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Wednesday, October 21, 2009

What government needs to do to improve healthcare

[B]elieve me, I understand why people think, "The government needs to do something!" Those people are right, the government does need to do something. Specifically, it needs to get out of healthcare.

How Government Screws Up Health Insurance

It's not an accident that health insurance tends to be tied to employment. During the wage-and-price controls of World War II and the Nixon era, companies competed for employees not by offering higher salaries (which was illegal) but by offering perks such as health insurance.

Currently, one of the major reasons companies offer insurance as part of compensation packages is that it is tax deductible. In other words, if a corporation pays $10,000 a year to insure you and your family, they can write it off as a business expense, and you won't pay taxes on it. But if the corporation increased your salary by $10,000 and told you to buy your own insurance, you would get taxed on that money.

Another major distortion is that there are barriers to interstate competition among health insurers. If all the Obama administration wants to do is promote options for consumers, this seems like low-hanging fruit.
-- from "The Wall Street Journal Defends the Predator State" by Robert P. Murphy


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