Low Prices, High Taxes?

Kerry Howley | July 20, 2006

The hallmark of the current U.S. health care system is its singular ability to screw over everyone involved. Behold the erstwhile Fair Share Act, which was supposed to help Maryland taxpayers shoulder the burden of a $4.6 billion Medicaid tab. In January, the state overrode Gov. Ehrlich's veto and passed the law, forcing Wal-Mart to spend 8 percent of payroll on health care or pay the difference into the state's Medicaid fund. Yesterday a federal judge ruled that the law "imposes legally cognizable injury upon Wal-Mart" and killed the idea, which was threatening to spread to other states.

Employers like Wal-Mart don't have strong incentives to offer comprehensive policies, and in a better world, no one would expect employers to provide health care at all: Wal-Mart would convert all of its health care benefits to salary and insurance companies would be selling plans (preferably based on the real expected cost of coverage) to individuals. (Bonus to public-health-types: Being a fat smoker would be costly.) The shift would do for insurance what Wal-Mart has done for pretty much everything else -- package the product around the demands of individual consumers rather than employers and providers. Employer-provided coverage is an idea as dated and moronic as -- well, as keeping medical records on paper in file cabinets, restricting HSAs to high-deductible plans, requiring a doctor's permission to obtain contraception, etc., etc.

Newt Gingrich, who is crazy, has some less crazy health care proposals.

Julian Sanchez reviewed the anti-Wal-Mart flick The High Cost of Low Price back in March.

Help Reason celebrate its next 40 years. Donate Now!

Try Reason's award-winning print edition today! Your first issue is FREE if you are not completely satisfied.

|7.20.06 @ 4:34PM|#

It's long past time to throw out the US health care "system" bath water. There are no babies in there. Trust me.

KipEsquire|7.20.06 @ 4:39PM|#

"imposes legally cognizable injury upon Wal-Mart"

That was just a formality to show standing. The merits of the case hinged on whether ERISA, hardly a libertarian linchpin, pre-empted the Maryland law.

Jennifer|7.20.06 @ 4:41PM|#

I have no love for Wal-mart but I'm still glad this law was overturned.

The Owner's Manual|7.20.06 @ 4:44PM|#

MR. GINGRICH: If you take all the countries I just listed, that you�ve been covering, put them on a map, look at all the different connectivity, you�d have to say to yourself this is, in fact, World War III.

This makes Newt crazy? That characterization must be coming from the branch of libertarianism that believes in open borders.

"How can anybody be out to kill us? Come on in, take my wife. Please. Nothing connects to nothing. Let's just get along."

|7.20.06 @ 4:44PM|#

It's long past time to throw out the US health care "system" bath water. There are no babies in there. Trust me.

Really Ruthless? Spoken like someone who has never been sick or needed serious medical care. There are a lot of babies in there.

|7.20.06 @ 4:45PM|#

Newt may be crazy, Kerry, but the link you provided doesn't prove it. Or are you trying to call half the commenters here crazy, too? (You might have a point, but ...)

Otherwise, what Jennifer said.

|7.20.06 @ 4:52PM|#

I just love modern journalism (referring to the linked article here, not Kerry's analysis). After reporting what the court did, we're treated to another two or three paragraphs outlining the surprising fact that Wal Mart and the industry group to which it belongs think the decision is great, and two anti-Wal Mart groups think it sucks.

abidemi|7.20.06 @ 4:56PM|#

In an ideal world, insurance companies would offer good, dependable, individual health insurance plans -- but in this world, they don't and won't. That's not government's fault, either. That's just the free market deciding some people are too much of a risk to take on unless they've got some form of a buffer like a group plan's collectivized risk.

Unless sick people decide that death is a-okay with them, that's why the U.S. is going to have a hard time crawling out of the employer-provided-health-care-hellhole it's in. Group plans are the only way some people can get insurance at all.

|7.20.06 @ 4:58PM|#

Hey, Happy Apollo 11 Moon Landing Day to everyone! A mere 37 years ago we first walked on the Moon!

I'm going to go cry, now. When the aliens come to destroy us, they're going to say, "Well, when we saw that you could go to your moon, we were going to let you join the Federation and give you all this technology to give you perfect happiness, but then you didn't go back. So we're going to liberate you from your pointless existence". Zap.

|7.20.06 @ 5:06PM|#

Thanks, PL, for that incredibly depressing reminder.

A thousand years from now, when the history of the XXth century is being written, world wars, political parties and assasinations will be of interest only to the most bookish of history buffs -- the big event of that century was the space program, and the Lunar landing.

