Who pays for health care?

Very basic ideas that journalists, pundits and politicians often misunderstand…  There is no free lunch because: 1. Everybody is a consumer.  2. Sooner or later, consumers pay for “everything”.

Who Really Pays for Health Care?: The Myth of “Shared Responsibility”
Ezekiel J. Emanuel, MD, PhD (Department of Bioethics, Clinical Center, National Institutes of Health); Victor R. Fuchs, PhD (Department of Economics, Stanford University). 
Journal of the American Medical Association. 2008; vol. 299: 1057-1059.

When asked who pays for health care in the United States, the usual answer is “employers, government, and individuals.” Most Americans believe that employers pay the bulk of workers’ premiums and that governments pay for Medicare, Medicaid, the State Children’sHealth Insurance Program (SCHIP), and other programs.

However, this is incorrect. Employers do not bear the cost of employment-based insurance; workers and households pay for health insurance through lower wages and higher prices. Moreover, government has no source of funds other than taxes or borrowing to pay for health care.

Failure to understand that individuals and households actually foot the entire health care bill perpetuates the idea that people can get great health benefits paid for by someone else. It leads to perverse and counterproductive ideas regarding health care reform.

This argument is also true in Mexico where the quality of IMSS/ISSSTE is so low that some employers resort to secondary or additional health care insurance from private providers.  If an employee ends up paying both the  public and private insurance premiums, the distortion on labor markets is even larger.  This is because public insurance (IMSS or ISSSTE fees) is mandatory in formal jobs: an employee cannot opt out of it if she chooses a secondary private option.

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One thought on “Who pays for health care?

  1. Here’s a different angle: I’ve just posted on the alternatives in the health-care insurance reform debate, assessing them with respect to federalism. That is, I suggest that we include an assessment of the likely impact on the system of governance itself. If you want to have a look, here is the link: http://euandus3.wordpress.com/2009/10/27/health-care-insurance-reform-a-spectrum-of-alternatives-with-respect-to-federalism/

    You might also be interested in this NYT article:
    http://www.nytimes.com/2009/10/27/health/policy/27health.html?_r=1&hp

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