Keith Hennessey provides additional evidence for why reducing costs should be the first priority in reforming the healthcare system:
A new study by Steven Nyce and Syl Schieber looks at the effects on wages of expanding health insurance coverage. Their results are devastating.
Dr. Schieber is a pension/benefits expert with Watson Wyatt. He is Chairman of the Social Security Advisory Board and he served on the Clinton Administration’s Social Security Advisory Council of 1994-96.
Lots of supportive information.
This certainly comes as no surprise to me. Employer-provided healthcare insurance is compensation. Economically, compensation and wages are the same (although not from a tax standpoint which is the original driver for adopting employer-provided healthcare insurance in the first place; that and WWII wage controls).
BTW, the historical precedent of the adoption of Medicare and Medicaid provides ample evidence for what’s described as the worst-case scenario, Scenario 3:
Scenario 3 – expanded coverage accelerates cost growth: Health insurance reform provides universal coverage through a mandate. Expanded coverage increases demand for health care, increasing health cost growth to be compensation growth + 6% per year.
In a system like ours in which the supply of healthcare is constrained and compensation is based on performing procedures (fee for services), increased utilization as a consequence of more people availing themselves of the system results in higher costs. That changes the behavior of providers. Increasing revenue carries with it the expectation that increasing revenue will continue. That’s what happened 40 years ago.
FWIW I don’t blame either consumers or providers. I blame Congress for designing a lousy system and then failing to provide adequate oversight for it over the period of more than a decade. By the time the out-of-control system caught their collective attention it was too late.
Equally important is the baseline: if we don’t do anything, increases in wages will be 50% of what they are currently. ie, we gotta do _something._
I agree, jpe. As I’ve noted in most of my many posts on healthcare policy, doing nothing is not an option.
However, unlike many Democrats, I believe that, largely due to the political toxicity of the issue, it’s of paramount importance that the reform enacted now deal with the problems we’ve got now. There is no tomorrow, no second bite at the apple.
Most of all, continuous fine-tuning will be disastrous.