The Key to Solving our Healthcare Cost Problem


My last three posts: herehere, and here, are concerned with the high cost of American healthcare and how this is so closely tied in with our very large and badly out-of-control national debt. In particular, three giant American companies: Amazon, Berkshire Hathaway, and JP Morgan Chase are forming an independent healthcare company to try to hold down healthcare costs for their combined one million employees in the U.S.

Dr. Elizabeth Rosenthal, an MD and editor-in-chief of Kaiser Health News, points out that this new company may help its own members but end up hurting the rest of us:

  • Previous efforts along the same line by Safeway and Boeing have held down costs for the companies own employees but are too small scale to have had broader impact.
  • The new company, much larger in size, may be able to negotiate lower prices from labs and hospitals for its own members. But then these same labs and hospitals will charge more for everyone else.

Moreover, in general, employer based healthcare insurance has lots of problems:

  • It diminishes incentives to reduce costs by insulating workers from the full price of their benefits.
  • It discourages changes that could displease even a small number of workers, thereby creating incentives to minimize disruption.
  • The pervasiveness of employer health insurance makes it more difficult for individuals to buy health insurance on their own, thus discouraging entrepreneurship.

Conclusion. Given the inherent flaws in employer provided health insurance, it is unlikely that more innovation by individual companies, or groups of companies, will lead to an overall solution to the exorbitant cost of American healthcare.
The solution lies in a different direction: ending or at least modifying the ACA’s employer mandate.  See here for details.  More later!

4 thoughts on “The Key to Solving our Healthcare Cost Problem

  1. Jack,

    In addition, there is an institutional co-dependency between the major medical centers for Complex Healthcare needs and the health insurance companies that offer these employer plans. It is driven by their separately pursued, but equally committed, business plans focused on managing market share. The only way out is to begin a long-term strategy to form an alternate method to support our nation’s under-graduate and post-graduate medical education. Our reliance on $18 Billion a year from Medicare for medical education is a no win strategy. There really is no means to begin this discussion when the cost and quality issues of our nation’s healthcare continue as is.

    Your commitment to make better use of the current financing processes offers the best strategy to fix our current financial arrangements as a basis to focus on its other problems.


      • The elimination of the employer mandate from the ACA 2010 legislation and the elimination of health insurance as a tax deductible expense has many implications, especially with the recent changes in corporate taxation by the Federal government. The actuarial stability of group benefits might be a casualty for certain citizens. Additionally, what is likely to be the resultant level of corporate expression of social responsibility for their employees, e.g., a recognition of individual levels of disposable income?

  2. How about just modifying the employer mandate to let employees migrate, if they wish, from the employer plan to a personal plan? Then everyone else, who don’t choose to migrate, would stay on the employer plan which would still be required for the non-migrators. This would be an improvement for the migrators who would receive a better plan or else they wouldn’t migrate, also be beneficial for the employer who would be covering fewer employees, and also save the government for the tax exemption because it would be for fewer employees.

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