The health care competitiveness fallacy
The Kansas City Star
One fallacy that still comes up frequently in the health care debate is the idea that employer-provided health insurance hobbles American competitiveness. This has been rebutted frequently but it keeps popping up, most recently in a Fareed Zakaria piece in Time (to which my attention was drawn recently by a colleague).
Zakaria gripes that Obamacare is far from perfect, and one reason is that it maintains the link between health care and work. This, he says, is a “huge burden” on American companies. Businesses in Germany, Canada and Japan don’t have to pay all that money for health insurance, but U.S. companies do.
Nonsense, says Harvard’s Greg Mankiw, a former Bush economist and the author of a popular economics texbook.
Many people forget that health insurance is part of total compensation and compensation is set by the labor market. If health insurance was decoupled from work, companies would still have to shell out roughly the same amount of compensation to draw the labor they needed. But instead of getting insurance from their employers, workers would get more cash income.
Zakaria is on-target in regretting the tie between insurance and health care, but not for the reasons he gives.