Yesterday I got into a give-and-take in a comments thread of a post on healthcare at The Moderate Voice. One of the things that became apparent to me is that an enormous amount depends on the concept of “affordability”.
The graph above purports to illustrate the issue and I think it does but perhaps not in the way those who put it together may have intended. For anybody who receives their healthcare from insurance that’s paid for in whole or large part by their employer, the chart does not illustrate the affordability gap. It illustrates the problem that employers face: an enormous proportion of their employees’ total compensation is received in the form of healthcare. It also illustrates the policy problems for the tax system. We’re taxing wages not compensation and as the proportion of compensation that’s not subject to the tax increases in order to increase revenues (which may be necessary for all sorts of fiscally responsible reasons) the only way to accomplish that is by increasing marginal tax rates which legislators haven’t exactly found easy over the period of the last twenty years at least.
For people who pay their own health insurance it does, indeed, illustrate an affordability gap. Clearly, there’s no way they’re going to able to afford to pay their own way.
The key challenge for prospective reforms hinges on what you think needs to be done to make healthcare affordable. If you think that to be affordable healthcare costs need to come down by 20-30%, that could be done through some combination of efficiencies in insurance administration, reducing the cost of pharmaceuticals, reducing legal costs, etc. Of course, it also means that universal coverage needs to be thrown out the window. You can’t reduce costs and expand coverage at the same time mostly through greater administrative efficiencies and cheaper drugs.
If, as I do, you think that to make healthcare affordable it needs to be significantly less expensive than it is now, then it requires a more dramatic change in how healthcare is delivered. Anything else means that you believe that people in the healthcare industry will take a voluntary pay cut, an extremely unrealistic assumption.
