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Americans Under 65

1. More than half of all Americans under age 65 get health insurance through their employer or a family member's employer. For that reason, America is often said to have an employment-based health insurance system for nonelderly people.

Many experts think America's employment-based system is problematic, but it's not all bad.

Can you name one advantage, and three disadvantages, of an employment-based health insurance system?

Think it out! Then, to see answers, click below...

In the market for individual health insurance, older people and those with health problems often can only buy expensive or inadequate insurance. This is because insurance companies are reluctant to sell insurance to individuals who are likely to cost them money.

But an employment-based system allows older and less healthy people to be grouped with their younger and healthier co-workers; employers often buy insurance plans that cover everyone in the group. Thus, many people who otherwise wouldn't have insurance are able to get insurance through their employer.

Unfortunately, an employer-based system often leaves the unemployed, or those employed at jobs that don't offer insurance, either with no insurance or inadequate insurance.

Health insurance is very expensive for many employers, especially those who have to compete with businesses in other countries where insurance is either provided by the government or not provided at all.

When people are dependent on their employer for health insurance, "job lock" can result. This means that employees stay in jobs they don't like in order to maintain their health insurance; it also means that some would-be entrepreneurs might decide to continue working for their employer rather than start their own business.

2. In general, "insurance" is something that people use to pay for large and rare expenses such as car accidents, not small and routine expenses like gas fillups.

However, this is not the case with health insurance. Many Americans use health insurance to pay for both large, rare expenses (like chemotherapy) as well as routine checkups.

Read each question below. Then, when you are ready to see the answer, click on each box...

Why do conservatives think it is problematic when small, routine expenses are paid for with insurance?

In general, when you have to pay for something yourself, you only buy it if you really need it, and you try to pay the lowest price you can. But when an insurer is paying all or part of the cost, neither you nor your doctor have much incentive to keep costs down.

This causes health care to be overly expensive, which is a tremendous burden on the federal government, state governments, employers, and families. The uninsured suffer twice, both because insurance is too expensive and out-of-pocket costs are too high. (An "out-of-pocket" purchase is when you pay for health care directly, rather than through insurance.)

Why do conservatives believe the government is responsible for the fact that Americans use insurance to pay for small, routine items?

Because the government has enacted many policies which encourage people to use insurance to pay for small, routine items.

The tax code contains a deduction which effectively subsidizes employer-bought insurance. When something is subsidized, people will use it more than they normally would. Thus, subsidizing insurance means that people will use a lot of insurance.

State and local regulations mandate that insurance plans must cover various expenses, including many that are not large or rare.

Medicare and Medicaid are both government insurance programs, and both of them cover certain small, routine exepenses as well as large, rare expenses.

Because of these policies which encourage insurance to be used to pay for expenses that aren't large or rare, conservatives believe the government has made the health care market worse.

What do conservatives want to do about this?

According to conservatives, the government has caused great harm by enacting policies which encourage people to purchase health care through insurance. The government ought to stop doing this; conservatives believe that the government shouldn't create an artificial advantage to getting health care through insurance.

Thus, the tax deduction for employer-bought health insurance ought to be eliminated from the tax code. If it can't be eliminated (for political reasons), then the tax code ought to contain equal benefits for people who buy health care out-of-pocket.

Many conservatives favor Health Savings Accounts, or HSAs. HSAs are tax-advantaged accounts similar to IRAs. But unlike IRAs, which are primarily retirement savings vehicles, HSAs are vehicles for saving money for health expenses. In order to have an HSA, a person must have high-deductible insurance. High-deductible insurance only pays for claims after a person has already spent a lot of his or her own money. (The specific amount is called the "deductible".)

Conservatives believe that federal and state governments ought to ease regulations and allow HSAs, and high-deductible insurance, to flourish. In addition, some conservatives favor reforming Medicare and Medicaid in such a way that high-deductible insurance is combined with deposits into HSAs or similar accounts.

Then, people will use insurance less and pay out-of-pocket more. When people pay for health care directly, such as with money they have saved up in their HSA, they have incentive to shop around. And when people shop around, doctors and other medical providers compete with each other to offer the most inexpensive, high-quality care.

3. Okay, so that's a conservative argument on health care policy. Don't liberals have a comeback?

Read each question below. Then, when you are ready to see the answer, click on each box...

Why do liberals think that paying for small and routine expenses with insurance is NOT a big problem?

The liberal economists Paul Krugman and Robin Wells argue that most health care spending consists of large expenses like chemotherapy, not small routine expenses like dental checkups or stuffy noses. Using HSAs to pay for small, routine items won't make a significant difference on health care spending, say Krugman and Wells, since such small expenses are not a major component of America's total health care spending.

Okay, that explains why liberals think that conservative ideas won't do much good. Why do liberals argue that conservative ideas will be positively harmful?

Currently, America has an employment-based health care system for people under 65. It's very flawed, but it has some positive qualities: under this system, many older and less healthy people can often get health insurance through their employer, which means their health care is effectively subsidized by their younger and healthier coworkers. (When shopping on their own, older and less healthy people often can't find affordable quality insurance.)

Liberals fear that the conservative policy agenda will undermine the employment-based system without replacing it with a workable alternative. If the tax deduction for employer-bought insurance is eliminated and people are expected to save up money in their individual HSAs, then poorer, less healthy people will be unable to get insurance or quality care.

Liberals also argue that people are less likely to utilize preventative care, or other needed care, when they have to pay for it out-of-pocket. Early medical intervention can save a lot of pain, emotional suffering, lost work-hours, and lost ability to care for children, and sometimes prevent death. Also, preventative care can sometimes save money in the long run, although some preventative care does not.

So, neither liberals nor conservatives are satisfied with our employment-based health care system. Conservatives want to replace it with a market system in which people save up money in their HSAs and only use insurance for large, rare expenses. But liberals argue this is both unfair and won't solve anything. What do liberals want to do?

Since an unregulated market will leave many people without adequate care, liberals believe the government ought to play a large role in health care. Most liberals would like the government to provide insurance for everyone; this is called a single-payer system. Under a single-payer system, people are not dependent on their employer to provide insurance (although employers may have to pay taxes to support the single-payer system.)

The Obamacare legislation will increase the number of people with insurance by expanding government insurance (through Medicaid) and by regulating and subsidizing the purchase of private insurance. However, it will not provide insurance for everyone. Thus, many liberals are disappointed that Obamacare is not a single-payer system, but many accept the Obamacare legislation as a suitable political compromise, and are now working to ensure its success.

Okay, we saw how a liberal would argue against the conservative plan for HSAs. But how would a conservative respond to that liberal argument? And then how would a liberal respond back to that conservative?

To find out, order your copy of Health Care and Public Policy for the Confused, Concerned, and Curious today!