Frylock, the major difference between health insurance and auto insurance is that people try not to use their auto insurance. The desire not to get in an accident and cause injury to oneself, others, and their personal property is what motivates people to drive carefully, and thus puts an inherent limit on the number of auto insurance claims filed. In turn, this keeps payouts down and therefore the cost of insurance affordable. A family might pay $3,000 a year in auto insurance.
By stark contrast, even if the employer pays 50%, a family will still shell out upwards of $8,000 a year for health insurance. At this steep cost, the impetus to use their health insurance is far stronger than that of auto insurance. This keeps claims pouring in and contributes to the rising cost of health care.
Quite correct. In fact, Sam, our health care costs are 11 times higher than Canada’s. It’s only that “low” because Canada depends on U.S. drug imports that raise their prices. Otherwise, Canada might be as efficient as the U.K., whose costs are only 1/17th of the U.S.'s.
I would wonder also if the other poster is a health analyst, I mean, missing what did happen in places like Massachusetts that implemented a very similar reform puts doubts on what he claims.
While it might make sense for businesses to cut individual employees’ hours to less than 30 to get around having to pay for insurance, businesses don’t make their hiring and firing decisions based on after tax profits. They base them on need. If they need additional employees then they will hire them. If they don’t then they will lay them off. If simply firing employees was a good way to save money then these businesses would have done it already. Anyone who has worked in a business should be able to see through this oft-repeated myth that cutting taxes on businesses will result in those businesses taking this extra money and using it to hire employees that they don’t need, or that increasing taxes will cause them to fire employees that they do need.
Won’t the market naturally correct for this by an increase in doctors? Won’t this mean a boon for medical colleges? Won’t this mean more healthcare jobs for the country’s brightest students? This seems like a good thing for the economy. Of course, med school is not a 2-month process, so we might need to import some doctors for the short-term.
No, because the AMA has been artificially increasing demand for physicians’ services for decades by holding down the number of medical schools. You can read about it here, although the author of this piece somewhat bizarrely blames the feds rather than the AMA. I’m not sure how anyone can argue the shortage has anything to do with Obamacare, in any event.
This is an overly simplistic way of looking at things. What a company ‘needs’ in terms of employees depends on many factors. For example, if I can make a shoe for $20, I might ‘need’ X employees to meet the demand for the shoe at that price. But if you increase the cost of my employees by 20%, and as a result my shoe costs $25, then the demand for my shoes will fall and suddenly I don’t ‘need’ those employees.
A better way to look at employment is to look at the marginal productivity of an employee. If an employee provides a value of $15/hr to my company, and my cost for that employee is $12/hr, then I’m going to keep the employee unless I can get an even greater return using my money for something else.
Now the government comes along and says I have to pay $4/hr to cover my employee’s health care. Suddenly I’m paying $16/hr for a person who only earns $15/hr for my business. That person is now going to be laid off.
In any business, there are typically employees who span the gamut from negative marginal productivity to high marginal productivity. Whenever you add employment costs, you move the curve. People who are zero marginal productivity become negative. People who are negative become more negative. People who are slightly positive become zero marginally productive.
Businesses don’t like firing people, because firing hurts morale and increases HR costs. New employees have to be trained, etc. That’s why some employees manage to keep the jobs even if they are ZMP (zero marginal productivity). Businesses would rather performance-manage those employees, retrain them, reassign them, or whatever they have to do to make them an asset to the company again, and only when they’ve exhausted their options will they terminate the employment.
But when a systemic change comes that moves the curve for all employees, they can’t do that. The productive structure of the entire workforce changes. At that point, you’re looking at mass layoffs.
You guys on the left are always so convinced that businesses can just suck up the costs you impose on them. You’re in total denial about just how low profit margins really are and how competitive the marketplace really is. You point to high CEO salaries as proof that these companies could pay a lot more to their people without any problems.
For example, the left has been screaming that Hostess didn’t need to go under, because the CEO’s pay had recently been increased by a large amount, and if the CEOs just stopped being greedy, there would be enough to go around. What you don’t understand is that A) there’s also a market for CEOs, and pay has to reflect demand and CEO productivity, and B) The CEO is just one man, and even if he didn’t earn a nickel the money saved could not pay for significant pay raises across the work force (which is what Obamacare ultimately demands).
For example, the CEO of Applebee’s has stated that Obamacare is going to cause layoffs across his chain. Let’s say that the CEO makes $5 million per year, and decides out of the goodness of his heart to earn nothing at all and give his salary to his employees. Applebees has 28,000 employees. The CEO’s salary amounts to $178 per employee per year. The Obamacare penalty is around $2000 per employee. It’s just a VAST difference. And Applebees has to exist in a very competitive marketplace for middle-class restaurants. Now, all of them face the same tax, so you could say that it won’t matter. But it will, because ultimately those restaurants are also in competition with fast-food places, with high-end restaurants, with home cooking, etc. If a meal at Applebees costs $20 instead of $15, fewer people will eat there. The end result is again layoffs.
The sad thing is that a lot of the industries that will be hit the hardest are industries that employ and serve the lower middle classes. If Wal-Mart lays off employees, it will hurt poor people, since that’s what the employees typically are. If it instead increases prices, it will hurt poor people, because they predominantly shop at Wal-Mart. Either way, poor people are going to take it on the chin.
