Tragedy of the Sniffles
There is some interesting discussion on the Central Missouri Community Action (CMCA) blog regarding rising health insurance premiums. The irony here (to me) is that a non-profit organization focused on alleviating poverty seems to be far more preoccupied with maintaining its existing level of employee benefits, even doing so entails cutting resources targeted for poverty assistance. But maybe that’s just me, and my cold Grinch heart (too late for Grinch references?).
Anyway, not to get on a tirade here, but the author of the post seems to be completely oblivious as to why the group’s health insurance premiums are rising in the first place (he thinks it’s an unfortunate side-effect of employing a mostly female workforce … oh, that cruel insurance agency and its bias against women). The reality is that health care costs are rising (for CMCA as well as everyone else) because we continue to view health care as a collective right. And in treating health care as a group decision, we are only guaranteeing continued abuse and rising costs.
The problem is similar to that of the long-noted “Tragedy of the Commons" principle, which shows how common resources without ownership or management will inevitably be over-exploited and abused. This occurs because the benefits of use accrue to individuals, while the costs are spread over the “commons.” In the health care case, individuals do not pay for the benefit of the "free" doctor visits and prescription drugs they receive; the cost is borne by all premium-payers. And because costs and benefits are out of whack, individuals have an incentive to overuse their care, because their individual “cost” for such care is negligible. Naturally, this leads to abuses of the system (on both the doctor and patient sides).
Health insurance abuse has been a trend at most places I have worked in the past. As long as somebody else is picking up the tab (the insurer/employer), employees have every incentive to visit a doctor for every ache, sniffle, or cramp they suffer. And then there’s “sick pay.” Most employers budget vacation and sick time separately. And since employees generally can’t trade unused sick days for vacation days (despite some rather vocal prodding on my part), it provides additional incentive for employees to skip work for doctor visits which will justify a paid day off from work.
Health care costs are never going to decrease (let alone stabilize) under our current model of “group health.” The only way we can guarantee “reasonable” health care costs in the future is if we put the budgeting decisions in the hands of individual consumers not the “collective pot,” as it were. The Show-Me Institute has been a strong advocate of health savings accounts (HSAs), which allow for employer contributions to health care costs on an individual basis. HSAs allow employees to pick portable insurance plans that work for their individual needs, regardless of their employment status. Employers can contribute to their employees’ HSA plans or help defray costs of individual insurance premiums directly. These HSA contributions are also tax-free, which allows contributions to be invested and used for future medical payments. And SMI practices what we preach, too.
The CMCA’s post ends with the following question:
"Any guesses as to what the most effective way to decrease our health insurance cost is?"
I can think of a few. …