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February 21, 2004

A Capitalist Call For Socialized Medicine?

Are Free-Market advocates soon going to be facing a choice of the lesser of two evils by accepting socialized medicine in order to facilitate the creation of jobs?

Many CEOs are reluctant to hire workers because of the associated health care costs.

"If U.S. manufacturers have the health care burden, and if you don't elsewhere, it starts to look more attractive to put your dollars elsewhere," said Bill Ford, chief executive of Ford Motor Co., the No. 2 U.S. automaker. "That's a real drag on the economy in terms of job creation."

Economists consider payroll expansion critical to supporting the economy. About 2.3 million jobs have vanished over three years, and U.S. job creation is too slow to keep up with population growth.

Yet many CEOs polled by the Business Council plan no hiring binge in 2004, though three-quarters expect the economy to grow faster than 3.5 percent. It grew 3.1 percent last year.

Just 40 percent of the CEOs expect to hire more this year, and 19 percent expect to hire less. Fifty-six percent cited higher productivity, 41 percent a shift of jobs abroad and nearly one-third economic worries for the soft hiring.

The reluctance to address the issue of how to provide the health care to all citizens is now acting as a brake on job creation and is at the root of cost shifting throughout the health sector.

Roughly one in seven Americans has no health insurance. That hurts HCA Inc., the largest U.S. hospital chain, which last year wrote off $2.21 billion of revenue because patients couldn't pay their bills.

Chief Executive Jack Bovender said the improving economy won't translate overnight into lower bad debts among patients. "What helps us obviously is more people becoming employed, and therefore having insurance coverage," he said.

The bad debts that Health Insurers are stuck with eventually work their way back through the system via insurance premiums. Those increased premiums will adversely affect those companies that have US employees who have health benefits and reward those companies that have managed to relocate employees to countries where health insurance isn't the responsibility of the employer.

At the margins, there will always be pressure to lower health insurance costs, and as job functions are relocated, we'll find that in order to maintain jobs within the US the productivity of the remaining workers will have to increase at a rate greater than the savings that could be realized by relocation. Obviously, some companies will be able to perform this calculus but the response of the companies under pressure will be to either relocate or to disgorge health care responsibilities. How long will adherence to the Free-Market philosophy continue when faced with international competitive pressures that make domestic job creation a less favorable option than moving operations overseas?

Any ideas on how to resolve this health care cost dilemma? I'll venture forth with the opinion that a compromise might be sought by removing the obligation from employers and shifting it to the taxpayer but allowing market forces to yield the best health management plans through multiple providers. A single primary payer but actualized through multiple providers. Additional secondary payers for optional coverage. Competition for clients and organizational practices will yield market-based differentiation while allowing health insurance portability with the consumers able to move between plans at will. Consumers with pre-existing conditions are covered because of the single payer configuration and the game of cost shifting abates.

How will the debate play out if the CEOs make the choice to advocate for government to relieve them of the burden of providing health care so as to enable them to create more jobs, but their employees abhor the idea of soicalized medicine?

Is turnabout fair play? Currently, there is a concern that the wealthiest are paying a larger share of income tax and that the poorest don't have any income tax liabilityat all, but by favoring a disgorgement of health care responsibility the corporate class will be turning the tables and be shifting the fiscal responsibility back to all citizens and thus engaging them into the national tax and spend debate.

Of course, we're left with the problem of eviscerating the entire health insurance industry. How long can we delay the need for national triage on this issue? What choices will be necessary? What economic sector will be sacrificed? Or is this whole post a strawman and are the problems with health insurance surmountable?

Posted by TangoMan at 10:47 PM