The Healthcare Shuffle

The healthcare shuffle, everyone valuing healthcare but wanting someone else to pay for it, saw its latest dance in Maryland yesterday.

Maryland’s legislature yesterday overrode the governor’s veto, and requires employers with more than 10,000 employees in the state to either spend 8% of its payroll toward health insurance or pay that amount into a state fund. Only Wal-Mart, with about 17,000 employees in the state will be affected, the other three employers with over 10,000 employees already spending over 8% of their payroll toward medical insurance.

The Washington Post calls it “a legislative mugging masquerading as an act of benevolent social engineering.” It is an unfair targeting of one company, which benefits many low and moderate-income shoppers with affordable goods at slim profit margins. That may lead to higher prices at Wal-Mart. The Post, also, points out that this piecemeal picking on Wal-Mart doesn’t get at the larger issues of providing reasonable healthcare to our uninsured.

Proponents of the law say that many of Wal-Mart’s employees and families have to turn to state, taxpayer-funded medical care programs (estimates are in the 5-10% range), so requiring Wal-Mart to play-or-pay is fairer to taxpayers.

Indeed, no one has suggested that the 17,000 Wal-Mart workers in Maryland moved to Maryland to work at Wal-Mart. So, if they didn’t have jobs at Wal-Mart, many more Marylanders without this low-skill employment might be a greater burden on taxpayers there. Somewhere close to three-quarters of Wal-Mart employees do have medical insurance either through Wal-Mart, their spouse, or Medicare and other retiree coverage. (See Don Luskin’s column at SmartMoney, for a pretty thorough fisking. Also see Wal-Mart’s press release. Sebastian Mallaby’s defense of Wal-Mart is another important backgrounder.)

The impetus behind this law, also sought in about 30 other states, is a service worker unions campaign. (See the unions campaign site, WalMartWatch.) The motivation is to protect the union-benefits at unionized employers. The other major food retailer in Maryland, unionized, joined in for similar reasons, to restrict Wal-Mart competition.

As with other efforts to shelter union-benefits, the easily foreseeable result will be less competition and less jobs. Companies will predictably respond to cost pressures. Here in San Diego, we had a multi-month strike over reducing benefits at Albertson’s, Vons and Ralphs last year, to compete they say with the coming of Wal-Mart competition. A two-tier benefits package was settled upon. Nonetheless, due to strike losses, its own relative competitive weakness, and the excess of competition in this market (there are 7 large and healthfood chain supermarkets within 1-mile of my house), Albertson’s is on the sale block.

It’s not that Maryland’s legislators are radically against reason. Last year, Maryland allowed a stripped health plan to be offered by small employers, at about a third lower premium. (At link, search for August 18, 2005 Baltimore Sun article by M. William Salganik, "Maryland has begun allowing insurers...") Like other states that have done this, either due to not being able or willing to afford even that, or the desire to have more comprehensive benefits, the response has been almost miniscule.

Hospitals are pressed to retrofit and expand their infrastructure and staffing. Doctors are pressed to see ever more patients at imposed and negotiated lower prices, while fewer of our brightest and ambitious seek entry to medical school. We fill our ranks with imported doctors and nurses. Patients are pressed to seek employers with good insurance at affordable contributions, or pay ever-higher premiums. Employers face year-after-year increases in premiums, doubling every 4-7 years, while giant employers and our governments with legacy union benefit liabilities are brought close to bankruptcy.

Even eliminating the young and foolish who risk going without insurance, and eliminating the millions of poor illegal immigrants, there are several tens of millions in America without health insurance. When needing hospitalization, or urgent care, they either qualify for charity – the cost of which is shifted onto the insured – or are hounded, sometimes into bankruptcy, to cough up “list price” for their care even though far above the discounts given insurers or Medicare/Medicaid.

There are only three ways to go: 1. Continue the current shuffle, sometimes whittling away at the problems of one group or another as we increase the difficulties of another, as we continue to gripe and pay one way or the other; 2. Nationalize healthcare, increasing availability for a few million, at the expense of the quality of and accessibility to care that the rest of us expect; or 3. Require each and every individual to obtain health insurance. Those who refuse will have an income tax imposed and be placed in a plan. Those of limited means here legally will still have Medicaid and Medicare. Those not here legally will have to be deported, and the healthcare providers will have to cooperate or bear the costs themselves, and be required to separately account for such expenses and keep them outside of their tax-deductible or negotiated expense basis.

Any way you slice it, or shuffle it, the national cost of quality healthcare is very high and, also due to aging demographics and better cures, rising rapidly and unavoidably. Either we will spread these costs more over those who can and should afford to pay their share, or we will continue the healthcare shuffle that only benefits fewer at the expense of the many.