Reorganizing The Financial Flows In American Health Care

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Abstract
Prologue: When American health policymakers discuss health cure reform, what they really are discussing is reform of the fi- nancing and delivery of health care, not of the care itself. Most of health cure financing deals with the flow of funds from U.S. households into health insurance funds (both governmental and private), whose responsibility it is to disburse those funds to vari- ous providers. As Uwe Reinhardt describes the process, Ameri- can employers enter the picture us "pumping stations" for this flow of funds. "Whatever contribution private employers may have made to American health cure is tempered by the decep- tion, inadvertent or not, that probably has served to indoctri- nate millions of American workers with a firm belief in the free lunch," Reinhardt writes in this essay. The myth of the free lunch-that is, that employers are paying for the health cure of their employees-has been the basis for "an unseemly pas de deux among employers and employees that may well have been one of the major cost drivers in American health cure," he con- tinues. The funds that businesses spend on health cure are re- couped in the form of higher prices, lower returns, or reduced wages. Whatever their shortcomings, employers are firmly set- tled in their position in the U.S. health cure system. Given this, Reinhardt argues, they should be limited to tusks for which they are well suited: collecting payroll-bused premiums and passing them on to health insurance funds. In the context of managed competition, employers would simply remit payroll-based premi- ums to health insurance purchasing cooperatives. A governmen- tal "fail-safe" plan would ensure universal coverage. Reinhardt is James Madison Professor of Political Economy at Princeton University. He is a prolific and often irreverent commentator whose views appear often in the nation's medical, economic, and policy journals and the popular press.

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