Monday, July 18, 2005

That rise in health care costs? Here it is.

Employers pay a steep subsidy for programs
Oregon employers and workers that carry employer-sponsored health plans subsidized the Medicare and Medicaid systems to the tune of 14.4 percent, or $634 million, in 2004.

Payment shortfalls from Medicare totaled $399 million, according to Brown's data, and Medicaid shortfall was $235 million from Medicaid.

While Medicare and Medicaid rates are non-negotiable, hospitals have more leeway in charges to private insurance. "When you have three customers, and two routinely pay less than the cost of doing business, the third payer becomes critically important," said Kevin Earls, vice president of finance for the Oregon Association of Hospitals and Health Systems. "Without the money you make up from [private insurance] you can't make up the losses you incur treating Medicaid and Medicare patients."

So government health care doesn't feel like paying the full price so hospitals make up the difference by charging private employers extra. We see this price in increased premiums, higher deductibles and bigger bills from the doctor.

Now what would happen if government wasn't two out of three payers but was the only payer a la plan Hillary? How would that difference be made up? Less service, less care, less doctors. Government has proven time and again that it can't provide a product or service better or cheaper than the private sector. Health care is just one example, another would be Amtrak and Greyhound.

I don't like going to the doctor as it is. Knowing that when I take my kid in for an ear infection and it costs me $412 it could cost $354 instead (14% less) makes it worse. The only thing that could be more infuriating is if going to the doctor was like going to the DMV...

3 comments:

Anonymous said...

So get the government out of health care. Stop funding Medicaid and Medicare. Stop providing tax subsidies for employer-provided insurance. (I work for a living and my employer doesn't pay for it, so why should I subsidize your employer-provided insurance?) Stop the excessive regulation, and let the poor get whatever health care they can pay for, even if not up to our licensed middle class standards.

Daniel said...

What subsidies does my employer get for providing health insurance? I am not aware of any.

Anonymous said...

Um, Daniel, YOU get the subsidy when your employer pays for your health care. Your employer gets an expense which reduces his taxable income. (No subsidy in this, as he gets the same expense he would get if he paid it to you as salary. Maybe a teeny subsidy because I think the employer avoids FICA and FUTA on employee health care, but I'm not going to quibble. Whether there is or is not a small subsidy here, I'm not worried about it.) The subsidy occurs when you receive compensation for which you are not taxed.

Simple example: Employee A is paid $20K cash, no fringes. Employee B is paid $20K cash, plus $5K health care. A and B pay the same amount of tax, and B's subsidy is equal to $5K times his marginal tax rate, and income is redistributed from A to B, and A is paying a higher effective tax rate than B.