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Employer-provided health care: where's the justice?

The United States is not best in the world at much of anything anymore.

Toyotas and Hondas, once derided as "economy cars," now outsell and outperform Chevrolets and Fords.

A team of NBA All-Star basketball players coached by future Hall of Famer Mike Kryschewski could not win the 2006 World Championship.

And to call the U.S. health care system "best in the world" is a perfect example of living in invincible ignorance. Just ask any American business owner.

Kirk Newhouse, 44, owns and runs Carl's Cafe. Carl's annually wins "Best Breakfast" and "Best Lunch Under $5" polls in the local newspaper. It's a true family business. Kirk's mom, 67, makes the pies.

Kirk plans to expand to a second and perhaps even a third location, which would be a significant boost to the local jobs market and economy. That plan is on hold, however, because Kirk doesn't have the money to make payments on the necessary business loan. He is a good manager, yet struggles just to meet monthly expenses and clear a reasonable profit. One reason is that Kirk pays for everyone's health care.

Kirk and his wife pay premiums to a managed care health plan. Their sons' university tuition and fees include a bill for health care coverage. Kirk makes Medicare contributions that pay for his mother's care. Finally, Kirk provides health care benefits to his employees through the system known as employer-provided health care. Kirk's plans to expand Carl's Cafe will remain on hold as long as this health care policy model is in place.

In nearly every other country in the world, health care is a right of citizenship for people of all ages. In contrast, health care in the United States is a right of citizenship only for those over 65 and those with certain named medical conditions.

For 160 million people (62 percent of Americans under age 65), health care is a right of employment. (1) Even so, some of the nation's 50 million uninsured citizens are employed. As Social Darwinism (lack of concern for the human condition) became the norm in American business culture, employers became as comfortable with ignoring employees' health care needs as they are with spending pension plan money now.

Until recently, criticisms of U.S. health care policy focused primarily on Medicare's shortcomings and the plight of the uninsured. Now, suddenly, some critics shine a glaring spotlight on the employer-provided health care insurance policy model. Among stakeholders abused by this model is Kirk Newhouse, representative of young men and women trying to grow America against tremendous odds.

How did health care benefits come to join vacation time and pension plans as job perks? How can Kirk and other American business owners be relieved of that burden?

Where it began

Employer-provided health care was born in the 1930s after Franklin Roosevelt decided not to try for universal socialized medicine. In a move that seemed ingenious then because health care was comparatively cheap, the federal government passed laws offering economic incentives to businesses that provided health care to employees.

As a result, two objectives were met at once. Many Americans in the prime of life would now have health care coverage, and business owners and executives could spend less money to satisfy union demands. (2)

This employer-provided health care model is now being called an "accident of history." Renowned medical economist Uwe Reinhardt of Princeton University says, "If we had to do it over again, no policy analyst would recommend this model. (3) Criticisms of employer-provided health care are hitting the public press. (4)

Ironically, health care organizations suffer a double hit because they are squeezed between providing health care for employees and stingy third-party payment formulas. As awareness of unfairness increases, don't be surprised if health care businesses lead an effort to breathe new life into business/community/government coalitions.

Once simply bargain-seeking groups, these coalitions would put pressure on the politicians and insurers to scrap the employer-provided health care model and replace it with something better.

Ah, but there's the rub. So far, no one has come up with a feasible replacement plan. The reason is that nobody's looking very hard. Quick fixes that are comfortable, convenient and conventional are only rearranging the deck chairs on the Titanic. Such solutions offer hope and make us feel good in the short term, but only lead to disappointment and delay genuine lasting solutions.


Consider these eight tough questions and answers about my proposed new system.

A new U.S. health care system

Q: Will the new uniform national health care system more closely resemble Canada's, England's, or Germany's? (5)

A: There would be no uniform national health care system. Following federal guidelines they help create, each state would develop and implement a system.

Hawaii would be allowed to continue the effective working model that has evolved there.

Massachusetts could continue on its path, even though that approach is flawed because it retains the employer-provided model. (6)

New York could feel free to keep its inefficient bureaucratic system.