And the great puzzlement of the historians - casual and wonkish alike - will be why we did it and then stepped back to our Earthly squabbles.

Obligatory on-topic comment: Kerry's assumption that the "public health" people want to improve people's health is flawed; what they want is the control that the flimsy excuse of improving people's health offers them.

|7.20.06 @ 5:09PM|#

Hey PL, I'll be visiting Amsterdam next weekend. Could you tell what kind you've been smoking so I can avoid it?

|7.20.06 @ 5:15PM|#

Eryk,

Just sad memories. I'm not that kind of libertarian. Leaving aside my political opinion about the role of government in space exploration, it bothers me to no end that we haven't done more in the manned exploration of space. Then again, don't go by what I say--my dad was working on Apollo when I was a wee lad, so I've been a space junkie since the beginning.

Back to health insurance--sorry for the hijack.

|7.20.06 @ 5:21PM|#

I have no love for Wal-mart but I'm still glad this law was overturned.

I have no love for Wal-mart either. I just go there to buy stuff, not to love them.

theOneState|7.20.06 @ 5:22PM|#

Kerry, I think you're my new favorite writer. And I don't care what you look like.

When's your book coming out? (Are you working on a book?) Seriously, your sentences pack a wallop. And you're the funniest person there. Great job.

|7.20.06 @ 5:25PM|#

Clean Hands:

Based on your XX century comment, what was the big event of the 19th century?

The Readers' Digest article brings up an interesting (and sad) idea: Selling "For when your health insurance company screws you" insurance.

|7.20.06 @ 5:35PM|#

Let's just make it illegal to be sick!

Wal-Mart fear--catch the wave!

In my professional life, I had to assess the danger--if any--to the banking industry if Wal-Mart succeeded in getting an industrial loan company charter. As you might guess, the outcry is almost completely off base. The people who oppose it are mostly those who just hate all things corporate, those who like Target better (kidding), those who have a vested interest in charging Wal-Mart payment processing fees (the avoidance thereof being the reason for seeking the charter in the first place), etc. There's almost no danger to banking (or to consumers) in this move, because the ILC doesn't really give you much of an edge, especially at a national level, for branch banking. Just chew on this for a moment: Target has had an ILC charter for years.

As a result, I tend to take any criticism of Wal-Mart with a grain of sea salt. Not that Wal-Mart is pure and innocent--it isn't--but its critics aren't particularly free of axes to grind, either.

R C Dean|7.20.06 @ 5:36PM|#

That's not government's fault, either.

I wouldn't be too sure of that. The government does such a comprehensive job of regulating insurance, and of doing so via policies supported by influential insurance companies, that I would be big dollars that there are good ways of providing individual insurance that aren't allowed because the big boys don't want the competition.

|7.20.06 @ 5:39PM|#

Probably the biggest news of the 19th century, to the extent that there's much there that deserves consideration a millenium down the line, is the development of machines to start doing labor in place of humans.

Yeah, there are a couple of wars that the wonks will take note of, including an internal convulsion in the North American republic that seems to have finally brought an end to the widespread practice of slavery -- but the first development I mentioned had pretty well put the death knell on slavery as an institution anyway.

Generally, imperial structures around the world continued to crumble, as well -- but this will be of roughly the same importance as the Viking incursions in Europe in the IXth and Xth centuries are to us today. There are echos, but you have to really be a history buffto give a damn.

|7.20.06 @ 5:44PM|#

Don't you people understand? Walmart is the reason all our jobs are going overseas, and people are poor!

Once we destroy Walmart, and big buisness, it will be gravy and and good times for everyone! Nothing will bring the jobs back to America like making America the most expensive and difficult place to do buisness!

|7.20.06 @ 6:09PM|#

In Canada, we have "free" [at least until you look at your tax bill] universal health care.

Of course, there is the little matter that I had to wait 18 months for hernia surgery and others are waiting months to years for heart and cancer surgery. But is "free."

Death is even cheaper

|7.20.06 @ 7:10PM|#

Get rid of tax-free health plans. The health plans that highly paid people get is really a joke. It's a way of giving people money that can't have 40% or more taken out of it. They get a luxury health plan that can pay luxury prices, and doctors start competing on luxuries without any incentive towards lowering prices.

There are short-term and student policies that people can buy on the open market. I don't see why full insurance couldn't be the same way.

|7.20.06 @ 9:32PM|#

I sure hope Walmart responds to the first such law in force by cutting everyone's pay until the 8% target is reached.

