The Future of Healthcare Reform, If It's Built on Top of the Employer-Based System

An underreported aspect of the health reform proposals being advanced by Congressional Democrats (in both the House and Senate) is the conscious intent to maintain the current system of employment-based health insurance as the basis of the American healthcare system. Nobody implementing a healthcare system from the ground-up, from either the left or the right, would design a system that links health insurance eligibility to employment as American laws and regulations currently do, yet a majority of Congressional Democrats are firmly committed to extending into the immediate future, at least, the disproportionate role played by employers in access to health insurance.

Support for employer-based healthcare may make frighteningly raw political sense, if enough people have bought into the mistaken idea that employer-based healthcare is something that they receive for "free" (when in reality, it is no more free than any other part of employee compensation) and that tax-code and regulatory changes intended to remove the advantages that corporate health insurance purchasers have over individual insurance purchasers amount to corporate health plans being taken away by the government. Nobody likes to be told that something they already have is going to be taken away.

But I fear that an even more cynical calculation may underlie the Democratic commitment to employer-based health insurance.

We know that very few seriously believe that the Democratic reform proposals, in their current form, are going to truly reduce medical costs or control medical inflation. There just aren't that many convincing examples to point to where Federalizing regulation, providing subsidies and imposing mandates have historically reduced the cost of anything. Yet, Democrats are proceeding untroubled by this, mainly because of 1) a general detachment from fiscal reality that is the hallmark of the modern Democratic party and 2) a sincere faith that government can achieve any goal given enough power and treasure -- give government infinite resources and it will do infinite good!

Ultimately, the economics of the Democrats' plans depend upon cost-controls being imposed from the top-down, after the government has amassed enough power over healthcare to impose them. But Dems are not keen on explaining this aspect of their plan to the public -- they are quite fuzzy on what exactly the mechanism to control costs will be. So who will they blame, when it turns out that creating a government-run insurance company and new bureaucracies to oversee an employment-based healthcare system, in order to cover more people than are covered now without any reduction in quality of medicine, fails to reduce costs?

I suspect the blame will be directed towards the middlemen, to the employers placed by legislation and regulation between individuals and health insurers. Advocates for ever-increasing government power over healthcare will argue that their well-intentioned plans haven't worked because of choices made by greedy employers (who maintain disproportionate influence over healthcare choices under Democratic health reform plan) and that if more people can be moved into more directly government-controlled programs, then everything will improve as "planned".

In the end, the Democrats are setting up the American people for a choice between letting employers make their health insurance decisions for them and letting government make their health insurance decisions for them. If people are interested in a third option -- allowing individuals make their own health insurance decisions, without substantial interference from government or employers -- they need to let their representatives in Congress know that they want that choice, because the Democrats are in the process of creating a health care framework for the United States that could soon make this into an impossibility.