picture painted. Once it's passed, those who were excluded will soon be included.
Once health care is guaranteed all those issues surrounding health will rise. One example. You will have to have decent housing guaranteed so that your "health" is guaranteed.
The end result of this mad plan will be to destroy wealth. Millions will become unemployed. How you will you make out? Bet against it. Big.
2Anglico| 6.22.09 @ 8:35AM
If I held someone up with the threat of force, and demanded they give me money to help my Grannie pay for her meds, that would be armed robbery. An "employer mandate" is using force to take money from one to serve the needs of another. This is THEFT! But today in America THEFT is legal, if you have a majority vote in congress!
Michael L. Hauschild| 6.22.09 @ 8:38AM
If ever there was a rational (and not rationalization) class warfare argument it is time for its invocation. There always was the overseas alternative for those “regulated” (read rationed) seeking medical procedures, after all our medical colleges produce the finest doctors in the world no matter where they go after they graduate. This is the entitlement that always has been available, but is about to become propriety to the rich, the franchised, and the celebrity. Average Joe will have to remain here and stand in line. If you do not believe this “do as I say, you do not get to do what I do” principle, examine where the children of the aforementioned attend school.
It is an absolute necessity to stop socialized medicine from becoming the law of the land.
Mikecampbelly2k| 6.22.09 @ 8:42AM
The LAPDOG media will do their part:
http://newsbusters.org/blogs/noel-sheppard/2009/06/21/nyt-cbs-stock-pro-obamacare-poll-obama-voters
Marcell| 6.22.09 @ 9:01AM
There is a high probability that we might lose this battle. If we do lose the battle, we should lose it in a way that forces the other side to deal with all of our concerns, so that it shows that we are looking out for the best interest of all Americans, & we are willing to fight on their behalf as well.
"Then, the Republicans can vote no on the bill based on their fundamental beliefs."
There are lots of ways to continue winning the debate on this issue during this week, yet I believe the issues surrounding lawsuits & the hefty costs that are spent on the R&D needed to make sure that the drug can pass the FDA's requirements, as one of my conservative freinds explained to me, are two great tools to control the debate. If the Republicans focus on the two talking points, at least behind the scenes, you will be a force to be wrecken with within the MSM.
Here are two articles to make my point:
Lawsuits That Make Care Costly
Sunday, June 21, 2009
Columnist Steven Pearlstein was correct in noting that various factors have contributed to rising health-care costs ["Self-Help for the Health-Care System," Business, June 17]. But, like many analysts, he understated the impact of medical liability litigation.
A 2006 Harvard School of Public Health study found that four out of every 10 medical malpractice lawsuits filed each year are "without merit."
Serving primarily to enrich the personal-injury lawyers who drive them, these lawsuits add significantly to overall health-care costs.
How much? In a Massachusetts Medical Society survey published last November, 83 percent of Bay State physicians cited the fear of being sued in their decisions to practice "defensive medicine," a phenomenon that adds at least $1.4 billion to annual health-care costs in that state alone.
According to the 900 doctors surveyed, on average, 18 to 28 percent of tests, procedures, referrals, and consultations and 13 percent of hospitalizations were ordered to avoid lawsuits.
Such findings make it clear: If any health-care reforms are to succeed, they must be buttressed by liability reform. Certainly real victims of negligence must be fairly compensated, but public policy must discourage litigation that abuses our civil justice system and makes health care less accessible and more expensive.
DARREN McKINNEY
Director of Communications
American Tort Reform Association
Marcell| 6.22.09 @ 9:02AM
The FDA Needs a Big Dose of Economics
October 25, 2002
Alexander T. Tabarrok, Daniel B. Klein
Providence Journal
Economist Mark McClellan was unanimously confirmed by the U.S. Senate to become the new commissioner of the Food and Drug Administration. Formerly a member of President Bush’s Council of Economic Advisors, McClellan as FDA chief will be in a position to reform FDA policy in light of economic understanding.