I love mathematical ineptitude. Who votes for these people?

Actually, such pay cuts are not uncommon. Lots of people have been required to accept lower pay (or no raises despite inflation) in order to keep their ever-inflating health benefits.

Robert|7.20.06 @ 9:50PM|#

For those of you who don't understand, the idea of the group in insurance is as a randomizer. If a large enough sample of people group together for some reason other than buying insurance, then theoretically the insurer's risk of getting too many money losers is lowered.

But what I don't understand is that practically everybody wants health insurance, so isn't a large enough insurance co. going to get that random sample anyway if large numbers of people just buy policies? I see no reason to mandate what just about everyone wants anyway.

|7.20.06 @ 10:13PM|#

On the subject of Wal-Mart, and its wiggling out of providing health insurance, regardless of the merits of the health insurance as it is now, or how it could be better, what it comes down to is:

We are the ones who end up paying the difference. Our taxes will go up to pay for Medicaid for those who have no health insurance.

Look at it this way. Here we have excessively high property taxes. There is a movement afoot to lower it, either by switching to otehr taxes, or by cutting spending, or by using revenues of state lotteries.

In any case, how are we to think of somebody who, because he claims is providing a much needed service has its tax bill cut in half? Should we cheer him on? You know that a) your own tax bill will not be cut and b) to make up the difference for the money they are losing your own tax bill will go up.

Same thing if it was electricity. Anyone who gets an exceptin does not lower your own payments, he raises them.

Therefore, we ought to be very wary of cheering people who lighten their loads by shifting them to others. We have loads enough of our own.

|7.21.06 @ 6:58AM|#

Robert at July 20, 2006 09:50 PM

The cost advantage of belonging to a "group" (eg all the employees of a company) disappeared a long time ago. This is one of the reasons that companies are having such a hard time keeping their coverage going.

The sooner health coverage is separated from employment the better.

Of course, it needs to be repeated that what most people want is not "insurance". What they want is someone else to pay their medical bills.

Robert|7.21.06 @ 7:37AM|#

I really don't think most people so much want someone else to pay their medical bills, as they want insurance. They're concerned about the possibility of being socked with enormous expenses at one time. The only reason it looks like they want someone else to pay their medical bills is because if you OFFER what appears to be that as a possibility, of course they'll take it, but it's not what got them animated to begin with.

|7.21.06 @ 8:49AM|#

Rex Rhino:

You show the same reasoning that Marxists did: We cannot allow conditions in the working class to ameliorate, because if they do, they will not want to rise in Revolution.

I am sorry, but when you are talking about blaming Goverment for what it does, it is one thing. But you want to blame it when the blame goes to those who dump their expenses on the rest of us, then you are no better than Marxists guerrillas who provoque the Governmetn in charge until it responds violently, so that the brutality of the repression turns the people against it.

So, can it with the revolutionary theory and focus on the question at hand.

|7.21.06 @ 9:11AM|#

Walmart's use of Medicare as a health insurance plan highlights how broken the health care system is, not how evil Walmart is. IMHO, Walmart is truly a place where losers shop (the service absolutely sucks, case closed), and if you think I don't mean you, I mean it doubly. I'll always choose the store where they give a crap if something goes wrong with the thing I just bought. Over the long run, the added value of service is worth more than saving a ten spot here and there. Of course, Lamar is a bit of a pretentious prick.

Larry A|7.21.06 @ 11:39AM|#

Unless sick people decide that death is a-okay with them, that's why the U.S. is going to have a hard time crawling out of the employer-provided-health-care-hellhole it's in. Group plans are the only way some people can get insurance at all.

True. But there's no rule that your place of employment has to be the "group."

Scratch that. There is such a rule. Government regulations keep the insurance industry from almost any innovative practice they can think up. Note that the major players in the industry go along with the regulations so they won't face competition from innovative companies.

For example, in 1995 when the Texas Legislature passed concealed handgun license legislation the instructors formed an association. One of the original goals was a simple insurance policy that would pay a licensee's legal expenses during the initial stage of an investigation after a self-defense incident.

A number of insurance companies looked at the issue. After all, statistics indicate that CHLs seldom get into trouble. There was simply no way, under the state regulations, to write a policy.

Now a company is finally selling a "legal services contract" under a new state regulation that does the job, but is legal simply because it's not "insurance."

|7.21.06 @ 4:25PM|#

Lamar:

I prefer to eschew (you see how erudite I am, that I use verbs like "eschew") using the term "evil", as it leads to much ponderousness in the debate.

