Vic Fuchs, the dean of American health economists, argues that employment-based insurance has an assortment problem focused on high income consumers (he compares it to Whole Foods versus Walmart) and a related high cost of administration.
May 9, 2019
Does Employment-Based Insurance Make the US Medical Care System Unfair and Inefficient?
Victor R. Fuchs, JAMA. Published online May 09, 2019. doi:10.1001/jama.2019.4812
"In the United States, the interests of high-income individuals dominate decisions about what medical care is offered and how it is financed. The result is a less efficient and less equitable medical care system than in other high-income countries. Employment-based insurance plays a key role in determining the production and financing of US medical care.
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"Emphasis is on specialty and subspecialty care, expensive technology, extra capacity to facilitate access (US hospitals have an average occupancy rate of 65% compared with an average of 76% according to the Organisation for Economic Co-operation and Development), and more and better-quality amenities, including space and privacy in the hospital.3 Architects who build in many countries suggest that design for US hospitals must also include better space for visitors and professional staff. This more costly product mix (specialty care and hospital amenities) is appreciated by patients at all income levels, but higher-income patients would and sometimes do pay extra for them. Many low- and middle-income households would be better off if medical care was less costly, and they had more money for other public and private goods and services.
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"The preference of high-income patients for a costly product mix also adversely affects the efficiency of research and development in the choice of projects because market size influences the direction of investment in innovation. Almost all private medical research and development is directed toward extending the product mix with few attempts to discover new lower-cost interventions with truly disruptive innovations. The interests of high-income patients not only result in inefficiency in medical care production and innovation, but also adversely affect the way the United States finances health care. The present system, which is a mix of employment-based insurance, other private insurance, numerous government programs, including Medicaid and Medicare, each with its own eligibility rules and payment schemes, and out-of-pocket payments, is extremely costly to administer.4,5 The large role played by private insurance in the United States helps high-income households because the price of the insurance is the same regardless of income, whereas government plans typically require higher-income individuals to pay a larger share of the nation’s medical care bill."
May 9, 2019
Does Employment-Based Insurance Make the US Medical Care System Unfair and Inefficient?
Victor R. Fuchs, JAMA. Published online May 09, 2019. doi:10.1001/jama.2019.4812
"In the United States, the interests of high-income individuals dominate decisions about what medical care is offered and how it is financed. The result is a less efficient and less equitable medical care system than in other high-income countries. Employment-based insurance plays a key role in determining the production and financing of US medical care.
...
"Emphasis is on specialty and subspecialty care, expensive technology, extra capacity to facilitate access (US hospitals have an average occupancy rate of 65% compared with an average of 76% according to the Organisation for Economic Co-operation and Development), and more and better-quality amenities, including space and privacy in the hospital.3 Architects who build in many countries suggest that design for US hospitals must also include better space for visitors and professional staff. This more costly product mix (specialty care and hospital amenities) is appreciated by patients at all income levels, but higher-income patients would and sometimes do pay extra for them. Many low- and middle-income households would be better off if medical care was less costly, and they had more money for other public and private goods and services.
...
"The preference of high-income patients for a costly product mix also adversely affects the efficiency of research and development in the choice of projects because market size influences the direction of investment in innovation. Almost all private medical research and development is directed toward extending the product mix with few attempts to discover new lower-cost interventions with truly disruptive innovations. The interests of high-income patients not only result in inefficiency in medical care production and innovation, but also adversely affect the way the United States finances health care. The present system, which is a mix of employment-based insurance, other private insurance, numerous government programs, including Medicaid and Medicare, each with its own eligibility rules and payment schemes, and out-of-pocket payments, is extremely costly to administer.4,5 The large role played by private insurance in the United States helps high-income households because the price of the insurance is the same regardless of income, whereas government plans typically require higher-income individuals to pay a larger share of the nation’s medical care bill."