Philadelphia Reflections

The musings of a physician who has served the community for over six decades

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Some ruminations about health financing, written while we wait for the Supreme Court to announce its decision on King v.Burwell.

Cost is the Big Issue, But Here's Another

In the calculation of A Dollar a Day, it is assumed Congress will permit Health Savings Accounts to purchase the catastrophic, low-cost high-deductible health insurance which pools the risk and acts as a fail-safe insurer of last resort. In a sense, catastrophic insurance through HSA substitutes for a limitation of out-of-pocket expenditures by the subscriber, and incidentally gives income tax exemption to everybody, not just employees of big companies. It also assumes the President will sign such a law, although that may have to wait for a new election if the matter cannot be compromised. No doubt, any president would be heavily influenced by the attitude of big business. The reader is reminded Henry J.Kaiser started this issue in 1944 as a wartime expedient, but the rest of big business has followed his lead, protecting its own tax write-off. For eighty years, this relic of World War II has been quietly but fiercely defended, along with the very large corporate tax reduction which is implicit.

Unfortunately, the negotiations between employer representatives and the administrators of the Affordable Care Act have remained secret, and a resolution of the position of employer-donated insurance has been delayed for two years. The probably motives of big business are clear enough, however, because very large corporate tax write-offs are at stake. Our proposal in this book is to compensate employers with a reduction in the world's highest corporate tax, which has been shown by the Irish government's experience to destabilize international currencies if it is done too rapidly. Adding to the transition awkwardness is the effect of disrupting patients and providers who are already engaged in transactions. Accordingly, there are cogent arguments for transitional accommodations.

Proposal 24 :Congress is urged to consider permitting employers to include catastrophic coverage as a fringe benefit, regardless of other modifications, and to continue coverage after terminations of employment until it is no longer required. Employees without catastrophic coverage may purchase it independently, and carriers will be required to coordinate successive policies in such a way that the employee runs no added risk during transitions.

Commentary: Catastrophic coverage is ordinarily much cheaper than current policies provided by employers, and therefore the corporate tax abatement will be less. Negotiations about corporate tax reductions may wish to take this into account, as well as compensating wage rises for affected employees. Because of the massive number of employees involved, transitions should be voluntary where ever possible.

When costs are better understood, the cost to the individual subscriber should be less. Unfortunately, the rhetoric cadence of "a dollar a day" will have to be sacrificed, because average costs may well be reduced below that figure. While the current employees of big business would nominally be paying for this change, increasing use of Health Savings Accounts would have the result of reducing their total health costs, as well.

Employers who currently provide health fringe benefits could well prove to be the heaviest losers. Negotiators for corporate tax reduction should remember this; it has the effect of describing much of our corporate tax revenues, as eventually paying for a considerable amount of health care.

Originally published: Sunday, June 21, 2015; most-recently modified: Wednesday, May 15, 2019