But I can say that behavior such as Wal-Mart, letting a taxpayer-funded program be their health plan is freeloading, something that we'd see immediately if instead of health costs we were discussing rent, or electricty or sewer systems. They pay less, and in consequence we pay more, whether or not we shop there.

Is it too much to ask taht people who do not shop at Wal-Mart do not have to subsidize it?

|7.21.06 @ 4:55PM|#

But I can say that behavior such as Wal-Mart, letting a taxpayer-funded program be their health plan is freeloading, something that we'd see immediately if instead of health costs we were discussing rent, or electricty or sewer systems.

Holy cow! Wal-Mart's employees get their rent, electricity, and sewer as part of their untaxed employment benefits?!! Can I get in on this too if I become a greeter for a few hours a week? If so, where do I sign up?

Or are you actually arguing that, if Wal-Mart's employees are paid so little or are so profligate with that income that they need government help with their rent, that Wal-Mart should be paying their rent as well as providing their health care?

Why health care and not rent? Why health care and not electricity? Why is the employer responsible for the employee's health care, but not his car? Some employers do provide their employees with cars. Does that mean Wal-Mart must as well so its employees don't need to use government subsidized public transit?

|7.21.06 @ 6:39PM|#

MikeP:

You may want to design a better system than what we have now, but as it is, the deal is that companies provide health insurance.

You may object to the practice, and devise a better system. You should say that no one should have to pay and that's it.

But as it is, when A, B, C, D pay for a certain service (good or bad, cheap or expesive, as you will) and along comes E and does not pay for that service, that means that A, B, C, D, and the others have to make up the difference.

That is freeloading.

Change the system if you will, and I am sure it will be in many respects better than what we have now. But individual exceptions only serve to make the current system even worse for the rest of us.

|7.21.06 @ 9:40PM|#

I think these are the issues:

1) In certain communities (including mine, which comprises a high-income, increasing-population demographic), retail chains/development such as Wal-Mart and Target (and others) are afforded property tax breaks, which are then foisted onto individual property tax owners (i.e., home owners) via city/county/etc. "bonds".

2) Insurance (health, life, disability, etc.) are tied to employment, which takes bargaining power away from employees/individuals (i.e., if you have a pre-existing condition, are undergoing cancer treatment, etc.) you will think twice about leaving a "sucky" job, because you won't be able to migrate your insurance, and thus an employer has lost incentive to remove the "suckiness" aspect of your job.

It reminds me of the "company store" motif. Certainly, individual liberties are constrained by "market" economies (with said highly freighted against individualistic power they would have sans legistlated obstacles.) Which makes all the difference.

There is no free market.

If your philosophy poses arguments assuming there is such, you are automatically on the losing end.

|7.22.06 @ 8:19AM|#

cj:

So the deal works with real estate tax, too.

Wal-Mart pays less, so everyone else pays more. Their pocket is picked, whether or not they shop at Wal-Mart.

But here, instead of doing the simple math, people go off on tangents on how taxes are evil by themselves, or how to devise a better health system.

Let's try to put it in mathematical terms.

Let x be a commodity (say electric power), for which y1,y2,y3,y4... pay z$ an hour.

Along comes A. which, after echoing the complaints that the electric company charges too much finds a way to pay z-zz$ an hour.

There are legitimate ways of reaching this arrangement: It builds its own power supply. It purchases power from a different supplier. It negotiates an across the board rate reduction with the company. In the first two instances the other users are unaffected, in the third, they benefit.

But what it does is run an unauthorized line to the main power supply, so that it is taking withot paying for it. The electric company does its own math, that the usage goes up, while the revenue stays the same. To have its revenues keep up with the increased costs, they raise the rates per hour for its paying customers. They pay now
z + (zz/n) n being the number of paying customers.

That's what wrong about it.

|7.22.06 @ 11:09AM|#

some people are too much of a risk to take on unless they've got some form of a buffer like a group plan's collectivized risk.

No. Insurance companies alleviate risks by having many customers overall. The customers don't have to have anything in common, apart from buying insurance from that same company. If you are in a higher-risk group, you must simply pay more. If it's still worth it to you, good. If not, put your money in the bank instead.

ZgJCIiBOMQ|7.24.06 @ 9:40AM|#

Reason Magazine

Get Reason E-mail Updates!

Site comments/questions:

Media Inquiries and Reprint Permissions:

Editorial & Production Offices:

advertisements