Care for people in my hometown of Humansville, Missouri, population 900, could be an extension of systems in place now. Primary care could be provided in Humansville through an outreach clinic manned primarily by physician assistants; secondary care could be at Citizens Memorial Hospital in Bolivar; tertiary care could be in the Cox and St. John's systems in Springfield.

Note that Cox and St. John's might choose to continue escalating health care costs by fiercely competing, or they could decide to join forces on at least some services to assure that the Humansville/Bolivar business goes to Springfield instead of Columbia.

Q: What health care services will the state and federal government directly provide?

A: None. If the government provided health care, that would be socialized medicine. Health care providers will compete for available dollars on the basis of both cost efficiency and evidence that services are readily available and consistently dependable.

Q: Would benefits be comprehensive?

A: Absolutely not, unless someone can solve the financing problems inherent in paying for everyone's three-stitch laceration, eyeglasses, 100 percent of prescription drug costs and deliveries of normal full-term babies. This plan is not a socialistic handout. The plan's motto is: You don't pay your share, you don't get the care. Tough love, baby. Politicians will be amazed at how many people will vote for someone finally taking a realistic approach to health care.

Experience with the Massachusetts plan should show us whether subsidizing health care for poverty level populations can work or not. If not, then that is something we might like to do but just cannot without torpedoing the whole plan.

However, if we truly care about that issue, we could mount a parallel effort to require payment of a living wage so that no one but laggards need live in poverty. Hmmmm. That might provide additional revenues for the health care fund by increasing the number of people who could afford the co-payments.

Q: Wouldn't those over 65 lose their Medicare contributions?

A: How could they? Their contributions were spent long ago to pay for the last generation's medical care. Those over 65 would continue to enjoy good coverage. The only difference would be that those over 65 and the U.S. Congress would no longer be the only ones in the United States with dependable coverage.

Q: So, there would be no supplementary insurance anymore?

A: Sure there would be supplementary insurance. Most current insurance executives will have well-paying jobs in the new system, but some will choose to offer private policies for uncovered services such as dental care.

However, there would be no need for "gap" insurance and long-term care insurance, if the system is managed as efficiently as possible. Note that competition for health care contracts will provide more incentive to do that than the present system of imposing new laws and regulations on the health care business.

Q: How would doctors be paid and how much?

A: Doctors' pay would be proportional to their skill as negotiators when they establish, review and renew their individual or practice group contract or individual employment contract with an integrated delivery system.

Q: How will this plan be financed?

A: Ask Paul Starr. Ask Uwe Reinhardt. And listen to them! Whether it is from a National Health Care Fund contributed to by multiple sources (gasoline tax, cigarette tax, sales tax, whatever) or individual payments similar to insurance premiums, the payers will be the same ... you and I! Don't let anybody tell you otherwise. However, consider the alternative, which is to return to the days when everyone paid directly for health care. If you plan to stay healthy and die suddenly, then that should be your choice.

Q: Would this plan be socialized medicine?

A: No. Socialized medicine is an egalitarian system in which health care is a universal right that does not involve personal responsibility, and in which health care services are delivered, paid for and evaluated only by a government.

Richard E. Thompson, MD, is former vice president of the Illinois Hospital Association, taught ethics at St. Petersburg College and Missouri State University, and is author of Think Before You Believe, Xlibris, 2005. He can be reached at


1. Starr P. The Logic of Health Care Reform: Transforming American Medicine for the Better. The Grand Rounds Press, Knoxville, Tenn: 1992. (Dr. Starr is author of The Social Transformation of American Medicine, winner of the Pulitzer Prize for general nonfiction).

2. Blumenthal D. "Employer sponsored insurance ... origins and implications." NEJM 355:(1), July 6, 2006.

3. Blumenthal D. Employer-sponsored insurance ... riding the health care tiger. NEJM 355:(2), July 13, 2006.

4. Howard C. "Employer-provided health care is killing us." Lufkin Daily September 9, 2006. Lufkin, Texas.

5. Health Care in German Society.

6. Altman SH and Doonan M. "Can Massachusetts lead the way in health care reform? NEJM 354:(20). May 18, 2006.

By Richard E. Thompson, MD

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Title Annotation:Ethical Aspects
Author:Thompson, Richard E.
Publication:Physician Executive
Date:Nov 1, 2006
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