Wednesday, December 2, 2009

Fourth-Party Payer?

A look at one of the problems at the heart of rising medical costs that is often neglected - employer-provided coverage.

Three-fifths of Americans, the share with employer-provided health insurance, are in the same situation. Since someone else buys insurance for them, using money they would otherwise receive as wages, they are in no position to shop around and typically do not know the true cost of their coverage. This disconnect between payment and consumption is one of the central problems with the health care system, contributing to insecurity, rapidly escalating costs, and the general lack of choice and competition. Yet both Democrats and Republicans insist on preserving it.

Yet it’s the tax-free status of those benefits that favors them over cash compensation, maintaining a bizarre system in which most Americans get their health insurance—unlike their car, life, or homeowner’s insurance—through their employers. As a result, they are insulated from the actual price of their insurance and are more likely to have plans with low deductibles that cover routine medical expenses as well as large, unpredictable costs. In choosing among providers, drugs, and treatments, they have little incentive to economize and usually do not even know the relative costs of their options.
So we have the first party (individual), second-party (doctor), third-party (insurer) and a fourth-party (employer) all paying portions of the bill. No wonder it is so difficult to determine the costs, let alone rein them in.

Don't forget, the plan currently being debated by the Senate will increase the linkage of employers and health insurance by requiring them to provide it or pay a fine.

Laissez faire, morbleu! Laissez faire!!

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