Assessing the Health Care Debate
The health care debate is picking up intensity, thanks to President Obama and Congress’ ambition to accomplish something on that front in the current year. The eventual shape of the legislation is still uncertain, and plenty of folks are weighing in to try to influence its final shape (in fact, 2009 is looking like a bumper crop for lobbyists). It’s another good example of the realities of political economy – but this time with at least one interesting twist.
Perhaps the biggest question around health care reform is how to finance the cost – and one of the clearest ways of doing so is to end the favorable tax treatment of employer health benefits, as the WSJ’s Kimberly Strassel notes. Strassel points out, however, that candidate Obama attacked candidate McCain on this proposal repeatedly, and that there’s an anti-populist impact to it, as it would hit most union members rather hard, thanks to their generous health plans. While Senators are busy trying to carve out an appropriate compromise, we believe this is yet another example – like the mortgage crisis and the tax troubles of some of Obama’s cabinet appointees – that the 80 billion pound elephant in the room is our tax code.
Finally, the CEO of Safeway penned an op-ed about an innovative approach to health coverage at his company. Assuming the numbers haven’t been massaged, Safeway has managed to keep a lid on health care expenses for four years, and they’ve done it with risk pricing – offering discounts for healthy weight, blood pressure, and cholesterol levels, and avoiding tobacco use – and offering annual repricing to reward progress made on any of those counts. He then points out some room for improvement in prevailing policy (we assume that $1,400 is the marginal cost of insuring a smoker, and not the total monthly cost – otherwise the math might be different):
Today, we are constrained by current laws from increasing these incentives. We reward plan members $312 per year for not using tobacco, yet the annual cost of insuring a tobacco user is $1,400. Reform legislation needs to raise the federal legal limits so that incentives can better match the true incremental benefit of not engaging in these unhealthy behaviors. If these limits are appropriately increased, I am confident Safeway’s per capita health-care costs will decline for at least another five years as our work force becomes healthier.
DISCLOSURE: Symmetry Capital Management, LLC, its clients, and the author have no positions in Safeway or any other companies mentioned.
UPDATE 2009.06.19 Some interesting comments by prior Senate Leader Bill Frist on CNBC this morning – he argued that there are significant gaps in the U.S. medical system that need reform, and also outlined some of the inescapable tradeoffs involved. You can watch a replay here. There’s a related interview here on a Price Waterhouse report on the costs of health care to small businesses.
URLs:
http://www.time.com/time/nation/article/0,8599,1904312,00.html
http://symmetrycapital.net/index.php/blog/2009/06/updegrave-free-market-morality/
http://online.wsj.com/article/SB124476309180208203.html
http://www.nytimes.com/2009/06/12/us/politics/12obama.html?ref=global-home
http://symmetrycapital.net/?s=tax+simplification
Tags: Agency Risk, Governance, Healthcare, Human Capital, Political Economy, Politics, Regulation
News and Views | art June 12, 2009
