Imagine if government created a scheme whereby $20,000 of your annual salary is diverted into the purchase of a product, which creates a monopoly for a small group of companies, thereby boxing you out of that entire product or service unless you find a job where that amount of money is diverted for that product? Well, that is essentially our government-manipulated health care system in one sentence.
According to a new report from the Kaiser Family Foundation, annual premiums for “employer-provided” medical insurance plans for families rose 5% this past year, more than double the rate of inflation. The price tag now stands at $20,576, as much as the cost of purchasing an economy car over again every single year. That is the money that is coming out of worker paychecks with so few people even realizing it. According to Kaiser, employees are now paying an average of $6,015 toward their premiums, up $1,200 since 2014, but they often forget the remaining $14.5K is coming out of their salaries too.
In total, premiums have risen 54 percent over the past decade. While that is not as bad as the skyrocketing cost of individuals plans, which have essentially become insolvent without government handouts, it is an outrageous indictment of Obamacare’s promise.
Oh, and deductibles, co-insurance, and co-pays have skyrocketed as well. Deductibles and co-pays are actually good when and if you are paying premiums that are the cost of catastrophic coverage. But to pay “Cadillac prices” for premiums and still get hit with so many more charges is outrageous.
Employer-based insurance is not market-based, it’s venture socialism from government
Now would be a good time to revisit the original sin of employer-based health insurance, and now that Obamacare is destroying it, maybe we should ditch the entire concept. What in the world is “employer-provided” health insurance to begin with? Why don’t we have employer-provided auto insurance or employer-provided homeowner’s insurance? The answer is because government didn’t force us into the other arrangements like they did with health care through the tax carveout for employers who provide medical insurance. Thus, for every additional dollar your employer increases your salary, he must pay taxes on it, but for every additional dollar he funnels to the insurance cartel on your behalf, he doesn’t pay any taxes.
This is the reason why insurance companies control the supply chain of health care and box out individuals seeking to purchase plans, two vices we don’t find with other forms of insurance. We don’t see State Farm price fixing the cost of roofing and construction materials the same way Aetna and United Health price fix the cost of MRIs or blood work. Government never created a monopoly for them through employer tax exclusions and government welfare programs funneled to “private” companies.
The medical insurance industry subsists on more government favors than any other industry. Between the requirement to purchase insurance, the requirement that companies offer the insurance industry’s product, and the $280 billion tax exemption to offer their product (four times the size of mortgage interest deductions!), the insurance cartel is essentially a government-sponsored entity or public utility. It has done nothing for society, but has destroyed the patient-doctor relationship, prevented medical innovation, and raised costs astronomically. It would have never persisted in this structure had government not distorted the market.
Imagine what would happen if the government mandated that every citizen not only own a firearm, but purchase a specific type of firearm produced only by a few companies. Then employers would be required to purchase them for employees, and they’d get a collective $280 billion tax cut for doing so. In addition, the entire personal security for all the elderly and poor would be managed by those companies and their services, through $1.6 trillion in combined federal and state spending! They’d be pretty darn wealthy and have all the power in the world to lobby for endless subsidies. And of course, a simple 9 mm handgun would cost you $50,000 if you were purchasing it without your “Ammo-caid card.” That, in a nutshell, is the exact situation in our critically ill health care system.
How did this nonsense begin? In 1942, Congress passed the Stabilization Act, which instituted wage controls in the workforce. Like every other deleterious government intervention, the wage controls led to unintended consequences. In order to compete in the labor market, employers began to look for other means of compensation to attract talent and reward productive employees. This gave rise to the tax exemption for employer-provided health insurance officially created by a 1954 IRS ruling. Concurrently, labor unions began engaging in collective bargaining for fringe benefits in addition to wages.
When government created the concept of tethering medical insurance to employment, it not only boxed out those individuals who seek to purchase insurance on their own, but has also immutably hitched health insurance to health care. Now health care is defined by medical insurance in a way that does not exist in any other industry with insurance, such as home or auto. The insurance cartel is now both the provider and consumer at the same time, squeezing out anyone who is not either subsidized by government or by the employer (although it’s coming out of your salary) into oblivion.
It’s no mystery why our national expenditures on health care have popped from $27 billion in 1960 to over $3.5 trillion today. Assuming health care would rise at the same rate as the rest of the economy, that number would be under $250 billion today. Thanks to government-run health care and government-distorted conception of private insurance, only 10 percent of all health care spending is out of pocket. This dramatically inflates the price for the few people actually willing to do spend out of pocket.
The government’s employer health insurance scheme together with Medicare and Medicaid becoming cash cows for the insurance cartel has impelled a circuitous cycle of creating monopolies to artificially inflate prices, thereby demanding more subsidies, which inflates the cost even more, so they can lobby for … more subsidies. Almost 60 percent of the annual revenue of the top five insurers comes from Medicare and Medicaid!
It’s time for conservatives to offer a vision of health care beyond the government’s failed model of giving a handful of insurance companies control over the market. It’s time to cut out all the middle men and have people directly purchase their own catastrophic insurance from day one and pay for the rest through a transparent market like everyone does with every other product or service. Those who truly can’t afford it should receive a subsidy in an escrow account to pay for it directly like with food stamps, rather than lining the pockets of the insurance cartel through the cronyist Medicaid program.
Over and beyond repealing Obamacare, conservatives should push for the following:
Bottom line: Would we rather have health care look like a mini-bar in a hotel room or Amazon? The shelves in an America supermarket or in a Venezuelan supermarket?
Daniel Horowitz is a senior editor of Conservative Review. Follow him on Twitter @RMConservative.