No, it won’t, because one of the ways the government plans to control health care costs is to put price caps on what doctors can charge. That’s the reason there’s a shortage of doctors now for Medicare and Medicaid patients.
One thing that is sure as rain is that when you cap the price of something, you create shortages. The government capped the rate of increase of drugs a couple of years ago, and we’re now seeing shortages of low-margin drugs as a result. In Canada we have tremendous shortages of doctors, which creates long waiting lists for treatment. Of course, to the government this is a feature because it keeps the cost of health care down, but to the patients, not so much.
The last, and only time that my place of employment had layoffs, (1/3 of the workforce) GWB was President.
By the way, the company I work for has been in business for over 50 years, and the last 2 years showed record profits. (Industrial, automation type products, without being too specific.)
The complaint against Hostess is not that the CEO got a recent bonus. It is that that bonus came at the end of a twenty year run of bad decisions in which that CEO played a significant role. Hostess made no effort to keep abreast of the upgrades to production that every one of its competitors had implemented years ago. Giving a bonus to the people who effectively drove the company into the ground was just stupid.
As to the “market” for CEOs, that is nothing more than the same bubble that every other part of the economy saw burst couple of years ago, but from which CEOs have somehow been protected. The boards of directors have fallen for their own hype or propaganda that they need to pay far above top dollar to get the best talent, and then they pay above top dollar to mediocre (or poor) performers who have obtained a reputation for quality simply by demanding more money. Even U.S. business has recognized that problem for years. Fortune Magazine devoted an entire issue to the situation in their June 25, 2001 issue, including this article. (One of the articles in that issue, that appears to not be on-line in the archives, was a roll call of CEOs that had trashed their companies while receiving bonuses–a situation that has hardly changed in the ensuing years as a review of just about any year’s issues of Fortune critical of overpaid twits ruining companies will demonstrate.)
As always it is convenient to ignore that happened in places like Massachusetts to launch a barely supported screed about this subject; also, I would love to wait to get some healthcare now, the small non profit y work for does not offer any.
That would be a neat trick, since Hostess’s current CEO was hired in 2010. Before that, he was a top executive at Kraft.
The bonuses they wanted to pay out totaled 1.75 million dollars, spread across 19 executives, or about $92,000 each. It’s a lot of money, but it’s not mega-yacht money. And for all I know, those bonuses could have been part of the executive compensation contract and unavoidable. Hostess had just come out of 4 years of re-organization. I have no idea how many of those 19 executives were ‘part of the problem’ - and neither do you. But unlike you, I’m not making sweeping claims about what was ‘stupid’ and what wasn’t.
And if those managers didn’t get those bonuses, they could have given every employee a grand total of a one-time bonus of $94. Do you honestly think that would have made a difference at all?
You guys just love to demagogue those evil CEOs and their high pay, and that’s your prerogative. But ‘fixing’ that problem doesn’t solve anything other than maybe making you feel better that you ‘got’ someone you disdain. Hostess would still be bankrupt even if those CEOs were working for free..
Sounds like Applebees will fire workers, but McDonalds will hire more. Where’s the evidence that the net effect will be bad, rather than the effect on a particular business or industry?
What happened in an individual state is not the same as what will happen across the country. And Romneycare is not the same as Obamacare. For example, I don’t believe there is a penalty for employers who don’t provide heatlh care, thus eliminating one of the big costs to business of Obamacare. In addition, Romneycare was an alternative to another plan that had been pushed by the Democrats for years which would have put a much larger burden on businesses, so it could be that businesses there had already adjusted to some kind of health care cost increase coming.
Massachusetts also had a much smaller percentage of uninsured people, and higher per-capita incomes.
But we’ll know soon enough. As this law rolls out and businesses are actually forced to make choices, we’ll see what kind of impact it has.
By the way, I love the hypocrisy coming from you - claiming that a tax on employment won’t have any effect on employment, while at the same time advocating for carbon taxes in the belief that taxing something and raising its price will lower consumption. You can’t have it both ways. Either taxes on a good or service act as a disincentive, or they don’t. Which is it?
“Us guys on the left” are convinced that we’d be better off with the system that works in basically the entire rest of the world – a “socialized” medical system that’s operated for public health rather than profit. “You guys on the right” are the ones that keep shouting about how America’s different, and the capitalist way/invisible hand/free market crap is so much better, and blocking all attempts to bring us up to, say, the late 1950’s global status quo.
So this is what we’re stuck with; a system where we have no choice but to make businesses pay for it (because everybody just knows that we can’t increase taxes…as works successfully everywhere else), and because it’s unacceptable to the right to consider the possibility that maybe running health care as a conglomeration of multiple for-profit steps, each of which has to add as much as possible to the cost of health in order to please shareholders, is about as abysmally stupid an idea as exists when the goal is to control costs.
The public overwhelmingly wants universal health care in the US, and this is the only bably step we’ve got along the route to achieving it, given Republican, not Democratic, resistance to doing it right.
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There are 600,000 physicians in America who care for the 48 million seniors on Medicare. Of the $716 billion that the Affordable Care Act cuts from the program over the next ten years, the largest chunk—$415 billion—comes from slashing Medicare’s reimbursement rates to hospitals, nursing homes, and doctors. This significant reduction in fees is driving many doctors to stop accepting new Medicare patients, making it harder for seniors to gain access to needed care.