Health Care Disconnect

Among the people who pay for health care, but have little direct benefit are employers, employee, and taxpayers. Employers pay for health care through their sponsorship of health insurance for their employees as well as their Medicare matching payments. Since employer health care payments are tax deductible, the taxpayers also are paying a portion of those costs. To an extent, uninsured taxpayers are subsidizing health insurance for employer supported plans.

Employees support Medicare recipients through the Medicare deduction. They support Medicaid recipients through their income and other tax payments. Finally, they indirectly pay for their own health insurance through lower wages. Finally, they may pay some of their own health care costs, either as partial payment of their health insurance and/or co-pays, deductibles, or other payments.

Almost all taxpayers support Medicare and Medicaid recipients as well as Federal military and civilian retiree health care.

Finally Medicare recipients pay certain deductibles as well as any supplementary insurance that they might purchase.

Patients pay about 15% of the total of health care expenditures. Except for that 15%, all of the payors receive no direct benefits from the payments that they make.

The remaining 85% of payments are made by private health insurers (36%), Medicare (22%), Medicaid (16%), and other governmental and private program (11%). Again, those companies and agencies don`t receive any direct benefit from the payments that they make.

The flip side of this disconnect is that the patients who receive the care only pay a small fraction of the direct cost of their care. In many situations, they pay nothing at all. For that reason, their incentive to shop between health care providers and to choose less expensive treatments is reduced.

That incentive also applies to health care providers. Their incentive is to choose treatments that maximize the potential health care benefit. That not only benefits the patient but it is likely to be both financially and professionally beneficial to the provider.

Similarly most people don`t have any direct financial incentives or costs that apply to their lifestyle choices. Some studies suggest that increased state and Federal cigarette taxes have resulted in lower smoking rates. For most people there are no direct financial consequences of unhealthy lifestyle choices and few, if any, financial incentives for healthy choices.

Federal regulations prohibit spending health savings account monies on diet or exercise despite the likely payoff in terms of much better health.