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Don't think of Healthcare as a Benefit, or a Necessity -- Think of it as a Wage Reduction

Posted Dec 10 2009 10:08pm















Writing on the op-ed page of The Washington Post yesterday morning, Obamacare supporter Ezra Klein tries out a new line of advocacy: He advises workers to line up behind the Obamacare bill because it will raise their wages. As Klein explains, "health-care coverage is not a benefit. It's a wage deduction."

Any more questions? If one ever needed more proof that the healthcare policy establishment sees healthcare as a zero-sum game, Klein's column provides it. Which is not to say that Klein's piece is wrong, in any of its factual particulars.

But the point is that healthcare is, among other things, an economic good--and not only that, it is a transformative economic good. People will happily pay for better health--turn on a TV, and there you see ads for Boniva, or Restasis, or Aricept. Those are desirable goods. If Medicare pays for those drugs, fine, but if Medicare doesn't pay, lots of people would still want them. And of course, the sky would be the limit for drugs and treatment that would truly bend the curve on illness--a cure for Alzheimer's, for example, or even a drug that would significantly slow down its onset.

Cures. That's healthcare at its truest and most profound. The kind of healthcare that makes you better. It was success in the search for cures that turned medical scientists, from Edward Jenner to Louis Pasteur to Paul Ehrlich (the German discoverer of syphilis treatment, and the man who coined the word "chemotherapy," not to be confused with Paul R. Ehrlich, the American Malthusian) into heroes.

But Klein lives in his own new world, in which healthcare advances are to be feared, because they will raise costs, as noted here at SMS in September. In fairness to Klein, he is in good company inside and outside of the Beltway; much of the healthcare establishment has come to see healthcare through a prism of skepticism and negativity, in which awareness of the upside of healthcare is outweighed by appreciation of the downside. It's an intellectual style, a fad among wonks, but for the time being, it's all pervasive. Here's the Klein quote in its original context:

But health-care coverage is not a benefit. It's a wage deduction. When premium costs go up, wages go down. When premium costs go down, wages go up. Yet workers don't know that. In fact, the information is hidden from them. That means that cost control seems like all pain and no gain, which makes it virtually impossible for Congress to pass. It's like asking someone to diet when they don't realize it will help them lose weight.


Klein offers a contrarian defense of managed care, and then makes a good argument for transparency in healthcare costs:

One of the best reforms that could be made this year would be to give workers that information. So far, however, efforts have been unsuccessful. During the Senate Finance Committee's negotiations, Ron Wyden (D-Ore.) offered to give employees the option to reject their employer's offerings in return for a voucher that would help them choose their own insurance on exchanges, which meant they would save money if they chose cheaper plans. Much more modestly, Chuck Grassley (R-Iowa) floated an idea to simply require employers to report their health-care spending on workers' W-2 forms. Both were stymied by an odd-bedfellows alliance of employers and unions.

It's not too late, though. Perhaps the easiest way to dramatize the issue for workers would be to attach health-care costs to each paycheck. If employers listed the cost of health care alongside the bite taken by payroll taxes, it would be much clearer to workers that health-care coverage was coming out of their wages, not out of their employer's largess. That, at least, could help them see the costs of the system more clearly, which is, unfortunately, something that all the congressional debate isn't helping anyone do.


Yes, transparency is good. And yes, higher wages are good. But good health is better.
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