Congress gave the FDA power over the drug market to make sure that only safe and effective drugs are sold. Sounds warm and soothing, but economists have a professional responsibility to recognize what Nobel laureate economist Douglas North calls the terrible trade-offs. In fulfilling that responsibility, economists usually become, as George Stigler put it, pourers of cold water.
Numerous economists have studied “the world’s premier consumer protection regulatory agency” (as the FDA calls itself on its Web site). When these economists express judgment, they always say that the FDA is too restrictive.
In trying to eliminate bad drugs, the FDA prevents or delays many good drugs from reaching Americans. Sam Peltzman was one of the first economists to do the grisly math. His work shows that lives saved by FDA restrictions are few compared with the lives that would be saved by drugs that would be available if the FDA weren’t blocking the way.
Economist Dale Gieringer examined the relatively laissez-faire period before 1962 and tabulated all the drug catastrophes. He shows that despite all the folklore about snake oil, serious catastrophes were few and far between, the worst being the 107 people killed in 1937 from Elixir Sulfanilimide (the chemist used a poisonous solvent, and subsequently committed suicide).
Terrible things do happen in the free market. But how terrible, and how often? Reinforcing Peltzman, Gieringer showed that the bad cases are few compared with the mortality and morbidity caused by FDA restrictions. For example, the FDA’s delay of beta-blockers caused at least 50,000 premature American deaths. There are many cases of death by delay, and probably many more cases of death by never-developed drugs because the FDA made getting permission too expensive and too uncertain. (The Tufts Center for the Study of Drug Development estimates that, on average, it costs $800 million to bring a drug to market.)
Economists recognize that bureaucrats respond to incentives. In deciding a new drug application, the FDA official might err by permitting a bad drug. If he does, a child might become gravely ill from the side effects of the new drug. Television reporters show the poor child languishing in a hospital bed. Viewers see and share in the suffering. When the child dies, people blame the FDA official who signed off on the unsafe drug. Shouldn’t he have known better?
But the other error is failing to permit a beneficial drug. If a child suffers from a disease that could be cured by a drug not yet permitted by the FDA, it is unlikely that the child’s parents or doctors would even be aware of that fact. When the child dies because a drug is not available or never even developed, no reporters are present. The death is quietly regarded as an unavoidable tragedy. If anyone knows of new therapies awaiting the FDA’s permission, and asks whether the child might have been saved, the FDA responds that such therapies are “experimental” and “unproven.” And that’s that.
Sensitive to these incentives, and never quite sure whether a drug is safe, the bureaucrat responds accordingly.
Economists like to ask interminably: “And what would happen next?” When the FDA is stingy in giving permission, drug development is stunted, and there is no automatic correction mechanism. This is quite unlike the automatic correction that occurs when bad drugs are released onto the market.
Economist Robert Higgs has published lengthy studies of the FDA regulation of medical devices. He finds: “Americans would be better off with drastic curtailment, ideally the complete abolition of the current regulatory regime.” Another Nobel laureate economist, Milton Friedman, concludes on the basis of these and other studies: “The FDA has already done enormous harm to the health of the American public by greatly increasing the costs of pharmaceutical research, thereby reducing the supply of new and effective drugs.”
The FDA also restricts what drug makers can say about their products. Economists John Calfee and Paul Rubin have led the way in showing how the FDA’s efforts to protect consumers from misleading information have often delayed consumer awareness of opportunities to improve their health. Calfee concludes: “The evidence is very strong that the FDA suppresses a great deal of useful information. Experience from related markets in this nation and abroad also strongly indicates that informational competition involving drugs and devices is likely to work well, and that the pharmaceutical market does not pose unique problems that make it unsuitable for traditional competitive dynamics.”
Rubin adds that if the FDA significantly liberalized commercial speech, “the results will be greatly improved health of consumers and reduced prices of pharmaceuticals.”
Economist Murray Weidenbaum put it this way: “Warts and all, the competitive marketplace is the best protector of consumers.”
