SPEAKING OF INDEPENDENCE…

7/1/09

This morning’s (i.e., Wednesday, 7/1’s) Wall Street Journal reports that Wal-Mart told the White House that the world’s largest retailer supports requiring employers (except for very small employers) to provide their workers with health insurance. This mandate is a centerpiece of the Obama health care package. Wal-Mart’s motives aren’t entirely pure; it provides, contrary to popular opinion, relatively generous health care benefits to its workers and thus wouldn’t mind seeing the field on which it plays against competitors who don’t provide such insurance leveled. Wal-Mart also hopes to fend off an even more aggressive and onerous mandate contained in a bill being cooked up by the Senate Finance Committee. In any case, however, the support of Wal-Mart, organized labor’s favorite whipping boy, for an employer mandate goes a long way toward making this proposal, dangerous for reasons that far transcend the substantial and potentially debilitating costs to employers, a reality.

Employer provided health insurance is a peculiar feature of the American health care system. It has its roots in World War II, when wage and price controls prevented employers from attracting scarce employees (What a difference a war makes!) with higher wages. Some clever employers came up with the idea of recruiting employees by offering health insurance, the provision of which did not run afoul of the wage-price controls. The rest is history; Americans increasingly came to look to their employer, rather than their own wallets, as the source of their health care. With the increasing predominance of third party payers, the mindset of “What the heck, it’s not my money—give me the best!” took over. The cost of health care, in what is perhaps the most predictable economic development of all time, skyrocketed.

With costs increasing to the point at which they could easily bankrupt all but the wealthiest of Americans, and the only plausible way for most people to avoid such a fate lying in the hands of their employers, people became dependent on a job not only to provide financial sustenance to their families but also to avoid the wealth devastating impact of an serious illness or injury. Thus, people who lost their jobs for any reason found themselves without health insurance and thus infinitely more financially vulnerable than one would normally expect as a consequence of losing their jobs.

Such vulnerability is bad enough, but think of the impact that our system of employer provided health insurance has had on entrepreneurship in this country. It’s almost impossible to determine how many fledgling Bill Gates, Ron Popeils, or Roger Penskes have been dissuaded from pursuing their dreams by fear of bankruptcy brought on by lack of health insurance. It follows that it is impossible to determine how much our economy and our lives have been hurt by these thwarted dreams. However, one has to conclude that, given the entrepreneurial spirit that at least at one time prevailed in America, the strength of which is proven by the rate of small business formation in this country despite the obstacles our health care system puts in its way, we have missed out on countless innovations because their potential inventors and purveyors have decided to suck it up and join the countless faceless corporate or government legions out of fear of having to “go naked” on health care coverage.

If the Obama administration succeeds in forcing employers to provide health insurance, our perverted system of tying one’s status as an employee to one’s health care, and consequently to one’s financial solvency, will become even more entrenched. This will serve to further quash one of the few things America still has going for it in the world economy: its spirit and history of innovation. Future Amadeo Gianninis, Ray Krocs, and Sam Waltons will be forced by the realities of health care to forego their dreams and instead go to work for huge corporations, where, despite the lip service paid to creative thinking, it is obsequiousness and uniformity of thought that are rewarded. Innovation will be stifled, and we as a nation will be playing on a field on which we have few, or no, natural advantages.

Notice that this argument against the curious connection between employment and health care that has become endemic in our economy could be used by either extreme of the health care debate. Both those in favor of a one payer system and those who oppose the entire Obama health care “plan” as a further socialization of our economy can cheer those of us who oppose the employment/health care link. I’m not arguing for or against either side, at least not in this post; I’m just saying that tying one’s health care to one’s employment status, a relic of an ill-advised price control policy from almost 70 years ago, has to be reexamined if we are ever to get health care costs under control and provide for continued entrepreneurship and consequent innovation, our economy’s only hope.