The healthcare debate and incentives

17 January 2010 | 0 Comments

As the healthcare reform debate rages on in DC, Massachusetts has suddenly been thrust into the spotlight with the special senate election on Tuesday becoming a deciding congressional vote on reform.  Unfortunately, I haven’t had a chance to closely follow the debate but I do know that the proposed legislation to offer universal healthcare is massive in scope and will shake the foundation of the current system.

To be honest, the legislation is probably so convoluted and confusing that nobody in the country knows exactly what the Frankenstein-like system will be like after implementation.

But it all got me thinking back to a class this past semester when a Professor performed a quick analysis of the incentives provided by the current healthcare system in the United States:

  • During World War 2, the US government placed caps on wages for labor.  Companies subsequently competed for the best employees by offering health plans.
  • The government instituted tax benefits – healthcare costs are deductible for companies, but NOT for individuals.
  • Healthcare providers are paid per test or procedure.
  • The government subsidizes sugar and corn (high fructose corn syrup).
  • Insurance providers aren’t allowed to charge rates to those covered on any behavior besides smoking.
  • Government proposes to mandate universal insurance coverage.
  • Government will pay for universal insurance coverage with savings (which it doesn’t have) and increased taxes.

While a very generalized, 50,000-foot view of the subject, the exercise helped to put things into perspective. I get cheap sugar coupled with all-I-can-eat (no pun intended) healthcare provided by my employer.  I don’t smoke, so I (or my company) don’t have to pay any more than the other, similar-aged person.  Obesity, here I come!