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Here's What's So Terrible About Health Benefits

August 28, 1994

In "What's So Terrible About Employers Helping With Health Care?" (Aug. 7), Robert Eisner makes broad statements about small business to support his conclusion that health care insurance should be financed by employers. His cursory treatment of difficult financial and business issues is disturbing. Readers impressed with his credentials as an economist might believe his conclusions reflect established principles of economics or business rather than optimistic ideas contrary to business experience.

First, he implies that since businesses have managed to survive the burdens of Social Security and unemployment insurance, they should be able to survive one more burden of health care. That is like saying that since the camel carried a few extra pounds last week, the camel should be able to handle yet a few more pounds this week.

In fact, many government burdens--including Social Security contributions, workers' compensation premiums and unemployment compensation--are significant burdens to business and substantial disincentives to employment.

Unfortunately, there is no way to calculate or demonstrate the level of employment this country could be enjoying if those and the many other burdens to employment were removed or reduced.

Next, he expresses doubts that the imposition of the costs of health insurance on businesses would raise labor costs "at all." He believes workers would take jobs with lower wages to obtain health insurance.

His conclusion would be less disturbing if he completed his hypothesis by discussing how the particular workers he has in mind will match up with the particular employment opportunities available, and by discussing the effect on the economy of forcing workers to take lower wages in order to cover mandated levels and types of health insurance.

Then he takes a handy "this is how the economy works" approach, stating that even if labor costs were raised, it wouldn't be a problem because all competitors would face the same increases.

He takes a static and local view of business and competition. In fact, business and competition are global and dynamic, and increases in payroll costs can affect a huge range of compensation, competition, automation and investment issues. The effect of government-imposed burdens on business cannot be easily identified, let alone dismissed as insignificant.

The greatest failure of his optimistic article may be the lack of discussion of the impact on new businesses, which, in particular, do not fit his cartoon image of competition.

The typical new small business hiring its first employees is most concerned with total cost and administrative burdens. While competitors' labor costs may be relevant competitive information, the key issue is whether the new business can bear the imposed burdens and still survive to become a stable competitor in the marketplace.

Economists and legislators can take comfort in warm and fuzzy economic theories, projections of costs, assumptions about competition and hypotheses of how well things are going to work "in the private sector" with the latest government program. Business owners know that they have to produce cold, hard goods and services, and cover payroll, to survive in an unpredictable, ever-changing real world.




After reading (Robert) Eisner's column, I have a better understanding of why our politicians can feel good about writing laws that cripple business and destroy jobs. Our intellectuals have given the politicians false ideas that ease the lawmakers' consciences.

Private insurance companies are heavily regulated by the government. Excessive insurance paperwork and bureaucracy are a result of nonessential requirements demanded by myriad federal, state and local agencies and are not a natural state of affairs, as implied by Mr. Eisner. Government programs traditionally have become bogged down in paralyzing bureaucracy. I am not aware of any government program that is efficient in comparison to private industry. How would a single-payer health care system escape what every other government-run program has fallen victim to?

The fact that Social Security and unemployment insurance are government-mandated programs in no way makes them efficient or morally justifies their existence.

"Asking" employers to "contribute" to a health plan, as Mr. Eisner suggests, really means forcing employers and employees to do what the government says is best for them. Participation by force is a common feature of both the single-payer plan and the universal plan.

Modern health care started out in reasonable shape. Then the government discerned a few minor problems. After a small fix here and another there, and more fixes to fix the fixes, the whole system went out of control until we found ourselves in this so-called health care crisis.

Perhaps the first step to solving this crisis is to identify the underlying factors that have caused the problems.

* We have a highly regulated medical insurance industry.

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