Philadelphia Reflections

Employer-based Health Insurance: End of the Trail?

America's health care crisis may well be solved by curing all disease

Dr. Fisher

America seems determined to invest whatever it may cost to eliminate diseases through medical research. It's pretty hard to know which diseases will experience a miracle cure, and how soon. So it's difficult to make major changes in the system in anticipation of what we all hope for. But it's not so hard to predict what will happen if we are successful.

Health insurance will progressively seem less necessary, and that will prove particularly true for young and middle-aged people. Since our present system of health insurance is largely based on employer-based groups, employers can be expected to become particularly restless about paying for it. Long before all diseases of working people have been completely eliminated, some clumsy political intervention could well cause a stampede among employers -- for the exits.

Even if everyone in the unions and in government is circumspect about alarming the mullets, steady erosion of disease costs among workers will lead to a steady migration of costs to retirees. For practical purposes, that raises the possibility that essentially all medical costs will become the responsibility of Medicare. Since it is universally agreed that demographics will make Medicare expenses unbearable for the national budget in ten or fifteen years, a shift of even more expenses toward the retiree group would be even harder to deal with. It's pretty hard to wish for some particular solution to a problem, when no one has even made a plausible suggestion about it.

So let's focus on the problem which is most likely coming first. Employer-based health insurance, and even health insurance, in general, may well be a thing of the past -- reasonably soon. The main component of it which will not be eliminated is the cost of obstetrics, the cost of perpetuating the human race. The charges being made for this normal and essential process are so burdened with liability risks that it is tempting to blame them all on lawyers. Cost-shifting to other activities and other age groups, however, is also pretty likely. If the concentration of overhead costs on obstetrics goes beyond a certain point, however, I would predict we will see a migration of obstetrics out of the general hospital environment into specialized birthing centers. That's not entirely desirable, because all specialty care is safer when conducted within reach of the whole range of supporting specialties. But if the financial pressure gets great enough, we will surely see a migration back to the specialty hospitals so common in the early 20th Century, then abandoned in the middle of the same century.

Worker's Compensation is another carve-out which will relieve central anxiety of employers, and hence hasten their indifference to general health insurance for their employees. And scandals in the health insurance industry are just going to accelerate the dissolution of support which is inherent in medical progress. Anyone who reads the papers carefully can name at least three billionaires among the ranks of health insurance CEOs.

The pace of coming medical progress is hard to predict, so it is daunting to propose a solution to the problems it will create. That includes proposals which many people would like to advance, like universal health coverage. Patchwork makeshift for uninsured people seems timid and defective. But grandiose proposals for fundamental reform of the whole system are simply foolhardy, at a time when health insurance may well become an obsolete concept, and far greater problems could be made much worse.

Originally published: Monday, October 23, 2006; most-recently modified: Thursday, May 16, 2019