Thursday, January 11, 2018

Linking health insurance and employment: does the saga ever end?

This is Joseph

Yesterday, I wrote about Matt Reed talking about unions.  He had an earlier post on how an aging work force was doing bad things to the health insurance costs at his institution.  His solution is pretty obvious from a policy perspective -- linking health insurance to employment is looking like less and less of a good idea over time.  Among other things, it reduces job mobility and insulates customers from directly seeing the relevant costs (a second payer causes problems).  But it also reduces the quality of life for older adults.

One of the commentators on the post had an excellent point about how it discourages things like early retirement for burnt out staff:

Here is how we think Matt: Retiring before 65 is economic suicide. Even if you have a decent pension and some serious savings, a quick look at the private health insurance market will dissuade you from even thinking about it. This is doubly the case if you have any known health problems. Those $2,000 a month premiums, $5,000 deductibles and $7,500 out-of-pocket maximums mean you are $30,000-some a year in the hole the day you walk out the door. If you become disabled and don't have private disability insurance that you bought when you were 20 it is even worse. I have known people who have been fired before age 65, but I don't know any that went out the door on their own. (Oh, and your chances of finding another job? Zero! Unless you like driving Uber.)
It's astonishing that costs of health insurance exceed that of many people's pensions.   It is also likely that we've long since hit the point of diminishing returns on trying to get people to pay more in deductibles.

Now I am not unaware of the risks and costs of transitioning to a single payer style of system, especially when health care costs are already high.  But it isn't absolutely clear to me that these high costs are necessarily helping improve health, overall, which is an issue.  But it is also clear that suddenly radically reducing compensation for a huge segment of the economy is likely to cause . . . disruption.

But it is a problem worth thinking about and it would likely pay large dividends to have a good policy plan for improvement.  I mean it isn't like there are nearby functional models that work in decentralized and diverse English speaking countries with a large immigrant population that manage to have a decent life expectancy.  Right?

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