Saddling Employers Isn’t the Answer for Healthcare

Aside from the defeat of fascism, World War II left us with two lasting innovations in the civilian sphere: the jeep and employer-provided health coverage. At the time, businesses couldn’t raise wages due to government-enforced wartime salary caps. Health coverage was offered as a means of attracting potential job applicants.

Since then, we have gradually convinced ourselves that an anomaly should be the norm, and politicians have discovered the political benefits of promising to make it so. What was once seen as a fringe benefit is now cast as an employment right. And in California, Maine, and many states in between, lawmakers are trying to sell the idea as at least part of a solution to what is perceived as the crisis of healthcare today.

The worst thing about employer mandates is that they confuse rhetoric with practice. While it is useful to pretend that employers somehow represent a unique class of citizens, the truth is that they are as locked into the state economy as anyone else. The costs that they must bear are at best one degree removed from that which will be borne by all the state’s residents once employers are forced to raise prices, reduce employees’ hours or even cut jobs altogether.

A study released this week by Harvard economists Drs. Ellen Meara and Meredith Rosenthal found that a national employer-provided healthcare mandate would increase the number of insured employees by 8.2 million but at the cost of almost a million (995,000) lost jobs. In addition the mandate would shift 1.6 million employees from full-time to part-time employment and decrease aggregate wages by $71 billion.

Compare that to an expansion in Medicaid coverage to 300% of the poverty line. Doing so would increase the number of insured by 5 million and actually have a positive impact on employment and increase aggregate wages by $16.5 billion. Considering that many states will experience serious shortfalls in Medicaid funding this year, the public funds required for this expansion — $16.4 billion — would be a big pill to swallow.

Unfortunately, most proposals getting thrown around carry a large price tag. And what is often missed in the debate over increasing healthcare coverage in the nation is how we can reduce the cost of healthcare overall. This means making healthcare more affordable no matter who’s paying for it, the government, business, or individuals.