Bob DeMarco Alzheimer's Reading Room

Thursday, March 6, 2008

Employers Pick Workers’ Pockets on Health Insurance


That misunderstanding is called the “myth of shared responsibility” by Ezekiel Emanuel, the ethics guy, and Victor Fuchs, the money guy, in a commentary in JAMA. They explain that the cost of health insurance comes not from employers’ profits but from employee wages. Employers adjust for rising health care costs by essentially docking pay, and “the increasing cost of health care has resulted in relatively flat real wages for 30 years,” they write.


Employers Pick Workers’ Pockets on Health Insurance

To those of you who have health insurance through your job, a bioethicist and an economist pose this question: Who do you think pays for your health coverage?

Most people who get insurance at work believe that it’s the boss. But the notion that employers really pay for insurance for their employees simply isn’t true.

That misunderstanding is called the “myth of shared responsibility” by Ezekiel Emanuel, the ethics guy, and Victor Fuchs, the money guy, in a commentary in JAMA. They explain that the cost of health insurance comes not from employers’ profits but from employee wages. Employers adjust for rising health care costs by essentially docking pay, and “the increasing cost of health care has resulted in relatively flat real wages for 30 years,” they write.

Why does the myth matter? Emanuel says that people’s belief that they’re getting a free benefit is a big reason why they are resistant to a major overhaul of the health care system. But employer-based health care is economically inefficient, Emanuel tells the Health Blog. A substantial chunk of the money goes to pay for things that have nothing to do with health care, such as underwriting, sales and marketing.

Uwe Reinhardt, a Princeton health economist, likens the employer-based health insurance to a garden party where a very slick pickpocket steals your wallet and then buys you roses and chocolates. “You’d be very grateful,” Reinhardt tells the Health Blog. Employers “are pickpockets who very skillfully take it out of your paycheck. Then they say, ‘Now genuflect.’ ”

A system with a common, government-levied tax and a voucher-based private delivery system makes better economic sense, some economists believe. “It would be much clearer that as costs increase, people will ask more carefully, ‘Are we getting something that’s worth it?’ ” Emanuel says. If someone else is taking care of the restaurant check, “you don’t ask so clearly what is this costing. If, on the other hand, you’re paying the bill, you ask more critical questions.”