Tax-subsidized, employer-provided health insurance is a case study in perverse incentives, and this piece should be required reading in congress. One of the main drivers of cost increases in our health care system is over-utilization, which is in turn driven by the disconnect between the real and perceived costs of medical care. Employer-provided coverage is the primary source of this disconnect.
Although employer-provided health insurance is obviously part of an employee’s compensation, it is not taxed as such. Thus, wage-earners tend to be over-insured with policies that require little or no out-of-pocket expenditure for even the most frivolous visit to the doctor or ER. As a result, millions of Americans buy more health care than they would in a market undistorted by this misguided tax policy.
President Bush has proposed a change in the tax structure that would remove some of these perverse incentives, and one hopes congress will take time out from partisan sniping to support the plan.
Post a Comment