We have created a Web site — FDAReview.org — that includes a compendium of 17 different expressions of judgment by economists, all speaking for liberalization. No economist who has studied the FDA comes to a contrary conclusion.
How has the FDA responded to economists' findings? It hasn’t. It just ignores economists. On the FDA’s Web site there is a bibliography of more than 50 works on the FDA, only one by an economist: Peter Temin’s tepidly critical history of the FDA.
Also on the FDA’s Web site is a puff piece entitled, “Science at FDA: The Key to Making the Right Decision,” boasting of all the microbiologists and pharmacologists employed by the FDA. Yet the FDA is in the business not of practicing medicine or doing scientific research but of making public policy. As such, the science most relevant to its decisions is not medicine or pharmacology but political economy. Making economist Mark McClellan the chief of the FDA promises to bring economics to the FDA — the real scientific key to making the right decisions.
Alan Brooks| 6.22.09 @ 10:04AM
but what do you mean "the government should be incentivizing freedom"?
Doesn't the marketplace?
Did you mean to write "the government should be facilitating the incentivization of freedom"?
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Marcell| 6.22.09 @ 3:01PM
Sec'y Sebelius Argues US health Care Too Expensive
WASHINGTON (AP) — Health and Human Services Secretary Kathleen Sebelius says the country has no choice but to revamp its health care program because current costs are "crushing families and businesses."
Sebelius acknowledged in a nationally broadcast interview that getting legislation overhauling the system enacted won't be easy and won't happen quickly and without many policy debates.
Sebelius, interviewed on ABC's "Good Morning America" Monday, said that people can must also bear more responsibility for holding costs down by taking better care of themselves. Health care adviser Melody Barnes said the administration's plan would redirect money "so that you are efficiently and effectively using it."
House Republican Whip Eric Cantor said a government-administered plan "will increase costs. It will reduce choices and essentially it will not allow you to keep what you have."
Copyright © 2009 The Associated Press. All rights reserved.
Marcell| 6.22.09 @ 4:02PM
Both sides should do the figuring on how much this is worth, & get back to me:
slivernblackcell@yahoo.com
Takes Time To Love
http://www.youtube.com/watch?v=Ar1XA16zsDM
*****************
Obama's poll numbers start to wilt
By: Michael Falcone and Andy Barr
June 22, 2009 01:47 PM EST
Eroding confidence in President Barack Obama’s handling of the economy and ability to control spending have caused his approval ratings to wilt to their lowest levels since taking office, according to a spate of recent polls, a sign of political weakness that comes just as he most needs leverage on Capitol Hill.
Smash Mouth Football =)
Pingback| 6.23.09 @ 1:44AM
2Dinternational.com » The American Spectator : The Employer Mandate and the Alternati links to this page. Here’s an excerpt:
Marcell| 6.23.09 @ 1:53AM
Earlier this year, I read an op-ed at American Stinker about how the Republican Party is losing the battle on the internet; it concluded that they needed to invest in someone who knows how to use the internet to market conservatism in more positive & inspiring ways…” & I know that I am the person.
….So, let's try to prove it.”
If this were a football game, the score would be 17 Obama & Repubs 7. I also feel as if I caught two big passes on the Repubs scoring drive.
…”It only makes sense to add this to my resume:”
Before I first came to this site, I decided to find the rightwingers who are the movers & shakers within the politicking business, & hopefully make them an offer they can't refuse, but I knew no one would take me serious, so I focused on one Person … “The Dick Cheney.” He was, supposed, to be the toughest rethug of them all... =)
This is for the researchers:
'Uncle Dick' Redux: Out of Office, Will Cheney Be GOP's Truman?
by John Gizzi
05/29/2009
http://www.humanevents.com/article.php?id=32048&page=1#c1
Good Night!!
Richard Baker| 6.25.09 @ 2:25AM
Marcell:
Why don't you try expressing YOUR thoughts instead of copying large sections of articles and stories from elsewhere and pasting them here. Speak for yourself, if you can. Quantity is not quality. Electronics have made you lazy.
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